Food Prices in Israel Have Fallen in Last Two Years, Treasury Says

Study estimates drop at 2.3% and says it will continue into 2016, but polls shows shoppers don’t believe it.

The Ra’anana branch of the Ehad supermarket, January 29, 2015.
Tomer Appelbaum

Food prices in Israel dropped 2.3% in 2014-15 at a time when prices in other developed economies were rising 4%, but they still remain high compared to other countries belonging to the Organization for Economic Cooperation and Development, the treasury said on Sunday.

At the end of 2015, Israeli food prices were 10% higher than the OECD average, although that is down from 16% at the end of 2011, it noted. Prices had been rising since 2006 and the downtrend began in Israel in began in 2014 and will likely continue this year, it said.

Although prices have been falling, a 2015 poll by the treasury, shows consumers haven’t noticed it: 93% of those surveyed said prices were rising. That could be because Israelis were shopping less at discount supermarkets and more at convenience stores and minimarkets, which generally sell food at higher prices.

In 2013-15, convenience store sales rose 21%, although products sold by them showed no drop in price. Meanwhile, sales at hypermarkets and discount stores dropped 1%, even though those stores lowered their prices 6%.

The report comes as the government moves ahead with plans to pressure food prices lower and close the remaining gap. Ahead of this year’s Passover holiday, it raised quotas for duty-free imports and plans long-term reductions in duties starting in 2017 as part of an overhaul of the farm sector.

However, an experiment in lowering prices for cheese and meat by exempting some imports from duties had at best mixed results. Data collected by the Finance Ministry through Nielsen, the market research firm, showed that prices for hard cheese fell only 1% in 2014 and 2% in 2015, not much faster than overall prices. Fresh meat prices fell 5% in 2015 but shot up 11% in 2015.

The treasury report said prices for fresh meat were subject to a lot of volatility and in 2015 importers didn’t use their full quota. The segment is controlled by two companies – Tnuva and Dabach – and while Super-Sol, Israel’s biggest food retailer, has begun importing meat from Argentina, it retails it at high prices, the report said.

The treasury ascribed the overall declines in food prices to a combination of global and domestic factors, including a 21% drop in world commodities prices in the last two years, a reduction in Israel’s value-added tax and a host of food reforms aimed at increasing competition in the industry.

Sources in the food industry, however, took credit for the declines, citing among other things the growth of lower-cost private label goods in supermarkets, a factor the treasury didn’t cite.

“Duties are only falling now so how can they say they have anything to do with prices falling in 2013 and 2014,” said Eyal Ravid of the Victory discount supermarket chain. “Falling prices are the result of a change in shopping habits, which led the way to lower prices.”

The only food categories that saw no drop in prices last year were fresh produce, meat, poultry and fish, all of which are subject to high import barriers, it said. On average, they rose 4.2% in the two years.

The categories with the biggest price declines were sugar and salt, down 8.8%; oil, sauces and hummus 3%, breakfast cereal 5.9%, canned goods 5.1% and dairy and soya drinks 4.3%, according to the treasury report.