Price Control Likely to Resume for Some Dairy Products

Following recent cottage cheese boycott over prices government reportedly likely to recommend state price controls on some dairy products; Control would decrease prices by 10 percent according to sources.

In the wake of the uproar over cottage cheese prices the Industry, Trade and Labor Ministry is likely to recommend reimposing state price controls on certain dairy products, TheMarker has learned.

The ministry had previously said it would not recommend such a move.

Cottage cheese activists in Holon - Adaya Fiterman - July 10 2011
Adaya Fiterman

The prices of these products would likely decrease by 10% as a result, the sources said.

Candidates for renewed price controls include "white cheese," a soft, unripened, spreadable cheese sold in tubs, and certain popularly priced sliced hard cheeses.

Cottage cheese, however, is unlikely to wind up back under price control. Even though it was the high price of this product that spurred a consumer boycott and launched the entire discussion, producers and retailers have already agreed to reduce the price to a maximum of NIS 5.90 per 250-gram tub, through the end of the year. The price-control formula would have set the price at NIS 6.30.

Under the new plan, the price of white cheese would drop from its current NIS 7 or more to NIS 6.30.

Sliced cheese, sold in shrink-wrapped packages of 200 grams for about NIS 18 - twice the price of the same cheeses purchased unsliced at supermarket deli counters - would be priced at around NIS 16.20 under the proposal.

This is a relatively small discount, but it would be for the long term, said sources. However, they acknowledged that it was unlikely to appease the public.

The committee for setting dairy pricing policy, headed by Industry, Trade and Labor Ministry Director General Sharon Kedmi, is expected to submit its findings to Minister Shalom Simhon soon.

Sources said that if farmers agree to receive a lower price from the manufacturers for their milk, then retail prices could be reduced even further.

Simhon has called for reducing VAT on several dairy products, but Finance Minister Yuval Steinitz objects to this.

Simhon and Steinitz are also expected to set terms to ease the way for investors to launch new dairies, which would increase competition, said the sources.

The supermarket chains have not expressed opposition to the reinstatement of price controls on dairy products.

"We recognize that they have to increase the number of price-controlled products because we saw that the prices of items removed from government oversight increased, and that this process essentially failed," said Zeev Vurembrand, CEO of Blue Square.

Commenting on the fact that the supermarkets and dairies would be hurt the most by such a move, he said, "We'll all need to absorb the costs and of course I care about the money, but this is the right thing to do."