Cheese counter Israeli shop
The cheese counter at a Tel Aviv food store Photo by David Bachar
Text size

The highly concentrated supermarket sector is expected to foil the government's plan to reduce dairy prices by upping the volume of imports, warned Agriculture Ministry officials in a discussion at the Prime Minister's Office over the weekend.

Supermarkets mark up imported foodstuffs by hundreds of percent, said the officials. Therefore, before stepping up dairy imports and damaging the country's dairy manufacturers, the government must ensure that reduced prices will reach consumers too, they said.

Participants in the meeting included Finance Minister Yuval Steinitz, Industry, Trade and Labor Minister Shalom Simhon, and Agriculture Minister Orit Noked. Agriculture Ministry officials presented multiple examples of products that were marked up by hundreds of percent after being imported.

"Take, for example, a cheese that reaches Israel's ports at a price of NIS 25 per kilo, and is sold to consumers for NIS 100 to NIS 150. Customs for that cheese is 50%, and the rest of the markup is money that goes to the importer and the supermarkets," said a senior Agriculture Ministry official. "Therefore, we need to address markups before opening the market to more imports."

The list also includes, rice, coffee, tea and ketchup.

"I'm concerned that the ministers want to step up imports without making sure that the reduced prices will reach consumers," said the official.

"The Finance Ministry wants to remove all limits on imports and cut customs to 25%. Importing 10,000 tons of dairy products would be one-quarter of the country's dairy market. Currently, imports make up 15% of the market."

Prime Minister's Office Director General Eyal Gabbai will need to decide how much hard cheese will be imported, what customs tax will be charged on them, and how much less dairies will be paying dairy farmers for raw milk. All these steps will ultimately harm farmers by pushing down dairy prices.

Simhon presented data indicating that the supermarkets force importers and producers to bear tens of millions of shekels in costs that do not directly relate to their products.

"When I'm forced to give a supermarket a 15% discount on a new product, I automatically increase its price by 15%," said one producer. "It's completely unrelated to the fact that the chain sells the product for twice what it pays me."