Small chains to sell cheap dairy
Seven private retailers join forces to take on Tnuva with HaMutag private-label cheeses, made in Israel and imported.
A group of seven private retail chains are joining hands to produce a private-label brand of dairy to compete with the giants Tnuva, Strauss and Tara - and sell for some 15% to 25% less, the retailers vow.
They plan to launch their private-label dairy products in the first quarter of 2012.
The seven are Rami Levi Shivuk Hashikma, ABA Victory, Mahsanei Lahav, Super Dosh, Big Zol, H. Cohen Netivot and Mahsanei Hashuk. They already collaborate on producing private-label products, branded "HaMutag" ("the brand" ), which is manufactured for them by the company Brand For You.
Now Brand For You is allying with a small dairy company called Hamoshava to produce the private-label dairy products for the seven private chains that sell HaMutag.
To begin with, Hamoshava will be producing 16 types of white cheese made from cow and sheep milk. Among them will be Bulgarian and other salty white cheeses, labaneh, and cream cheese in a variety of flavors.
In the next stage, scheduled for the second quarter of 2012, the stores intend to sell HaMutag yellow cheeses, imported by two companies: Willi Food, which will bring cheeses from western Europe, mainly from Denmark, and Tel Aviv-based A. Seyman Trade, bringing cheeses mainly from France, says Rafi Sheffer, CEO of Brand For You. The stores will sell the cheeses pre-packaged, as well as by weight at the stores' delicatessen counters.
Investment in the first two stages of the assault on the established dairy companies is estimated at NIS 3 million.
As for prices, Sheffer promises that the pre-packaged products will cost 20% to 25% less than parallel products made by Tnuva, which is Israel's biggest dairy and fresh-foods company, and will also be cheaper than products made by small dairy companies Gad and Zuriel. The cheeses sold over delicatessen counters at the stores will be 15% to 20% cheaper, Sheffer says.
Brand For You aspires to achieve a 6% share of Israel's dairy market in a year of launch and to reach 20% in three years.
At a third, stage, which isn't scheduled yet, the plan is to offer HaMutag yogurts, puddings and even milk, Sheffer says, adding that when ready, the company intends to export as well.
Motivated by protest
The inspiration to diverge into dairy came from the socioeconomic protests this summer, which sent Israelis into the streets by the hundreds of thousands to demonstrate against the high cost of living. As consumer awareness increased this summer, so did sales of HaMutag products. "From June to August, sales increased by 15% to 20% compared with the previous months," says Sheffer. By September-November the increase was 35%, mainly because consumers are losing their reluctance to change brands, he believes.
Indeed, Tnuva, once one of Israel's most beloved companies, has become one of the most loathed: Israelis felt betrayed by it, a survey of brands conducted in September showed. TheMarker's annual survey of the leading brands in Israel, conducted with research company MarketWatch, looked at the biggest four dairy companies. Strauss had taken pole position, though it too found itself targeted by protesters over its prices. It was followed by Tara and Gad. Tnuva had traditionally been No. 1 but found itself in last place: While people continued to buy its products, they professed fury at the company.
The private seven-some weren't the first: The Mega chain, owned by Blue Square, recently announced it would be importing cheeses through Willi Food. But for the time being it's been selling these cheeses only on its deli counters, not pre-packaged on shelves. Super-Sol, the biggest retail chain in the land and a subsidiary of Nochi Dankner's IDB Group, has been importing yogurt from Greece but it isn't a private-label brand.
"All the big chains around the world have private-label brands, which are a highly successful sales category," says Sheffer. The biggest overseas chains make their own dairy but Israel is too small for that. He adds that food manufacturers Osem and Strauss are perfectly happy to make private-label products for the international market, but won't do it for the home market.
Another thing that has changed is that small dairy companies in Israel have recognized the increasing power of private-label brands among consumers and are losing their fear of expanding in that direction, Sheffer says. Importers also found inspiration in the spirit of protest and expanded their range of products.
What next? Sheffer thinks the big food manufacturers will start making low-cost, private-label products for the home market too: Tnuva, Strauss, Osem and the like will recognize the new reality and will change rather than steadily lose market share, he predicts. Or at least they will start making lower-cost products that will compete with private-label brands.