Israeli Dairy Producers Ask State to Help End Mass Cottage Cheese Boycott

Tnuva, Strauss and Tara break their silence, call for regulator's intervention.

For the first time since the consumer boycott of cottage cheese began last week, Israel's big-three dairy producers - Tnuva, Strauss and Tara - yesterday spoke out about the crisis.

Executives would not commit to lowering prices, but instead pointed disgruntled consumers in the direction of the government, calling for the state to look at the numbers and issue a verdict.

dairy - Nir Keidar - June 20 2011
Nir Keidar

"Let the regulator come and examine everything: the gross price of the milk, the VAT. We'll cooperate all along the way," said Tnuva CEO Arik Shor yesterday. Shor spoke in Tel Aviv at an annual conference of Israeli food producers titled "Food in the new Era 2011."

"What interests us is the consumer. We don't shy away from competition. Let them check us all, from the dairies to the retail chains. The state should propose its solution for coping at a time when the prices of all food products abroad and in Israel are rising. I call on the regulator to go inside, to do it quickly and offer a solution," Shor said.

Shor admitted that the consumer boycott is taking a toll on the Tnuva group and on him personally. "We recognize that our flagship brand, which is in every refrigerator in Israel, is carrying on its back all of the frustration over what is happening in the world. We absolutely feel it, and we are listening to consumers. We are studying what they are saying, researching what they are doing, and we want to create a solution that will cause them to buy the cottage cheese that they love," Shor said.

'Unrestrained competition'

Shor's counterpart at the Strauss Group chimed in with his own call for government intervention in the crisis.

"The politicians have to look at what can be done," Strauss Israel CEO Gadi Lesin said. "We are not elected by the public. From our perspective, go and examine the industry, the profits of Israeli companies, the unrestrained competition we are forced to deal with."

Itzhak Tamir, CEO of the Central Bottling Group Company's Israel Group, which owns Tara Dairies, termed "demagoguery" claims by consumers that the country's food producers do not care about their customers.

Consumer is king

"There is nothing more important to a company CEO than the consumer," Tamir told conference attendees. "Without the consumer, the company doesn't exist. Executives have a commitment to the customers, the owners, the employees and to the environment. I don't even know how to respond to the charge that CEOs don't care about the customer," he said.

"On the other hand," Tamir continued, "the CEO also has a responsibility to his company. It's not a crime to make a profit. A company that can't show a reasonable profit has no reason to exist, and the consumer is the first to be hurt by this. Companies have to be sensitive, and their profits have to be fair. The consumers are directing their justifiable anger over their lack of knowledge and their helplessness to the companies, but they're not the right place. They don't make unduly great profits and they don't raise prices for the fun of it. Companies don't like raising prices. It's a step that involves confrontation. You don't get up in the morning and hike prices," Tamir said.

As head of the smallest of the big three, Tamir seemed particularly offended by the idea that Tara was being tarred with the same brush as Tnuva and Strauss.

"The protest does not seem justified against Tara. The price must be reduced through a joint effort by many elements, not just the dairies, who are dependent upon raw materials costs," Tamir said.

"To say that there's no competition in the food sector is a ridiculous cliche," he continued. "The first thing that Strauss and Tnuva do when they wake up in the morning is to think about how to destroy Tara."

Protest is good

When asked why Strauss and other dairy producers did not react earlier to the public protest, Lesin said that consumers don't want to hear explanations while they are protesting. In answer to the big question - will they lower their prices - Lesin and his counterparts declined to answer.

Lesin said he and his fellow CEOs are prevented by law from responding, since any response could be interpreted as a violation of regulations against price-fixing.

The panelists went on to attribute the high price of cottage cheese to Israel's high manufacturing costs and the companies' devotion to delivering high-quality products.