Why Are Foreign Retailers Going Shopping in Israel?

At a time when many Israelis are finding it hard to go supermarket shopping, international supermarket chains are going on a shopping spree in Israel. They have a good reason for coming here – Israel is known as an expensive country whose population is growing by some 2 percent a year.

Until a few months ago, the possibility that an international supermarket chain would make aliyah seemed very unlikely. But the reforms for imports and the Abraham Accords woke up the international chains, which now are less frightened of operating in Israel. Add to all these new variables the facts that Israeli consumers tend to do much more of their shopping in the supermarket compared to Europeans, that Israelis have a tendency to spend too much and that they are insensitive to price.

This is why it is way premature to expect the cost of living to ease up a bit just because of the French chain Carrefour, which signed a franchise agreement with the local Yeinot Bitan supermarket chain owned by Electra Consumer Products; SPAR, the Netherlands-based multinational retail giant that announced on Sunday it would open franchises here; and representatives of the French supermarket chains Casino and Intermarche, which are scheduled to hold meetings in Israel in the next few days with large and mid-sized food wholesalers to examine cooperation.

The franchise model Carrefour and SPAR are building on is meant to serve the foreign chains taking a large cut of the sales, and to increase the sales of their private brands without entering into large investments – and as a result their involvement will be accordingly small. A larger impact on prices could be made if a cheap foreign chain, for example Lidl or Aldi, announces they are entering Israel independently and not via a franchisee.

• Israel's annual inflation rate rises to 4.4 percent in 11-year high
• Israeli spike in housing prices is a social problem
• Not just Netanyahu: Why do billionaires and politicians make such good friends?

Israeli retailers have good reasons for remaining calm in the face of the “foreign tourists” and their effect on the local market – but at the same time, they are not missing out on the opportunity to meet with them and check out the possibility of cooperation, with the goal of riding on the wave of purchasing power, the private brands and the knowledge of the global players.

Those who should be worried in the face of these developments are suppliers. Private labels in Israel make up less than 7 percent of sales, and this figure has not grown since the beginning of the coronavirus pandemic, but for the supermarket chains that have invested in building their own private brands, such as Supersol and Rami Levy, market share has reached about 25 percent, according to data from StoreNext. International chains have private labels of a high standard and with attractive prices, and these brands can expect to grab a respectable share of sales in Israel.

For example, while the Yeinot Bitan and Mega chains do not have a private label, the 150 Carrefour branches that will replace them will include thousands of products from its private label, with prices that are expected to be below average. The main victims will be the smaller and mid-sized suppliers of dry goods, toiletries and cleaning products – as well as the importers of international brands manufactured overseas.

But it is unlikely that all this will change the bitter feeling Israelis have every time they enter a supermarket outside of Israel – where they can fill up their carts without the suffocating feeling they have at the checkout counter here. The fear is that the global chains are coming to Israel primarily to make a buck, and less to compete and win the battle over the price.