Almost a month after news leaked that some of its breakfast cereals were contaminated by salmonella, sales of Unilever Israel’s products in the category are still being shunned by shoppers and showing double-digit drops in sales.
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- Food makers in Israel kept tainted products secret
Sales of Telma cereals were down an average of 83.4% in the week of August 14-20, compared with their weekly average in May-July before the problem surfaced, according to data compiled by the market research firm Nielsen.
The contamination only affected three brands of Telma cereal – its Cornflakes, and another version of the product aimed at Haredi shoppers, and Cocoman children’s cereal. But oddly enough those brands have seen smaller sales declines than other brands.
Telma Cornflakes sales are down 65.2% and Cocoman’s have fallen 32.3%. The biggest drop was for the children’s cereal Ugi, whose sales plunged 87.3%. Telma Branflakes and its Kariot children’s cereal also saw big drops of 78.2% and 77.7%, the Nielsen figures showed.
Unilever had initially denied there was a problem and later said none of the tainted products had left its factory. Although no one has reported to have been sickened, Unilever did in fact send one consignment of Cornflakes out and failed to properly store and quickly destroy the contaminated products.
“Unilever’s behavior has hurt it dramatically in terms of public confidence in the company,” said Avi Benayahu, a strategic consultant to the food industry. “The public is prepared to accept that mistakes happen, but when it comes to their health, it wants the problems to be reported quickly and it has zero patience for keeping things under wraps or lying.”
He said big companies like Unilever Israel, the local unit of the giant British-Dutch food company, are often punished more heavily than smaller companies.
Unilever loses dominance
Consumer distrust has hit Unilever in a market where it has traditionally been the dominant player. Before the crisis, it controlled 53.9% of the cereal markets in revenue terms, but last week its share had shrunk to just a third. The week before that it had been just 29.9%, according to Nielsen.
The main beneficiary has been Osem, a unit of the Swiss company Nestles, which boosted its share to 34.3% from 21.9%. Imported Kellogg’s products boosted their share to 5.7% from 2.9% and store brands to 5.2% from 3.8%.
Unilever isn’t alone. Shamir Salads, a maker of hummus and other prepared salads and dips which also conceded that some its products had been contaminated by salmonella, saw its sales drop 74.7% last week, Nielsen reported.
The source of the problem was another company providing ingredients to Shamir, which used it in its own products and to make private-label products for the Super-Sol and Yohananoff supermarket chains. Sales of private label salads are down 70.5%.
The steep declines come against a background of drooping sales for prepared salads that preceded the crisis amid what observers say is tightened health awareness on the part of Israeli consumers.
Motti Scharf, a media adviser, said he was optimistic that Unilever and other food companies would recover.
“It’s premature to come to any conclusions about the impact of the latest crisis because a few weeks means nothing in a world where the consumer memory, particularly in Israel, is very short,” he said. “Right now, the media guns have fallen silent. The latest recalls have gotten less attention than the first ones by Unilever and Shamir Salads. I assume it’ll all blow over in the next few weeks.”
Benayahu said Unilever could win back the public’s confidence by outlining plans to prevent contamination problems in the future and offer discounts. “It will be able to recover within a few months, although it may not be a complete recovery,” he said, noting that the company has other product lines that haven’t been affected.