Clubmarket recently became the first supermarket chain to market its own dairy line, selling Gad Dairy products under the house brand Premier Club.

Clubmarket has launched a line of white, salty cheeses, and will soon expand it to include cream cheeses, ricotta, and yellow cheeses, according to Gershon Weisman, vice president for merchandizing & buying at Clubmarket. He added that the company is also considering launching a line of drinking milk.

Supersol CEO Effie Rosenhaus had threatened to sell Gad products under its own label during the Strauss-Supersol spat in early 2004, but that never panned out. Retail sources indicated that chains have desisted from entering the market in order to avoid a confrontation with dairy powerhouses Tnuva and Strauss.

While Weisman insists that the major dairies have nothing to fear, because "both we and they will benefit", the new line does increase competition over shelf space. Gad's agreement to produce a house brand is due to its difficulty in surviving without expanding production volume, sources said, pointing out that limited shelf space usually squeezes out smaller lines.

Israel's dairy sector is worth NIS 5 billion, and volume grew a slight 0.5 percent last year.

Tnuva dominates the dairy market with a 68 percent share. Strauss is second, but does not participate in the NIS 1 billion drinking milk market, the single largest category in the dairy sector.

Salty cheeses, like feta and Bulgarian cheese, bring in NIS 330 million annually, on volume of 10,500 tons.

Clubmarket has set out to grab a 10 percent market share in the niche market of salty cheeses, Wiseman said. The chain maintains an annual turnover of NIS 4 million in this category. Clubmarket is investing to promote its Premier Club house brand and planning to add new fresh food products, Weisman said. It will expand its egg line after a successful pilot with its "super fresh egg" brand. While the brand accounts for 7.5 percent of the chain's sales, Clubmarket's goal is to increase that share to 12.5 percent by the end of 2005, Weisman added.