Food Sales in Israel Continued to Fall in First Half of 2016

Industry worried as decline runs counter to trend of rising consumer spending.

Shoppers in an Israeli supermarket, where the lights are dimming on the Era of the Free Bag.
Tomer Appelbaum

Israeli food sales continued to decline in the first half of the year even as overall consumer spending rose, worrying manufactures and retailers who can’t fully explain the decline – much less offer a solution.

Preliminary data from Storenext, which tracks sales at 2,150 supermarkets around the country, found that sales of food, beverages, toiletries and cleaning products were down 0.6% in the first half of the year, compared with the same time in 2015. Given that Israel’s population grows by about 2%, the drop represents a much sharper per-capita decline.

Food industry executives say they are worried because the declines include basic food items, in which some categories have been seeing very big drops, and the government said last month that consumer spending rose at a 4.8% annual rate in the first quarter.

The Bank of Israel sees spending rising 4.3% this year, down from 4.9% in 2015, but still a high pace, as unemployment falls to record lows and real wages are rising.

“There’s no doubt that today the food industry is in a recession, which is due to a slowdown in per-capita spending,” Itzik Saig, CEO of Osem, the Nestle Israeli subsidiary that makes a wide range of foods from salty snacks to hummus, said last month.

“It’s difficult to explain why a sector that is generally immune from a recession is suffering so much. I’ve been in the industry 25 years and don’t recall anything like this.”

Industry experts, however, point to growing consumer awareness after the 2011 social-justice protests, which has caused shoppers to compare prices, avoid overpriced top brands and more recently shun foods – most notably processed meats and prepared salads – regarded as unhealthy.

Sources said food sales alone would likely show an even sharper drop that the overall category. One indicator is that sales in the run-up to the Shavuot holiday in 2016 were down 3.2% from the pre-holiday period in 2015.

Moreover, food sales were down 2.7% in the first four months of the year for which there are final figures, while sales for all consumer products, including beverages, toiletries and cleaning products, were down a slightly less at 2.5%.

The only good news was that sales turned 2.2% in higher in May, even though the Shavuot holiday last year fell during the month while this year it occurred in June.