Quite a few Israeli businessmen have enjoyed watching David Wiessman, the owner of the Dor Alon group, squirm in the face of the pressure of the ultra-Orthodox boycott against his supermarket chains. Wiessman's aggressive business practices have made him many enemies over the years.
One of these enemies, Shalom Fischer, was Wiessman's former partner - and present competitor. Fischer is one of the owners of Israel's largest supermarket chain, Super-Sol, and he seems to be particularly enjoying the situation. The two have been bitter enemies since the time they controlled Blue Square, the number-two supermarket chain, and could not get along even for a minute.
Fischer is religious - and is Matthew Bronfman's partner in business. Bronfman and Fischer split from Wiessman three years ago, and since then they have not missed a single opportunity to get back at their former partner. Wiessman is convinced Fischer is behind the boycott, and last week he even hinted at it in an ad he took out in the newspapers. Of course, without naming names.
The story behind the boycott is the opening of the Dor Alon's AM:PM chain of convenience stores on Saturday, Shabbat. Wiessman, who also controls Blue Square, bought AM:PM a year and a half ago, and overnight laid himself open to a myriad of pressures from the ultra-Orthodox sector. As for Blue Square, they have never had a problem since they are closed on Saturday and sell only Kosher products.
But AM:PM is another story altogether. The chain started and grew in the secular bastion of Tel Aviv, and its business model is based on being open at hours and days appropriate for a city which never stops - this clearly includes Saturdays. Wiessman even tried being nice about it, and removed the non-Kosher products from the shelves. But that was not good enough - the ultra-Orthodox wanted more. In the meantime, Wiessman is showing signs of surrender, and last Saturday he closed a number of AM:PM branches for the day.
Standing on the sidelines and watching the unfolding events is another of Wiessman's competitors - Nochi Dankner. The more pressure put on Blue Square, the bigger the opportunity for growth in Dankner's Super-Sol.
Dankner owns dozens of companies but has a particular fondness for Super-Sol. It provides him access to hundreds of thousands of Israelis who shop in the supermarkets. It provides him access to 228 points of sale spread out over the entire country.
Super-Sol has managed to create a lot of value for Dankner when it bought out the failed number-three supermarket chain Clubmarket. It has also divided the chain - and brand - into three: Super-Sol Deal, Super-Sol Sheli (My Super-Sol) and Super-Sol Big. In January 2007, Dankner received an offer he couldn't refuse: One from Fischer and Bronfman to buy Super-Sol for $1.09 billion. The deal, which never bore fruit - would have been Dankner's most successful deal ever and made hundreds of millions in capital gains for him.
As is his custom before every big deal, Dankner prepared a notebook full of all the pluses and minuses of the sale. The lists included some purely business considerations such as profits and cash flow; but it also included other considerations such as community relations and promises he made to Super-Sol employees that he would not sell.
Dankner consulted with dozens of people over the deal. Half said sell, and half advised no. Among those on the "no" side was Rabbi Yisrael Ifergan, known as the "X-ray rabbi" for his medical healing and advice, and with whom Dankner consults before any significant business move. The rabbi also said Super-Sol was one of Dankner's portfolio's strategic assets.
The food business, more than any other business, needs rabbis and other religious officials. David Wiessman learned this the hard way. Supermarket and retailing chains give the owners influence and power over suppliers, manufacturers, customers and consumer patterns. And when we talk about the largest supermarket chain in Israel, with a 38% market share, the power and influence are even stronger.
Dankner listened to the rabbi and others and did not sell out. But two months later, he made an even more successful move: He sold Bronfman and Fischer 20% of Super-Sol for $214 million, 30% higher than the stock's market value.
This left Dankner with control of Super-Sol, with a nice influx of cash and two partners who know the inside of his biggest competitor's business extremely well.
The bonus for Dankner is that his two new partners also have a desire for revenge against Wiessman. Whether Fischer is behind the ultra-Orthodox boycott of Wiessman, or not, it is clear Super-Sol is the big winner from it. And if Super-Sol is the winner, then Dankner is now in the industry's strongest position. He has two partners who would love to take over Super-Sol and continue their war of revenge against Wiessman, their former partner. As Blue Square gets further and further stuck in the mud, the price the two will have to pay for Super-Sol will rise.
This complicated story teaches us a few things about pressure levers in the business world.
The first is the power of revenge. We have seen quite a lot of businesses founded out of revenge, others toppled because of revenge and businessmen who have gotten into deep trouble as a result of revenge.
The Wiessman-Fischer-Bronfman saga is far from over.
The second lesson is about the limits of power. When AM:PM was just a small chain of Tel Aviv convenience stores owned by three young men, the ultra-Orthodox world took no interest. But the minute Wiessman entered the picture and added AM:PM to his hefty portfolio of businesses, the ultra-Orthodox sat up and took notice.
The bigger you are, the more you can be squeezed.
The third lesson is about the hypocrisy of the ultra-Orthodox. Often the sector draws praise for its ability to organize as consumers. This time, however, they don't deserve any such praise.
True, there is a split within the rabbinical establishment in the ultra-Orthodox community over the boycott of Wiessman's businesses, but no one from the ultra-Orthodox world has yet been able to explain why they are boycotting Wiessman.
The rabbis have never declared a boycott against ultra-Orthodox tycoons Lev Leviev or Moti Zisser, who also operate some of their businesses on Shabbat.
It seems David Wiessman needs to take an introspective, self-searching look at his books and see if he has contributed enough money to yeshivas and the rabbis.
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