The Antitrust Commission's investigative department has unearthed evidence of collusive action that confectionery company Elite took to knock British newcomer Cadbury out of the local chocolate bar market, which it dominates. Having completed its investigation, the commission's legal department must now decide if there is sufficient evidence to file suit against Elite and its CEO Giyora Bar Dea for breaking the antitrust laws.
Antitrust Commissioner Dror Strum announced yesterday that his offices had completed the investigation into the chocolate wars, and had concluded that Elite had abused its position as a monopoly, and its dominant position vis-a-vis with retailers of chocolate bars - supermarkets and small grocery stores - offering discounts and benefits for selling Elite's chocolate brands, and removing the rival chocolate.
Elite food company was declared an official monopoly in the chocolate and cocoa sector in 1988. As such, it is forbidden to abuse its market power by harming the competition.
Sales in the chocolate field in Israel are estimated at around NIS 1 billion a year, and Elite has captured around 70 percent of this. Once its status as a monopoly was declared, Elite was forbidden to enter any exclusive arrangements with its clients (the retailers) that would involve shutting out the minority competitors.
In December 2002, Carmit began marketing products of the British chocolate giant, Cadbury, and since changed its own name to Cadbury Israel. The British firm's entry into the Israeli market was launched with great fanfare, and a commensurate advertising budget. "We will invest $2.5 million in advertising in the coming months," said Rael Goodman, Carmit's CEO, at the time, "and a similar amount on marketing." The aims were not moderate; Cadbury Israel aimed to capture 12 percent of the market, at first, and 25 percent in the near future.
The British chocolate brand hit the television screens, the papers, the billboards and the supermarket shelves. It began to worry the local monopoly, and within a few weeks of Cadbury entering the fray, Elite called a press conference, and announced it was cutting prices by 4-15 percent of those of its products which directly compete with Cadbury.
But the problem was not price, or image. It was shelf space and the elbow power to get it. Carmit is only a small firm, and had trouble getting Cadbury's chocolate bars onto the shelves. Two months after a lavish advertising splash, Carmit still could not convince the chains to devote more than 35 percent of their shelf space to the U.K arrival. In many cases, the store would not let Cadbury be displayed next to Elite products, and Carmit had to set up their own stand-alone units. These were the type of obstacles which Strum's investigation uncovered.
In the popular small grocery stores, the situation was even more difficult. Cadbury bars were even less evident, tucked away, or not to be seen at all. As a result, Cadbury lost sales in its first winter in Israel. To compound its problems, the company failed to win kosher certification for its products before the Passover holiday, a bumper sales time.
Half a year after launching its Cadbury Dairy Milk against Elite's traditional red cow bar, Cadbury had captured only 3 percent of the market.
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