Israel's Social Protests Hit Profit at Super-Sol

Supermarket chain's CEO quits as profit falls 60% to NIS 71 million.

Super-Sol CEO Effi Rosenhaus announced he was stepping down on Monday, two years after he was indicted for his role in the supermarket chain's alleged antitrust violations of its merger with Clubmarket.

Rosenhaus' resignation apparently came in response to Super-Sol's third-quarter financial results, which were released Monday. The company's operating profit was down 44%, to NIS 71 million, and net profit was down 60%, also to NIS 71 million, apparently as a result of the summer social protests over the cost of living, which specifically targeted the chain and some of its suppliers.

Super-Sol - Hagay Frid - 29112011
Hagay Frid

In addition, Richard Hunter, who has been serving as Super-Sol's operating officer since the investigation into Rosenhaus began, also announced his resignation on Monday. Hunter, who was Netvision's CEO before coming to Super-Sol, apparently will be continuing to a senior position at the IDB Group, which owns the chain. Rosenhaus is expected to leave IDB altogether.

The two handed their resignations to Super-Sol's board at a meeting Monday. Itzik Abercohen, Super-Sol's VP-operations, will be stepping in as CEO, and Eli Gidor will become senior deputy to the CEO.

Super-Sol stated in response that Rosenhaus would not be leaving anytime soon and that he would become an external consultant after departing.

"Super-Sol's board of directors decided today to appoint Itzik Abercohen as CEO," the company said in its official statement last night. "Abercohen has 11 years' experience at Super-Sol and he was the company's VP-operations for the past seven years. He will take his position at the beginning of January 2012. Abercohen has an MA in political science and served in the army for 27 years. His final position there was as head of the Defense Ministry's delegation in Switzerland."

The company also confirmed that Hunter and Rosenhaus had submitted their resignations. "Effi Rosenhaus is finishing an 8.5-year term as CEO and president, during which he made the company Israel's leading retail chain," it stated. It also noted that the company's two board chairmen would be forgoing the bonuses they were due to receive based on the company's net profits, as part of the company's efficiency measures. Their salaries were also being cut 25% in 2012, it said.

IDB Group chairman Nochi Dankner thanked Rosenhaus and Hunter for their work, and called Rosenhaus "Israel's No.1 retailer." Rosenhaus himself said his years at Super-Sol had been challenging, and said he felt great satisfaction from his time there.

In February 2010, the Antitrust Authority indicted Super-Sol, Rosenhaus and Gidor for violating the terms of the chain's merger with failing supermarket chain Clubmarket. Gidor was VP-sales and marketing. In 2005, the antitrust commissioner approved Super-Sol's merger with Clubmarket under restrictions designed to minimize damage to consumers. One was that Super-Sol could not intervene in its suppliers' relationship with its competitors. Rosenhaus and Gidor allegedly violated this by trying to pressure suppliers not to participate in a Hanukkah sale by competitor Blue Square (Mega ).

But apparently what led to Rosenhaus' departure was not the legal suit but this summer's social protests.

Super-Sol is the country's largest grocery chain, with 255 stores and 548,000 square meters of retail space. In the company's 2010 financial reports, it stated it had 22.7% of the country's retail market for food, drinks and tobacco. That year, it had NIS 11 billion in sales, and net profit of NIS 335 million. Its share of the supermarket sector was 36%.

The company became one of the focuses of this summer's protests, which began over the price of cottage cheese and spread to address the cost of living as a whole. The protests, and the boycotts that ensued, forced Super-Sol and its competitors to refrain from raising prices and to offer discounts in an attempt to woo back customers.

Super-Sol in particular was targeted by a boycott by the Tel Aviv student union body, which called on the chain to lower prices. It ultimately relented and announced it was cutting prices on a limited list of items.

Super-Sol was not the only supermarket chain to see the protests reflected in its third-quarter results; competitor Blue Square also reported declining profits, for instance.

Super-Sol had been scheduled to publish its quarterly reports a week ago, but ultimately did so only on Monday.

Executives said the slowing economy had also played a role in the company's poor profit figures. For years, Super-Sol had been very profitable. It and Cellcom had been considered IDB's cash cows.