Discount Chain to Import Products Directly and Pass Savings on to Shopper

Victory plans to start parallel imports of personal care and other products

Oren Ziv

Victory, Israel’s smallest chain of discount supermarkets, is mounting a campaign to bring in more shoppers by promising lower prices on a range of products it will import directly from overseas, bypassing the officially authorized importers.

Victory said on Sunday that it plans to begin so-called parallel imports of personal care products like mouthwash, toothpaste and deodorants as well as chocolate, candy, pasta and other products. All told, these product categories amount to no more than 5% of its sales, but Victory promised that more products will be added.

“Buying products at more attractive prices overseas, including those already imported to Israel, should enable the company to sell them at its stores at more attractive prices than today,” Victory said in a statement to the Tel Aviv Stock Exchange.

The food retailer’s move comes as renewed griping among the public over the high cost of food has been revived by a Facebook posting last month showing that chocolate pudding in Germany costs a third of the price of Israel’s “Milky.”

The so-called “cornflakes law” approved in August will greatly expand the parallel imports of food products that require minimal health supervision, such as breakfast cereals and pasta, when it goes into effect next year. The idea is to break the monopoly of importers designated by overseas manufacturers that control local monopolies on imported brands.

Victory, which carries private-label brands, said the parallel imports would make it more competitive with other discounters, notably Rami Levy, provide a wider variety of products and improve profit margins at the same time.

Like other efforts aimed at lowering food prices, attempts at parallel imports have not been successful in the past. Other discounters like Hetzi Hinam and Osher-Ad engage in the practice from time to time, but its impact has been minor.

When mass protests broke out in the summer of 2011 over the high price of food and other issues, the supermarket chain Mega announced it would begin parallel imports of the popular disposable diaper Huggies from Turkey, selling them in its stores for what was then regarded as the low price of 36 shekels ($9.52). Mega, Israel’s second-biggest supermarket chain, promised it was the start of a long-term move to lower diaper prices, but the initiative didn’t last long. For several weeks prices of diapers fell on average to about 38 shekels at all the major chains, including Mega, Super-Sol and Rami Levy – but when the inventory at Mega ran out, prices went back up.

Sources close to Mega suspected at the time that Kimberly-Clark, the United States maker of Huggies, blocked further imports because it uses a system that awards country exclusivity to each of its importers/distributors.

Supermarket chains risk getting into conflict with the authorized importers when they undertake parallel imports, especially as they are often done as one-off purchases where a cargo of merchandise is available for sale, rather than through an ongoing contractual arrangement. In some cases, authorized importers have blocked the shipment of parallel imports when they reach Israel.