Amid the uproar over the news that the German counterpart of Milky, the beloved Strauss chocolate pudding, was selling for the equivalent of a shekel (27 cents) in Berlin compared with about 3 shekels in Israel, Strauss said the two products weren’t comparable.
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The German version wasn’t of the same quality or flavor, Strauss contended. Either way, a similar pudding was selling in Berlin for the equivalent of a shekel, much less than what Milky cost in Israel before the uproar drove the price down.
TheMarker has looked at 10 products that can be found on nearly every Israeli table and selected the least-expensive version, based on the website of the Rami Levy discount supermarket chain. It compared these products with the least-expensive counterpart in Britain, based on the Tesco website and the price per 100 grams. It turns out that Israelis pay about twice as much for the basket than Brits.
The basket at Tesco costs the equivalent of about 53 shekels ($14), compared with about 108 shekels at Rami Levy. And the average wage in Britain is higher: 1,500 pounds — 9,000 shekels — compared with 6,500 shekels in Israel. One reason for the price disparity is Israel’s 18% value-added tax on food, while the British government doesn’t impose VAT on most food.
But that doesn’t account for the entire difference. In Britain, for example, 500 grams of Tesco’s private-brand Italian-made pasta sells for a bit more than a shekel. At Rami Levy, the least-expensive 500-gram pasta costs 3.50 shekels. Rami Levy’s private-brand equivalent costs 3.80 shekels per 500 grams; the leading Israeli pasta brand in the category, Osem, costs about 4 shekels.
There were particularly large price disparities for bread. Tesco customers can buy an 800-gram package of sliced white or whole-wheat bread for the equivalent of 2.70 shekels. In Israel, the cheapest option is Angel Bakery’s unsliced standard bread at 4.40 shekels for 750 grams – and it’s subject to price controls.
The sliced version, which is also price-controlled, costs 6.90 shekels. In Britain, an 800-gram loaf of sliced bread costs the equivalent of 2.70 shekels. Over there, white and whole-wheat bread are priced the same, but in Israel, whole wheat is much more expensive at between 10 and 15 shekels for just 500 grams.
When it comes to breakfast cereal, the discrepancy between here and Britain is nearly threefold. A 500-gram box of Tesco’s private-label cornflakes costs 1.86 shekels. A 750-gram box of Kniya Hahama cornflakes costs 7.90 shekels.
Horrible British bread?
“You have to compare each country individually; it doesn’t matter what the price is at Tesco, Shmesco or other food retailers abroad,” says Eyal Ravid, who owns Israeli’s Victory discount supermarket chain. Ravid points a finger at Israeli consumers.
“First, let Israeli consumers buy our products that sell for the lowest price rather than pay a lot for the major brands. Once consumers start buying private-label pasta for 3 shekels instead of Osem pasta for 5 shekels, and tuna for 5 shekels instead of 7 shekels, the price of the major brands will go down. True, they won’t cost a shekel, but the price will be lower. And we have begun parallel importing of a lot of well-known brands.”
Food manufacturers say the criticism of them isn’t justified either. “Just as the newspaper Israel Hayom is distributed for free because it serves the interests of the person who publishes it, Tesco sells bread at a loss to look better,” says Angel Bakery’s Yaron Angel, referring to U.S. casino magnate Sheldon Adelson, considered close to Prime Minister Benjamin Netanyahu.
“When you go to Tesco, their cheap bread is hidden on the lower shelf,” Angel says. “It’s also a product I wouldn’t buy because it’s in the oven for a third of the time of my bread. It’s a horrible product. I don’t want to produce bad bread cheaply, but rather good bread that costs money to produce.”
Angel also takes issue with the surveys. “Most years we’re running a loss, but everyone has their eyes on bread. There were sales promotions at the Osher Ad supermarket chain for three loaves of sliced bread for 10 shekels, but they don’t show that when they’re doing surveys,” he says.
“We also have to incur the costs of kashrut supervision and have price-controlled products that represent about 40% of our sales. And there’s the 18% value-added tax. And we’re a small country. And still, the price of bread in Israel is not high compared to the rest of the world.”
The bread sector is different from other industries controlled by monopolies, Angel adds.
“The owners of industrial bakeries are the only suckers willing to produce price-controlled bread. It’s not that bread in Israel is expensive because our workers make a lot of money, similar to electricity being expensive because employees at the Israel Electric Corporation make a lot of money,” he says.
“Anyone who’d like is invited to take our bakery if he thinks there are high profits in our sector. For the time being, I haven’t seen anyone put an offer on the table to buy us.”
Kosher will cost you
Officials at Baladi meats blame kashrut for making Israeli consumers pay almost twice for a kilogram of meat. A kilo (2.2 pounds) of ground Baladi beef at Rami Levy costs 39.80 shekels compared with the equivalent of 21.50 shekels at Tesco.
Baladi’s VP for sales, Lior Leiser, recounts his visit to Costco, a U.S.-based discount chain, where he said the price of meat and chicken was a fraction of the price in Israel.
Some chicken parts that go for 8.80 shekels per kilo in the United States cost as much as 25 shekels in Israel, he says.
Leiser attributes the price difference to kashrut and the cost of importing. “At nonkosher chicken processing plants in Brazil and the United States, which slaughter about half a million chickens a day, they employ just 50 workers,” Leiser says.
“But at a major plant in Israel that slaughters only 100,000 chickens a day, they need 400 employees because of kashrut. It’s a crazy procedure that increases the cost of the production process.”
Eyal Ofer, from the nonprofit organization Israel is Dear to Us, which aims to lower the cost of living, blames economic concentration. “In Britain, everyone can adjust his food purchases to his income level. In Israel, everyone has to pay monopolistic prices,” he says.
“In Israel we’re captives; we pay the price of concentration of economic interests and the lack of sufficient competition at the supermarket shelf. If there were more small manufacturers on the shelf, the major ones would have to lower prices.”
Another major disparity in food prices is in the frozen-vegetable segment. Oshik Efraim, chairman and part owner of vegetable manufacturer Vita Pri Hagalil, blames the government for the difference in the retail price of frozen vegetables.
“We haven’t raised prices for nearly four years, even though farmers have raised the prices they charge us for a third year now. Prices are higher because of kashrut, water, electricity, fuel and municipal tax, which has risen 25% over a few years. The package-labeling law alone costs Vita Pri Hagalil 1.2 million shekels a year, and we spend 1.5 million shekels every year on kashrut,” Efraim says.
“All food producers in Israel other than the big ones barely manage under current circumstances in the industry. Finance Minister Yair Lapid and Prime Minister Benjamin Netanyahu have to think how their actions in recent years have contributed to the cost of living before they point a finger at producers.”
Efraim also criticizes government efforts to increase food imports from Europe when European farmers receive subsidies while his taxes and expenses keep rising.
Rami Levy, who owns the supermarket chain bearing his name, also calls the government the main culprit for high food prices.
“I agree with the conclusion that in Israel food products are usually more expensive than abroad; this is true regarding about 70% of products. If you take all the taxes and customs duties in Israel, you see that operating costs here are higher,” Levy says.
“To really lower prices, the producers that operate at much higher profit margins than the supermarket chains must lower their prices. And the government has to lower the price of municipal taxes, electricity, water, VAT, duties and the like. If that doesn’t happen, this country’s prices will never really be lower.”