Year After Salmonella Crisis, Cereal Sales in Israel Still Ailing

Fear of re-contamination has effected production output, a major supermaker executive claims

A year after one of its production lines was contaminated by the salmonella bacteria, sales of Unilever Israel’s Telma breakfast cereals have yet to return to their old levels, data obtained by TheMarker show.

Moreover, as its sales have fallen, the company is struggling to put enough breakfast cereal products on the shelf, as it takes extra precautions to ensure salmonella isn’t found again in any of its products.

“They’re always short of something, mainly cornflakes but also Delipecan and other products,” said one executive at a major supermarket chain, who asked not to be named.

“The company says it’s because they are producing for fewer hours a day and are stopping production to clean equipment, out of fear of contamination,” the executive added.

He said it was also possible Unilever was cutting back production to create the impression that demand was high by limiting supplies in grocery stores.

Unilever saw its market share for breakfast cereal fall by half to 30% when the salmonella affair surfaced last July.

Although no one was infected by the bacteria, the company’s woes were compounded by its mishandling of the contaminated products, some of which arrived in supermarkets.

Data from the market research firm Storenext show that Unilever’s share of the cereal market last month was just 53% – down 10 percentage points from June 2016, on the eve of the crisis.

In the first half of 2017, its cereal sales were down 20.7% from the same time in 2016.

Unilever’s rivals in the cereals sector – which include Osem-Nestle, imported Kellogg’s products and private-label goods – increased their market share.

But all the makers have suffered, with overall sales in the category down 7.5% year on year in the first half of 2017 – 278.4 million shekels ($77.7 million), down from 293.8 million.

For Unilever alone, that added up to lost sales of 29 million shekels.

Unilever said in a statement that the figures show that it has recovered from the low point following the affair, and that it remains the best-selling brand in Israel.