Osem, Soglowek Suspend Price Hikes

Mega dropping cottage cheese to NIS 5.49, calls on dairies to cut prices by July 1

Food manufacturers are starting to heed the public outcry over price increases: Both Osem and Soglowek yesterday announced the suspension of planned price hikes - for the time being.

Osem vowed not to increase any product prices until "after the holidays" in October, though it had previously advised the public of plans to increase prices by 4% to 10% on July 1. Soglowek has also retreated from its intention to raise prices at the start of July, the company said.

Three months ago, Soglowek raised the prices of its processed meats and other products by about 3%. Later, explaining that the price hike didn't cover the full cost of increased outlays on inputs, the company said another increase of 3.9% would come into force on July 1.

Soglowek chief executive Pini Kamari said the company pays heed to public opinion and understands the reasons for the uproar over food prices. "Therefore, we decided the right thing at this time is to suspend our request to raise prices," Kamari said.

"However, it bears saying that the price increases we proposed are crucial to our survival in a reality in which prices of raw materials and energy are surging," he added, saying the company can't bear the burden alone over time. It means to begin a dialogue with its customers, retailers, suppliers and government officials about how the burden can be shared, he said.

Soglowek - better known as "Zoglobek" in Hebrew - makes a wide range of salamis, processed poultry products and baked goods, including frozen pizzas. It also has a range of vegetable products.

As for Osem, it had stated that prices of its snack foods, including Bamba peanut puffs and Bissli, would be rising by 4% on July 1. Baked goods, such as Habayit cakes, and Nestle breakfast cereals were to rise 5%. Nestle coffee products were to increase by 7% and Vitaminchik concentrate for juice was slated to increase by 10%.

Now, said Osem (which is controlled by Nestle ), it is heeding public sentiment. "Osem has decided to absorb the sharp increases in prices of raw materials, energy and cost of labor," the company stated.

But in a conversation with TheMarker, Osem chief executive Gezi Kaplan stressed that the company couldn't absorb the full increase in production costs over time. If anything, he added, raw material prices are trending upward even more. "We can't sustain these price levels over time," he said.

Asked if he feared consumers would take the gesture as an admission that the price increases hadn't been necessary in the first place, Kaplan said, "I am convinced that we needed to raise prices. But we have to heed the consumers."

Its sense of responsibility requires Osem to absorb the increase in production costs itself for three months, and it's strong enough to do that, he said.

"I hope people won't react cynically," he added. "We are in the midst of a crisis involving widening income gaps. More and more families can't make it through the month ... This is beyond cottage cheese and food."

Mega takes on dairies

The Facebook-fueled consumer rebellion erupted a week ago over a humble staple on Israeli dining tables - cottage cheese, which had risen to more than NIS 7 per tub.

Yesterday, a week after the protest began, the Blue Square retail group warned dairy producers Tnuva, Strauss and Tara that it is slashing its selling price for cottage cheese to NIS 5.49 at its chain of Mega supermarkets, effective immediately.

It asked the dairies to lower their wholesale prices for the curds by the same amount by July 1. If they don't, Blue Square wrote, it will consider changing its procurement habits.

But the solution of the price cut is an interim one, Blue Square stressed: It will comply with whatever legislation is passed or whatever decision is handed down by the relevant regulator.

Other retail chains, including Super-Sol, Rami Levi, Kimat Hinam and Aba Victory, had announced special but short-term deals for cottage cheese. Rami Levi, for instance, slashed the price to NIS 4.90 per tub. Super-Sol was offering two for NIS 9.99 to members of its customer club if they bought at least NIS 75 worth of other goods.

Blue Square's Mega stores had not followed suit, and reported a 30% slump in sales of cottage cheese.

"I saw that the dairy manufacturers weren't bothering to respond to the criticism," said Blue Square CEO Zeev Vurembrand. "They were casting all the blame on the regulator."

He vowed that any dairy that cooperates with the chain's initiative will get prominent placement on supermarket shelves.