Super-Sol Deal branch in Jerusalem.
Super-Sol Deal branch in Jerusalem. Photo by Emil Salman
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Sales of consumer goods dropped 2% in May and June compared to the same period last year. Consumer goods include such items as food and drinks, cosmetics and household products.

Figures from StoreNext Israel, which collects sales data from stores, for the first two months of 2012 show a 5.7% increase in consumer goods sales compared to the first two months of 2011 in monetary terms, and a drop of 0.4% for the March-April period. All told, consumer goods sales rose by 0.9% in the first six months of 2012 compared to the same period of 2011 - well below the rate of population increase, meaning a per capita drop in consumer spending.

"I don't remember a case where there was a 2% drop in sales over two months, and that is despite a 2% annual rise in population," said a senior executive at one of the big supermarket chains. "We are in a recession in the food industry and feel it all the time," he added.

Some of the drop in sales stems from lower prices. While the consumer price index for the first half of 2012 was 0.3% higher than for the same period of the previous year, in the past few months prices have fallen and May and June showed a 0.7% drop in prices.

In addition, consumers have changed their buying habits, which has added to the economic slowdown.

The average household spent 0.4% less in the first six months of the year than in the same period of 2011: NIS 10,177 compared to NIS 10,220. This compares to 4.7% growth in such spending in 2011 compared to 2010.

Low-price sales channels also grew at the expense of traditional ones. Discount supermarket chains grew to 61.2% of all such sales in the first six months of 2012, up from 60.7% in the same period of 2011 and 59.6% in 2010. Smaller supermarkets, corner groceries and big city stores saw a drop to a 37.2% market share in the first half of the year, compared to a 38.8% share in the same period of 2010.

Consumers also changed their buying habits in other ways. They have been moving to basic brands, as opposed to premium brands.

The change is evident not in only in the price, but also in the number of items sold - for example in such categories as oil, grains, macaroni, cheeses and bread. Consumers are switching to store and private label brands, which now have a 5.6% market share, up from 5.3% in 2011 and 5.1% in 2010.

Another reson for the slowdown in consumer product sales is a slackening of companies' marketing campaigns. For example, the number of new products launched in the first six months of 2012 fell 13.2% from the same period of 2011; and advertising spending fell 12.5%.