diapers - Nir Kafri - 24082011
Buying Turkish diapers at a Mega store. Photo by Nir Kafri
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After a mere six week or so, the great Diapers Dispute between two business groups, headed by two of Israel's most powerful businessmen, is over. Dudi Wiessman's retail chain Mega has achieved a meeting of minds with Hogla-Kimberly, which is controlled by Nochi Dankner's IDB group through Hadera Paper. During the snarl-fest, Mega had independently imported Huggies diapers from Turkey. Industry sources believe that with the hostilities now history, Mega will stop doing so, and once it finishes the inventory in hand of Turkish diapers, it will resume buying from Hogla-Kimberly.

In other words, the price of Huggies is likely to return to former - higher - levels at Mega chain stores.

Also, parents should brace for the aggressive discounts on Huggies diapers at competing supermarkets to stop as well. The chains had reacted to Mega's low price with special bargains.

All that said, Mega denied this would happen, saying it would continue to market imported Huggies diapers, which can be found at all its branches.

It was at the start of July that Mega announced it would be parallel-importing Huggies from Turkey, where they cost less, and sell them at its Mega-Bool heavy discount outlets for NIS 36 per package, well below the price of Huggies made in Israel by Hogla-Kimberly. Mega stated that its intent was to lower costs for consumers.

But sources near the Diaper Discord said the real reason was a months-long spat between Hogla-Kimberly and Mega after Mega unilaterally decided to bill its various suppliers, including Hogla-Kimberly, for its "eroding profitability." It did so by not paying its suppliers in full.

Hogla-Kimberly told Mega that if it didn't pay the money in full, it would stop giving Mega discounts or would boycott it entirely. It also unleashed a lawyer, and a brisk correspondence began.

Note that Hogla-Kimberly is a member of the IDB group, which owns a rival retail chain, Super-Sol. IDB owns 49% of Hogla-Kimberly through Hadera Paper; the international Kimberly group owns the other 51% interest. Mega is Super-Sol's biggest rival.

Sources in the know about the spat say Blue Square, through which Wiessman owns Mega, has decided to pay most of the millions of shekels it withheld from Hogla-Kimberly. "Mega has already more or less returned the money. They did not explicitly reach an agreement that Mega would stop importing diapers from Turkey. But I think that the Turkish diapers are going to mysteriously disappear from store shelves," said an insider near the IDB group. "In any case, the purpose of the parallel import was to pressure Hogla, that's all."

Other sources say Mega isn't going to pay the outstanding amount, and that's that. But the source at IDB points out that the discord has cost both companies money, on lawyers and on advertisements against each other (in one, Hogla-Kimberly said the diapers sold at Mega were "less absorbent" ), and they want it to end. "That's what happens when you play chicken. Ultimately Hogla-Kimberly won because Mega understood this battle wasn't good over time."

Another source says Mega realized it couldn't sustain Turkish imports reliably. More than 300 million Huggies diapers are sold each year in Israel, and Mega is responsible for 15% of that, which translates into 45 million a year. At some points in time during the last six weeks, some sizes of diapers ran short at its stores.