Study: Kashrut Certification Costing Israeli Economy $770m

Kashrut adds 5 percent to price of food production, report says, with monopoly of Chief Rabbinate needlessly inflates figure.

Shawarma restaurant with a kashrut certificate issued by the Chief Rabbinate.
Emil Salman

The cost of kashrut certification costs the economy about 3 billion shekels ($770 million) a year, not counting fresh fruits and vegetables, adding about 5% to the cost of producing food, a preliminary estimate by the Finance Ministry has found.

The report noted that kashrut supervision accompanies the entire process of bringing food to Israelis’ table, lifting costs at each step of the process. Farmers, manufactures and importers are all subject to supervision as are groceries, res taurants and hotels.

The report acknowledges the role of kashrut as part of the principle of Israel as a Jewish state, but it asserts that kashrut can and should be enforced efficiently and at a reasonable costs.

Although private kashrut-supervision organizations have emerged, the Chief Rabbinate retains an effective monopoly on certificates. The mainly ultra-Orthodox certifiers, such as Badatz, don’t offer supervision in place of the rabbinate but offer a second, usually stricter certificate in addition.

“This monopoly requires thousands of jobs and its practices raise the cost of living in Israel as any exclusive provider in the production process would,” the report says. “Situation arise where more restrictive practices are enforced in some places and not others, transparency is lacking, certain suppliers are given preference over others, barriers to entry are erected to products and smaller manufacturers.”

Sources at the treasury estimated the inflated costs from the kashrut monopoly at 300 million shekels.

Ministry economists are still trying to measure the impact of kashrut certification on fresh produce, but their initial estimates is that it adds another 1 billion shekels.

Most of the costs are due to the requirement of retaining a kashrut supervisors for orchards, but growers associations estimate that the cost of observing maser (tithing) costs them about 150 million shekels annually in lost harvests.

Yaron Abramson, an accountant who is conducting the study for the ministry, estimated the cost for kosher slaughter (shechita) at 2.06 billion shekels a year, by far the biggest component. The costs of maintaining kashrut supervisors at supermarkets and hotels to prevent non-kosher goods from being sold or served add another 390 million shekels annually.

The cost of supervision costs the typical supermarket branch 80,000 shekels annually, the report estimated. Assuming that the store’s turnover is at least 40 million shekels, that amounts to 0.2% of turnover, not counting the cost of kashrut supervision along the production process.

Food retailers do not have to have a kashrut certificate, but only one of the top 10 supermarket chains in Israel, only one – Tiv Taam, which has a relatively small market share – doesn’t have one because they stand to lose customers.

Kashrut requirements impose costs as well by restricting imports on products like cheese, making the market less competitive, resulting in higher prices.