Mega, Supersol May Have to Sell a Dozen Branches

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Mega outlet in Rehovot: Also big in red inkCredit: David Bachar

Israel’s two biggest supermarket chains, Mega and Super-Sol, may have to sell off 15 to 20 branches in areas where there is very little competition, once the new Food Law goes into effect at the beginning of 2015. A study by the Antitrust Authority, which was published Wednesday, found a number of regions where the two chains enjoy over a 50% market share.

Some 7% of Israel’s 700 supermarkets are located in areas with very limited competition. Mega and Super-Sol, which have both been troubled by low profitability and restructuring plans, have a total of 47 stores in these areas. Next year the Antitrust Authority could ask the Antitrust Court under the new law to require the chains to sell or close a third of these stores.

The new law defines especially high concentration - or low competition - as a situation in which a specific chain has at least three stores in an area and over 50% of the market. The chains could sell one of the three branches, and would not be able to open new stores in the area without Antitrust permission.

The Antitrust Authority will soon ask the supermarket chains for more up to date information, said sources close to the Authority.

The problem for the supermarket chains is that the branches in noncompetitive areas are assumed to be by far their most profitable. For example Super-Sol controls much of the business in Ramat Aviv as does Mega in Givatayim — both of which are considered to be expensive areas to shop, reports the Israel Consumer Council.

Earlier this week, Super-Sol announced it would close 15 money-losing stores and fire hundreds as part of its cost-cutting plans. Mega is also closing stores and cutting back.

Mega opening new brand in Bnei Brak

In an attempt to win back profitable business, Mega will open a new line of supermarkets aimed at the Haredi population in cooperation with Haredi millionaire Arye Wolfson, TheMarker has learned.

The new chain will be named “Tachlis,” a Hebrew slang word taken from Yiddish which means “practical.” The first branch will be opened in Bnei Brak next week. This store is considered a pilot and expansion will depend on its success.

Nati Tucker contributed to this report.

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