Trader Joe's Style Grocer Comes to Israel: Low Prices, but No Brand Names

You won’t find Coca-Cola or Osem ketchup on the shelves or special sales, but the owners of the newly launched Ehad (“one”) supermarket chain promise that its no-name products sell for 10% to 20% less than equivalent items at Israeli discount chains.

The first Ehad branch, with 1,000 square meters of floor space, is set to open this week in Ra’anana. A second store, in Netanya, is scheduled to open in March. The operators plan to add a new outlet every quarter.

The brainchild of Iri Shahar, former CEO of the retail group Fishman Chains, Ehad is modeled on German discount chains Aldi and Lidl, which sell little-known brands and where items are displayed in their packing cartons.

Shahar said he doesn’t believe the absence of familiar, trusted brands will deter Israeli shoppers, who during the 2011 social protests made known their disgust with high prices.

“I’m assuming that the intelligent Israeli consumer, who shouted in protest three years ago and more recently when he found Milky was selling in Germany for a shekel, one who compares prices and has trouble getting through the month — even the upper 10% — will come to us,” Shahar said, referring to the popular refrigerated dessert.

While each branch will carry only 1,000 items and some basics such as baby food and instant coffee will not be offered, Ehad will offer other attractions. “The checkout lines will move faster in our stories because the cashiers don’t weigh items or offer register specials, because there aren’t any,” said Shahar.

Ehad is the latest salvo in the price wars that have brought down grocery prices in Israel over the last year and taken a heavy toll on the leading chains, Supersol and Mega, as they try to compete with discounters like Rami Levy.

Razors became the latest battleground in the price wars this week, with the Victory discount chain vowing to slash its price for the Gillette Fusion to just 45 shekels ($11.50) from Monday. The item sells for 92.80 shekels at Supersol.

“This is a product that every man uses and curses every time he buys one. Now he won’t need to curse because he’ll be paying $11 like they do abroad and not double as they do in Israel,” said Eyal Ravid, a one of Victory’s owners.

Rami Levy fired back, cutting the Fusion’s price to 42.90 shekels on Sunday, down from 77.50 shekels.

Supermarket executives warned that it was unlikely Fusion prices would stay low for long. Victory was able to buy the razors wholesale cheaply from an unofficial supplier rather than the manufacturer in a practice known as parallel importing. But unofficial suppliers can’t guarantee a steady supply of all items.

Ehad will sell cottage cheese, whose price helped spark the 2011 protests, for 4.90 shekels. It won’t be from big dairies Strauss or Tnuva but a small maker called Ha’arava. The price is far below the 5.80 shekels that Supersol charges online for Tara but more than the 4.80 shekels that Rami Levy charges.

Rami Levy, the founder of the grocery chain that bears his name, played down the significance of Ehad’s entry into the market, saying the Israeli shopper wasn’t about to give up his or her favorite brands to save money.

“I don’t understand the concept. Their prices are no lower than the price for off-brands at our stores,” he told TheMarker. “Unfortunately, the shopper won’t compromise on 10 out of 30 products that he has come to buy, because a child or a husband or a wife wants a particular product.”

Despite its lower prices and the 5 million shekels to 6 million shekels each store costs to build, Shahar said he will be offering employees good wages by industry standards. Cashiers will earn 25% above minimum wage and stockers 40% over minimum wage, Shahar promised.

“They deserve a living wage and we want them to stay with us a long time,” he said.