Tnuva  - Hagay Frid - 16092011
Tnuva dairy products. Photo by Hagay Frid
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Tnuva’s soft white cheese and sweet cream will be put under price control and their prices cut. This, according to a source close to an interministerial panel that is expected to submit its recommendations on the issue within days.

The source said, however, that the decision was not final, and added that after a hearing was held on the matter government officials backed down from a demand to reduce the prices of these products by 20%.

Representatives of the giant dairy manufacturer told members of the Price Committee, a joint body of the agriculture and finance ministries, that Tnuva’s high profit margins on white cheese (“gvina levana”) and sweet cream made up for its losses on milk in plastic bags, which is price-controlled.

In preliminary recommendations issued in August, the panel proposed returning white cheese and cream to price supervision.

The committee also recommended eliminating a tax benefit claimed by supermarket chains on discounts they receive from dairy producers.

It said the majority of these discounts were not passed on to customers and in fact increased the chains’ profits.

Committee members pointed out that salaries at Tnuva Food Industries had increased significantly in 2010 and 2011. The interministerial committee recommended recognizing just half the payroll increase in calculating the concern’s profitability.

Tnuva dominates the market for sweet cream, with an estimated 85% share of the market. With the exception of 32%-fat heavy cream, commonly used for whipped cream, the company has been free to raise the prices as much as it wants.

The remainder of the market is held by Tara Dairy. Its prices are similar to those of Tnuva, and it does not seem to be posed to increase its additional market share.

As a result, the Prices Committee decided to recommend imposing price supervision on Tnuva’s 38%-fat sweet cream.

After the panel’s decisions are approved and put into effect, Tnuva will be free to charge whatever it wants for 32% cream, while the price of its 38% cream will be set by the regulators.