Israeli Supermarkets' Price Wars Come to Jerusalem

In bid to become dominant player in food retail, large chains like Mega and Super-Sol are slashing their prices, challenging their biggest competitor, the large private chain Rami Levy.

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After pitched battles in Ashdod, Modi'in and Beit Shemesh, the new front
in the supermarket price wars is Jerusalem.

TheMarker has learned that Mega has launched an aggressive price war targeting the Rami Levy chain in its home town, and has forced it to cut its already discounted prices further. But Mega's campaign goes beyond price-cutting. The chain has begun distributing bags and fliers in the capital's Talpiot industrial zone, a major commercial area in the south of the city, with the slogan: "In Talpiot people demand equality. Rami Levy Modi'in prices now at Mega Talpiot."

The implication is that Jerusalem shoppers are being denied the same low prices as consumers are getting in Modi'in, where a price war broke out several weeks ago after Rami Levy opened a second outlet there, prompting Super-Sol Deal to counter with price reductions and causing other supermarkets to be dragged into the fight.

Mega began slashing prices on many products at its Mega-Bool branch in Talpiot starting Wednesday afternoon. It is selling a whole chicken for NIS 4.49 a kilogram, chicken legs for NIS 6.99 a kilo and an assortment of produce tomatoes, cucumbers, carrots, potatoes and cabbage for 49 agorot a kilo.

In addition, Mega has cut prices on a range of dry goods: Osem Ketchup now retails for NIS 6.79, Telma Cornflakes for NIS 9.79, Sugat Persian Rice for NIS 5.99, Elite Instant Coffee for NIS 16.99 and Osem soup nuts for NIS 8.99. In its fliers, Mega is promising to keep prices at these levels at least until the end of December.

In response, Rami Levy lowered prices at its Talpiot branches to several agorot less than Mega's. In fliers it is distributing in the neighborhood now, the chain advertises Sugat Persian Rice at NIS 5.49, tomatoes at 49 agorot a kilo, Telma Cornflakes at NIS 9.75 and Elite Instant Coffee at NIS 16.80. It also vows to keep them at these levels until the end of the year.

Talpiot is one of the country's biggest shopping areas, with annual sales estimated at NIS 600 million. It is also the heart of the Rami Levy supermarket empire, the place where his business took off and now numbers three branches as well as company headquarters. Mega-Bool has one branch in the neighborhood and Super-Sol Deal two.

Mega bids for dominance

The price war is Mega's bid to become the dominant player in food retailing. Over the years, discounting was led by small private chains the biggest of which is Rami Levy against Super-Sol and Mega. But in the last year, Super-Sol has sought to become the price leader and has challenged the competition in Ashdod, Beit Shemesh and Modi'in. That has hurt the smaller chains (see story on this page).

But a comparison of 19 products sold at the Rami Levy stores in Jerusalem and Modi'in shows that 11 are still lower in Modi'in. Titulim Premium diapers sell for NIS 32.99 in Modi'in versus NIS 40.29 in Talpiot. Badin fabric softener is NIS 10.90 in Modi'in versus NIS 18.17 in Talpiot, while Telma Cornflakes are NIS 9.79 versus Talpiot's NIS 16.49. Osem Ketchup us NIS 6.69 in Modi'in and NIS 10.59 in Talpiot.

A comparison conducted by TheMarker a week ago also found wide gaps between prices in Super-Sol's and Mega's prices between their branches in Modi'in and those in the southern development towns Sderot and Netivot. In Modi'in prices were tens of percentage points less than in the other two cities even though both chains had promised a year ago to equalize prices.

The price differentials have nothing to do with geography and everything to do with competition in the immediate area. In shopping areas where competition from Rami Levy is intense, Super-Sol and Mega lower prices, while in other places they remain unchanged.

At Rami Levy, managers were saying yesterday that despite Mega's steep discounting, their stores still had lower prices. "They are simply comparing prices to some of the sales we are having in Modi'in, but for the rest of the products that sold at everyday prices, they are still higher than ours in Modi'in," said Yossi Sabato, deputy CEO for trading at Rami Levy.

Sabato showed receipts from Mega Talpiot dated yesterday next to those from Rami Levy's outlet in Modi'in. They showed Nile Perch cost NIS 30.25 a kilo at Mega Bool Talpiot compared with NIS 18.99 at Rami Levy in Modi'in. Sano paper napkins were NIS 10.08 at Mega versus NIS 4.74 at Rami Levy.

Levy himself put a positive spin on the price wars. "I'm glad that the big chains are going our way and trying to offer the shopper the same fair prices that we do," he said. "It's a pity that they are only doing it in specific areas, where I have stores, and not at all their branches."



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