Food manufacturer Tnuva’s market share in Israel has continued to plummet, and for the first time dropped under 50% of the dairy sector last week.
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The most recent strike against Tnuva came as competitor Tara on August 2 received the Eda Haredit sector’s Badatz kashrut certification, the strict level of supervision demanded by ultra-Orthodox consumers.
Until now, Tnuva was the country’s only major dairy producer with Badatz certification.
In the weeks that have followed, Tara has further eroded Tnuva’s market share.
The ultra-Orthodox sector buys some 1 billion shekels (about $280 million) a year in dairy products, about 10% of total dairy consumption in Israel. Milk in plastic bags is the most widely sold product among this sector.
As of late July, Tara sold only 1.6% of the country’s milk in bags. As of August, Tara sold 18%. Tuna dropped from a 96.6% share to 80.1%.
According to statistics from Storenext, which are based on sales at supermarket chains and mini markets, Tnuva’s overall share of the dairy market in the ultra-Orthodox sector dropped from 71.8% from the beginning of the year through July, to 68.9% as of last week.
Tnuva is likely to keep losing market share among the ultra-Orthodox sector, as Tara has released to date only milk, cream and leben cheese under its new Badatz certification. Tara is currently launching Badatz white cheese, and is planning to launch yellow cheese, puddings, chocolate milk and the rest of its products with the new certification in the coming weeks.
Tnuva for its part does not have Badatz certification for all its products. Some of its products are sold with Va’adat Mehadrin certification, an internal Tnuva kashrut authority that joins several different certifications.
Until now, Tara had used Agudat Israel kashrut certification, which is considered to be of the relatively strict Mehadrin level, while the third major player in the dairy market, Strauss, uses Rubin kashrut, also considered Mehadrin.
Over the past few days, an anonymous video that attempts to cast doubt on Tara’s kashrut certification has been making the rounds.
Tara has been working for the past year to obtain the certification, and brought 120 dairy farms up to Badatz standards.
Strauss is the big winner of Tnuva’s loss of market share as a whole, picking up most of the market share that Tnuva has lost, primarily in profitable categories such as yogurts and puddings. Strauss’ gains come in the wake of marketing campaigns on behalf of the brands Splendid, Milky, Danona Pro and Actimel, as well as new product launches, which all together brought Strauss’s market share up from 24.1% at the beginning of the year to 25.4% last week.
Tnuva’s loss of market share among the ultra-Orthodox sector is the continuation of a trend that has been going on for years now. Tnuva has lost ground for several reasons, including increasing competition from the supermarket chains’ private brands, increased imports, ownership and management changes, a lack of innovation and sales by competitors. More than a year ago Tnuva announced an efficiency plan that would include letting go more than one-quarter of its senior management, merging departments and hundreds of layoffs.
According to Storenext’s figures for supermarkets, last week Tnuva’s market share of dairy products dipped under 50% for the first time, settling at 49.4%. In the previous week Tnuva held 50.1% of the market, and 50.7% a month ago. The company had an average of 50.9% of the market from January through August.
In 2013 Tnuva had 57.8% of the dairy market,
The loss of market share comes even as Tnuva has offered more and bigger bargains, showing a willingness to let profitability erode in an attempt to increase sales and bring back customers.
Tnuva CEO Eyal Malis spoke up Wednesday, acknowledging that Tnuva’s market share may not increase and could likely fall even further, adding that the company would not continue with such aggressive sales.
Malis added that the company’s expenses had risen as the price of raw milk increased, and is likely to cut out 80 million shekels from the company’s bottom line this year. Energy costs have also increased, along with the minimum wage, slicing another 100 million shekels from the bottom line.