Panel to Check Supermarkets' Profits

Committee charged with finding out what aspects of the supply chain were pushing up food prices.

The committee examining the country's food prices is expected to look into the supermarket chains' profit margins when it resumes work after the holidays.

The committee, headed by Industry and Trade Ministry Director General Sharon Kedmi, was charged with finding out what aspects of the supply chain were pushing up food prices. It submitted its initial findings to the Trajtenberg committee for economic reform, but the latter criticized it for not investigating the role that supermarket chains played.

kedmi - Tomer Appelbaum - June 28 2011
Tomer Appelbaum

Importers and producers said the chains were to blame for much of the high cost of food, and said they often marked up products by tens of percentage points and reaped handsome profits.

Kedmi's committee had found that the chains were responsible for food price increases at the very least indirectly, since they demanded manufacturers bear costs including funding new branches, supplying their products at a discount so the chains wouldn't bear the burden of running sales, and funding annual bonuses. These demands cost manufacturers millions of shekels a year, expenses that are passed along onto consumers.

Thus retailers, not consumers, benefited from manufacturers' discounts - instead of paying a fair price based on production costs, consumers also covered the costs of the retailers' outsized demands.

Industry and Trade Minister Shalom Simhon has called the retailers' demands a "black hole" swallowing capital.

Instead of focusing on the retailers itself, the Kedmi committee asked to hire an external consultant to compare the profitability of grocery store chains in Israel and abroad. The Knesset Finance Committee rejected that demand. The Trajtenberg committee later demanded the Kedmi committee fill that gap itself.