With over 90 percent of the market, the Central Bottling Company has long been the Israeli king of cola drinks. Its rivals, Tempo (Pepsi) and Jafora (RC), have never posed a real challenge to the official bottler of Coca-Cola in Israel.
In recent years, a new kind of competition has emerged from companies importing Coke and other Coca-Cola products. It’s the same product as Central Bottling’s, but they can sell for tens of percent less.
But Israeli shoppers may soon find those bargains hard to come by. TheMarker has learned that the Chief Rabbinate has decided not to renew the kashrut certificate for Coke products imported from Eastern Europe.
The Chief Rabbinate is the official body authorized to certify that a product made in Israel is kosher. Vis-a-vis imports, it accepts the certification issued by a select group of rabbinical authorities where the products are manufactured.
That had been the case for Coca-Cola products imported from Europe, which were certified kosher for 2018-19 from an approved organization called Ma’or Kashrut, according to the Rabbinate’s website. But the approval was not renewed for 2020.
Israel has eased rules in recent years for so-called parallel imports of products that local importers obtain from third parties abroad, rather than directly from the manufacturer. The aim is to introduce more competition and lower prices for categories where official importers or manufacturers of foreign products under license have a lock hold on the market.
Without a kashrut certificate, many Israelis won’t buy a product and many more won’t have access to it because supermarket chains and many restaurants and institutions only serve kosher products.
The official reason for the change is that an examination conducted by the Rabbinate with Coca-Cola executives and kashrut-granting authorities showed the organizations that had been approving imported Coke from Eastern Europe weren’t authorized to sign off on the concentrate for making Coca-Cola.
“A request was made to import Coca-Cola products approved by a kashrut organization recognized by the import unit of the Chief Rabbinate,” it said in a statement. “[But] an examination conducted by the kashrut unit found that ingredients without a kashrut certificate were being used. For that reason the importer was not given a kashrut certificate for the product.”
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The formula for the concentrate is a closely guarded trade secret. As the official Coca-Cola bottler in Israel, Central Bottling gets the syrup ready-made and makes soft drinks from it. The body that oversees the kashrut of the formula made in the United States is the Orthodox Union, whose OU symbol appears on more than 400,000 popular products in the United States.
The rest of the bottling process in Israel is supervised by the Rabbinate and a private certification agency of Heksher Rav Landa.
Central Bottling denies it had anything to do with the Rabbinate’s decision not to renew kashrut authorization for imported Coke. “Central Botting Co. does not deal with issues relating to parallel imports. Needless to say, the body authorized to address issues on kosher products is the Chief Rabbinate of Israel,” it said in a statement.
But Eliran Ben-Shlush, who imports Coca-Cola, is suspicious about the timing.
“For the last four years. I have been importing to Israel almost all of Coca-Cola’s products from Eastern Europe – Coca-Cola, Fanta, Sprite and beer. I import 35 containers a month. Each one contains 2,600 six packs of 1.5 liter bottles – 91,000 bottles a month and about 1 million a year,” he said.
“Until a few months ago everything went smoothly, then suddenly OU and Heksher Rav Landa tell the Rabbinate that the concentrate for the products I import isn’t under [kashrut] supervision,” said Ben-Shlush.
Until now, Ben-Shlush has sold only to restaurants, independent grocers, convenience stores and the like. The big supermarket chains have not bought his imports, even though he says he can sell to them at prices that are 30 percent less than what Central Bottling charges.
“Today, the supermarket chains lose money on Coca-Cola – it’s a loss leader,” he said, referring to products sold at a loss in order to lure shoppers to their stores.
The decision not to renew kashrut approvals only applies to Eastern Europe, but Ben-Shlush said it would deter imports from any other countries in the future. “If you make the claim that that Coca-Cola isn’t kosher anywhere by the U.S., South Africa and Canada, we won’t be able import Coca-Cola from anywhere else,” he said.
Central Bottling is one of the five biggest food and beverage companies in Israel. As a closely held company, controlled by the Wertheim family, it doesn’t releases figures on sales and profits. However, in December it was fined 39 million shekels ($11.4 million) by antitrust authorities for abusing its monopoly position in the cola market.
One of the reasons that the Competition Authority investigated the Central Botting was an internal company document entitled “Parallel import procedures” which instructed managers to stop sales of carbonated drinks to customers that also sold imported Coca-Cola products.
Supplies cut off
The authority found instances not only were customers threatened but actually had their supplies cut off. The authorities also found that Central Bottling had agreements with customers, such as restaurants, bars and kiosks, that allows it to back out of agreements.
In addition, it barred, or severely limited, customers from using the refrigerator cases provided by the company to stock competitors’ products. It also encouraged customers to remove Tempo’s and Jafora’s refrigerator cases.
Meanwhile, the Rabbinate had made it difficult for parallel importers to get kashrut certification for their products. After the so-called cornflakes law, easing rules on parallel imports of dry foods, went into effect in 2016, the Rabbinate made no special provisions.
Only two years later did it issue procedures for parallel imports. But importers say the rabbinate has made it difficult for them to get approvals. According to the Rabbinate’s own figures, of 52 applications for kashrut approvals on parallel imports since the law went into force, only 10 have been approved.
Industry sources say that when the Rabbinate sends a kashrut inspector to an overseas plant, they are often unfamiliar with the local market and environment.
“That manifests itself even in little details like sending an inspector to a factory on a Sunday when they should know that abroad Sunday is a weekend day and no one works,” said one source, who spoke on condition of anonymity, who ascribed the problem to lack of professionalism.
Israeli law gives the Rabbinate a monopoly on kashrut certification and the use of the label “kosher” on food products and restaurants. There are a host of private certifying agencies operating in parallel, most of them from the Haredi community. They can approve products but can’t explicitly say they are kosher.
Anxious that they might run into antitrust scrutiny, official importers have refrained from pressuring the Chief Rabbinate directly to deter parallel imports like Ben-Shlush.
However, many in the industry say they believe the private kashrut agencies are effectively blocking parallel imports by citing halachic (Jewish law) problems. The private agencies depend on revenues from their main customers – official importers and local manufacturers – and have an interest in protecting them from competition, they say.
In July, the state prosecutors’ economic division announced that it was considering indicting Rabbi Yitzhak Arazi, who had long served as head of the imports units at the Chief Rabbinate, subject to a pretrial hearing. Arazi, who had held the job for many years and had effective veto power over certificates, is alleged to have taken bribes reaching into the hundreds of thousands of shekels in cash and gifts from large number of importers seeking certification. In exchange they received speedier approvals and other benefits.