Israeli food makers say the boycott ordered by the Palestinian Authority this week against their products isn’t likely to have much impact on their sales in the West Bank, even if the boycott is strictly enforced.
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“The impact of a boycott like that on the big companies’ bottom line will be infinitesimal, even zero,” said one industry executive, who asked not to be identified. “In the end, they’re punishing themselves, and they’ll feel the pain because they need Israeli food products more than the companies need their purchases.”
The indifferent reaction came after the PA announced Monday it would bar products made by five of Israel’s biggest food companies — Strauss Group, Tnuva, Jafora-Tabori, Osem and Prigat — in response to Israel’s decision to stop handing over tax revenues it collects for the PA.
Palestinian merchants were given two weeks to sell off any products from those manufacturers that they have in stock.
Of the five companies, Tnuva stands to be the biggest loser if the boycott is rigorously enforced. Israel’s biggest food company sells between 200 million shekels and 250 million shekels ($52 million-$65 million) of goods in Palestinian-controlled areas, mostly basic dairy products. Still, that represents less than 3% of its total sales.
Osem, whose product line includes prepared salads and salty snacks, gets less than 2% of its sales, or about 70 million shekels’ worth, from Palestinian shoppers. Strauss sells mainly ice cream and other high-end dairy products, for which there isn’t much demand in the West Bank. It isn’t considered a leading brand there, even though it is Israel’s second-biggest food maker.
“The products they sell in the PA are the most basic of the basic, and they sell them at low prices because they know consumers don’t have money to spend,” said the industry executive. “Profitability is much lower than in Israel.”
Nevertheless, at least one Israeli food executive expressed concern about the timing of the boycott, noting that it was coming as food sales in Israel are declining. “It’s like Murphy’s Law: The boycott is coming just as there’s a slowdown in growth and declining sales, which is already pressuring companies,” he said.
An Israeli executive was skeptical the boycott would succeed because of the difficulties of enforcing it. But, he added, “If the boycott really takes hold, it means losing not a little money. The five big companies have combined sales to the PA of about 1 billion shekels a year.”
Israeli food makers supply about 70% of the processed food in Palestinian areas.
Palestinians have the most difficulty accessing milk, which unlike other dairy products can’t easily be imported or sourced from local dairies. Palestinian dairies don’t have the production capacity to serve the entire Palestinian population, and in any case buy raw milk from Tnuva.
“Palestinians will have a hard time without Israeli food products, so I doubt the boycott will be widely observed for very long,” said Musa Hasadiyah, CEO of Israeli Arab marketing company Albustani Advertising. “The main problem is dairy products, because the PA is filled with imports from Turkey — sweets, pasta, soft drinks, etc.”
He said the PA hoped the boycott would give Palestinian food manufacturing a chance to develop.
Magdy Kitani, CEO of the Israeli Arab supermarket chain King Sotire, predicted the boycott might be effective. He said consumers aren’t interested in the boycott, but said it would likely be more widely observed than previous calls because it was called by the PA.