Food Still Costs More Than in 2008

Manufacturers are raking it in, retail chains aren't, accuses Dror Strum.

Even after the price cuts announced by the country's major food manufacturers in response to public pressure in recent weeks, many foods still cost more than in 2008, TheMarker has found.

Product prices of Israel's five biggest food companies - Tnuva, Strauss, Osem, the Central Bottling Company (Coca Cola Israel, which owns the Tara dairy company) and Unilever (which owns Telma) - remain tens of percent higher than in 2008. The price comparisons TheMarker conducted are based on the prices the manufacturers charge retailers (before markups and VAT).

Adi Zim of Kimat Hinam - Ofer Vaknin
Ofer Vaknin

Inflation ran at 13% over the period 2008 to the present. Some prices increased only as much as inflation, or by less. But many increased by far more.

Unilever was first to lower prices after the students threatened to boycott it, Strauss and Osem. Yet many of the prices remain higher than their 2008 levels. Goldband margarine, for instance, was lowered from NIS 6.37 to NIS 5.99 per bar, but it still costs 58% more today than in 2008.

On the other hand, the price of a 4-liter bottle of Unilever fabric softener hasn't changed in three years.

Unilever said the prices TheMarker cited did not factor in discounts it gave to retailers, below the list prices. Its discount had grown significantly in the last three years, Unilever said. Also, from 2007, raw material prices had risen by 20% to 140%, it said.

Unilever was also forced to raise some product prices, but took up most of the increase at its own expense. Finally, the company said, prices on store shelves were set by the retailer, not Unilever itself.

Carlsberg beer: Up 59%

Strauss, another company under threat of boycott, is also, by and large, charging more than it did in 2008. A month ago, soon after Tnuva announced a price cut, Strauss lowered prices of some dairy products for the September holidays, including Milky pudding and soft white cheeses, because the price of raw milk was dropping. Later, it extended its holiday prices to the end of the year.

The student unions are expected to announce steps soon to pressure Strauss to lower prices on non-dairy products as well, such as salads and chocolate. TheMarker indeed found that many of Strauss's non-dairy prices have risen by more than inflation. The company's 200-gram package of Turkish coffee has risen 51% in price since 2008.

Nor has its dairy been exempt: Vanilla-flavored Danny pudding increased 33% since 2008. Of the products TheMarker checked, only Ski cheese is being sold for a price similar to what it cost three years ago - NIS 4.84 for a 250-gram tub today, versus NIS 4.89 then. A month ago, its list price was NIS 5.58.

"Between 2008 and 2010, the consumer price index increased 14%, not to mention the increases in electricity rates, water rates, property tax, input prices and wages," Strauss said. "This forced all sectors of the economy, including the food sector, to adjust prices to a degree."

The trend at Tnuva was mixed. A month ago, the company announced it was cutting the prices of dozens of products by 15%. After the price cuts, products such as cottage cheese and 5%-fat white cheese are being listed at prices similar to those in 2008, after adjusting for inflation. Yet products whose prices weren't cut are still selling for significantly more. A 100-gram bar of butter now costs 20% more than it did in 2008. Cream with 15% fat (for cooking) in a 250-gram container costs 31% more than it did three years ago.

A month ago, the Central Bottling Company lowered prices of Tara products. Yet other products the Central Bottling Company sells remain costlier than before the public protest began this summer. TheMarker found that the Central Bottling Company substantially jacked up beer prices: Carlsberg now costs 59% more than in 2008; Tuborg costs 22% more.

A bottle of Coca Cola, by the way, has increased by 11% in price since 2008, which is less than inflation in that time.

What goes up and never comes down?

Moving onto Osem, it was the last to fold before the threat of boycott by the students, and also, its 2008-2011 price differences were the smallest.

On the one hand, its natural juice offerings cost a lot more. A 1-liter bottle of lemonade has increased by 39% from 2008. But the price of that staple snack among Israelis, Bamba peanut puffs, has risen by just 0.4%, a fraction of the 13% rise by the consumer price index in that time.

A former antitrust commissioner, Dror Strum, had harsh words for the food industry yesterday.

In his various professional capacities, he had seen data on the profitability of the food manufacturers and of the supermarket chains, Strum said. "One thing is clear: The profitability of the food manufacturers is enormous compared with the marketing chains. While in the world, food prices rose after the 2008 crisis erupted, and then fell back, here they went up and never came down."

The manufacturers were making a fortune at the expense of the marketing chains, he charged.

Adi Zim, among the owners of the Kimat Hinam supermarket chain, agreed with Strum. "The manufacturers have a monopoly that makes it hard for the retailers to lower prices," Zim said. "If tax and customs are lowered, the manufacturers, who are also the big importers, will earn more and won't lower prices."