Israel Expands Controls on Dairy Prices

The new regulations should bring down the prices of more products and prevent evasion by repackaging.

Reuters

The government on Tuesday announced it is expanding price controls on dairy products to include milk sold in 1.5-liter and two-liter containers as well as butter sold in 200 gram-packages, white yogurts and 15%-fat sour cream.

In addition, manufacturers will no longer be able to charge more for products that are packaged differently but are essentially the same as price-controlled products.

The new rules, issued by the Agriculture and Rural Development Ministry’s pricing committee and its supervisor of prices, go into effect August 1. They will for the first time encompass Israel’s No. 2 and 3 dairy companies, Strauss and Tara, in addition to their bigger rival, Tnuva.

“What’s new in the document is that they told Tara and Strauss their products are also under supervision, since in the past, the price supervision order applied only to Tnuva products. This rule is the most dramatic for Strauss, which until now has managed to evade supervision. Now the leben, whipping cream and Sky [soft white] cheese have turned into price-controlled products,” said a senior dairy industry executive, speaking on condition of anonymity.

The regulations mark the latest effort by the government to bring down the cost of food and other consumer goods, a drive that has hit the dairy makers more than other segments of the food industry. Two weeks ago, the cabinet voted to open 20% of the market for hard cheeses, yogurt and cream to imported products duty-free as well as to eliminated duties on calf imports and set a quota of 5,700 tons of duty-free fresh beef.

The regulations, which will be enforced by the Economy Ministry, define what is “similar product” in the dairy market and under what conditions such products will come under price supervision. The change comes in response to the practice of the dairy companies of marketing products that are similar at highly variable prices.

“Strauss was able to sell milk that wasn’t under supervision because it is fortified or has higher fat content. Now they’ll have to prove it deserves an exemption from price controls,” the executive said. “Tara, for example, when it lowered its prices last time for 5% white cheese noted that it has cut them even though it is not subject to price controls. Now, they’ve been told that their products are under supervision. In addition, they’ve added their Lebanese eshel [yogurt], two-liter [containers of] milk, yellow delicatessen cheese, sweet cream, sour cream and white cheese.”

Executives at Tnuva, which is being sold to China’s Bright Food, said the new rules won’t affect the company, since the expanded price-supervision list is similar to the one already imposed on it. For example, cheese and butter in sizes not under price supervision are sold at exactly the same price per quantity as the price-controlled products. Strauss said is was studying the regulations and would act accordingly.

The new rules could affect the prices consumers see in stores, which are often higher than the manufacturers recommended prices, with the extra profit going to the retailers and not the dairies.