Even as the shekel was strengthening against the dollar, Israeli food and beverage importers didn’t lower their prices and instead collected ever higher profits, a Finance Ministry report released yesterday showed.
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“The combined profits of the 10 biggest importers reached half a billion shekels [$131 million] in 2013, a real increase of 230% over 2005. In the same period, the turnover of these same companies increased in real terms by 31%,” the report said. “An analysis of the figures shows high, even unusually high, profit margins are being enjoyed by food importers in general, and the biggest ones in particular.”
The report said the figures showed the need for the government to have adopted the “Cornflakes Law,” which opens the food-import market to so-called parallel importers – companies not authorized by the overseas manufacturers to import their products, but obtaining them through third parties. The law only applies to dry foods that present fewer health and safety issues.
The Finance Ministry declined to provide the names of the importers covered in the report, because the data the report was based on were taken from the Income Tax Authority and are covered by privacy protection laws.
But surveys by Dun & Bradstreet and other business research firms show that the top 10 imports are likely to include Neto, which packages imported goods under the Vilager brand Schestowitz, which imports Barilla pasta and a host of nonfood products; Shintraco, an importer of grains and oils; and Masterfood, which specializes in meat and fish.
Beverage importers enjoy especially wide profit margins, and their numbers are likely to include M. Ackerman, Hacarem and Tempo, all importers of wine and alcohol.
The study found that combined profits of all food and beverage importers rose to about 650 million shekels in 2012, from about 320 million shekels in 2003. Profit margins, which treasury economists calculated as pre-tax profits plus salaries of the companies’ top executives (who are almost always shareholders), rose to over 7%, from just over 4%.
Both figures were little changed in the first four years of the survey, but climbed in 2007 and 2008 when they plateaued at the higher level.
Among the top 10 importers, whose profits were surveyed for the years 1997 through 2013, the trend was even more pronounced. Their combined profits had been about 30 million shekels in the first year, but came close to 500 million shekels by the final year. Their margins, which were about 4% in 1997, had reached 14% by 2013, according to the report.
Profits and profitability among the top 10 were relatively steady until 2006, rose in 2007 and 2008, and then rose again in 2012 and 2013.
“The findings points to a sharp rise in food-importer profits in 2007-08. This increase is likely to be explained in large part by the appreciation of the shekel in those two years,” the report noted. “In other words, the decline in prices in shekel terms, as a result of the appreciation, was not translated by the importers into lower prices [to retailers and consumers].”
All told, between 2004 and 2012, retail food prices rose 36%, much higher than the overall rate of inflation of 21%.