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The major supermarket chains are trying to muscle in on Super-Pharm's traditional product base. According to sources in the sector, the big chains - Supersol, Blue Square and Clubmarket - understand that they are losing customers, not only to the cut-price out-of-town megastores, but also to Super-Pharm. Thus, they are trying to win back customers with special prices, attacking the pharmacy chain in its traditional field of pharmaceuticals, toiletries, cosmetics and baby products.

In retaliation, Super-Pharm is out to strike special deals with its suppliers including exclusivity over certain products. This was clearly seen in a recent spat, when Super-Pharm pulled Materna's baby food products off its shelves as the supplier would not grant it similar deals to other stores. Though no details were released on the dispute, when Materna's products returned to the store's shelves last Friday, they were under the same special offer seen in New Pharm and Jumbo. Someone had clearly flexed muscle, and won.

"Super-Pharm is not out to earn wider retail margins through higher prices, like the food store chains, but by increasing market share," said one of the sources.

Yair Asa'el, VP of marketing and trade at Super-Pharm, confirms that competition has heated up, but added that the store has maintained its market share. Some major suppliers, though, contend that Super-Pharm has been losing out to the large supermarkets and private stores too.

In 2003, Super-Pharm saw 9 percent growth in sales with revenues of NIS 2.1 billion. It reported 8 percent growth in cosmetics and drugs, 5.5 percent growth in toiletries. As a privately held company, Super-Pharm is not obliged to release full details, but it is clear that the 9 percent boost in sales came when the major retail chains saw sales fall.