Four months after the discount supermarket retailer Yenot Bitan purchased the country’s second largest supermarket chain, Mega, including predominantly urban Mega Ba’ir stores, it is already clear that the move did not increase supermarket competition in the country’s urban areas. Prices at supermarket chains operating in the cities remain high, a survey that TheMarker conducted with data from the MySupermarket price comparison website has revealed. The price comparison included more than 70 items.
After it encountered severe financial problems, most of Mega’s stores were sold to Yenot Bitan, although in some locations, antitrust authorities required that they be sold to other retailers, where Yenot Bitan already had a substantial presence. Mega had been second only to Super-Sol when it came to its presence in the supermarket industry.
TheMarker’s survey looked at prices at Yenot Bitan, Mega Ba’ir, Super-Sol Sheli and Rami Levy supermarkets a day before Yenot Bitan took ownership of Mega on July 1. They were compared with prices on November 6, making use of the supermarket retailers’ data on the MySupermarket website.
Prices at Mega Ba’ir stores on items compared did not go down on average, and instead actually rose 0.3% compared to the prices prevailing before Yenot Bitan took over Mega. The entire basket of items was priced this week at 1,287 shekels ($338), precisely the same as the cost of the items at Super-Sol’s urban format stores, Super-Sol Sheli. The fact that the prices were the same is arguably a reflection of the limited choice that urban consumers have, in most cases being relegated to one of the two chains in the country’s urban areas.
Super-Sol Sheli’s price for the basket of items did reflect a small, 1.5% drop in prices in November compared to late June, however. It is possible that, although prices at Mega Ba’ir did not drop after it was taken over by discount food retailer Yenot Bitan, it did at least provide some competition for Super-Sol Sheli, as reflected in the small drop in average prices there.
Mega had been ailing financially for many years and as a result, before its sale to Yenot Bitan did not present Super-Sol Sheli with major competition. Just prior to its sale, Mega was run by a court trustee and many items that it would have previously stocked were not on the shelves. The expectation, however, had been that once it was sold, Mega would provide stiffer competition for Super-Sol Sheli. A drop of 1.5% was far less than what industry observers had in mind.
In fact, in August, Super-Sol CEO Itzik Abercohen even acknowledged that he had not seen Yenot Bitan lowering prices or increasing competition since its takeover of Mega.
The Rami Levy chain has been a leader in the discount supermarket scene and it should be noted that the survey found its prices on average were 14.7% lower than Super-Sol Sheli and Mega Ba’ir.
The survey also revealed that not only did Mega Ba’ir’s prices not go down after Yenot Bitan purchased the stores. In fact, prices at Yenot Bitan itself rose an average of 1.3% on the items checked. Since Yenot Bitan has revenues of more than 2.8 billion shekels a year without Mega, even a price rise of 1.3% represents 36 million shekels in additional annual revenue.
Initially it was proposed that Mega be sold to a lot of different buyers in the hopes that this would increase competition in urban areas, but in the face of resistance by Mega’s workers’ committee, most of the chain was sold to a single buyer, Yenot Bitan. Another suggestion was that the entire chain would be sold to Rami Levy, but that was scuttled by antitrust authorities over concern that it would limit competition. The ownership of 113 Mega stores, more than 100 of which were generally smaller urban-format Mega Ba’ir stores, was transferred to Yenot Bitan on July 1. Sources have said that Yenot Bitan intends to keep its own Yenot Bitan discount brand locations separate from the Mega stores that it acquired.
There may still be new competition coming to Israel’s cities, however. Sources say that Rami Levy, whose locations for the most part are larger stores, plans on entering the smaller urban format supermarket sector in the coming months, which could set off a price war. When Rami Levy had expressed an interest in buying Mega, it came with a promise to lower prices at the chain by at least 10%.
In response to TheMarker’s survey results, Erez Eisenberg, marketing VP at Yenot Bitan and Mega, said Mega stores have maintained a fair pricing structure for neighborhood stores. Noting that his company has only owned the Mega stores for four months and was still studying the situation, he added that the “quality” of the stores’ promotions had improved since the takeover. He also noted that the survey checked prices on only a small portion of the 15,000 items that Yenot Bitan stores sell, so a price rise of 1.3% on so few items was not an indication of a trend.
For its part, Super-Sol said the 1.5% price drop at Super-Sol Sheli was the result of the increased availability of promotions and benefits provided to its customers. The Antitrust Authority replied in part that four months is too short a period to gauge the effect of the sale of Mega on competition.
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