Two and a half years have passed since cost-of-living protests erupted across the country, triggered in large part by the rising cost of food. Although some food price increases were reined in for a time, they began rising anew last year, a study by the market research firm Nielsen Israel has found.
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The price of food, beverages and household products rose overall by a relatively moderate 3% last year, according to Nielsen, but price hikes on some items were quite steep. It also found that shoppers cut back on the quantity of food they bought, suggesting that the high cost was the reason.
Based on data from the major food retailers and smaller grocers, Nielsen found double-digit increases for beer (11%), long-life ultra-pasteurized milk (10%), alcoholic beverages (10%) and pet food (10%).
Not far behind were frozen meat products (9%); bread and deli-counter salads (both 8%); canned fish, meat substitutes and eggs (all 7%); as well as frozen vegetables, salty cheese and frozen baked goods (all 6%). On average, prices for the supermarket chains’ private label products rose 4% last year.
However, industry sources contend that price increases would have been much steeper had it not been for the cost-of-living protests.
“Before the protests, manufacturers typically raised prices by 10% to 15% a year, and now that’s not happening,” said the senior executive at one major supermarket chain. “In 2012, the producers and the chain stores couldn’t raise prices due to consumer anger and at the end of 2012 and in 2013, when they chose to increase prices, they did so by a few percent.”
Furthermore the retailers’ overhead, including the cost of electricity and water and municipal taxes, rose during that period, too, the source added.
In the second quarter of 2011, just before the outbreak of the social justice protests, food prices soared by 6%, sparking particular outrage over the cost of that staple of the Israeli household, cottage cheese. The protests made retailers and food producers leery of the consumer, and from the third quarter of 2011 until the end of 2012, there was marked restraint in price hikes.
During certain periods in 2012, prices actually went down, and for the year as a whole, the price of food remained static.But most food manufacturers raised their prices at the end of that year and at the beginning of 2013.
Some retailers, including the country’s largest supermarket chain, Super-Sol, instituted price hikes that exceeded the wholesale price increases they faced from manufacturers.
The year 2013 began with price rises of 1.6% in the first quarter of the year, but the trend only accelerated as the year went on: 3.4% in the second quarter; 3.8% in the third; and 4.2% in the fourth quarter. Overall, since the outbreak of the cost-of-living protests, food prices have increased by 4%.
According to the Nielsen study, consumer habits have changed since the protests and shoppers are more conscious of price hikes. The volume of food sales declined by 1.5% in 2013 compared to the year before, but on average consumers still paid 2.3% more for what they purchased.
“In 2012, companies did everything they could not to raise prices, because they were traumatized by the protest,” said Sagit Attar, Nielsen Israel’s managing director. “In 2013, they already felt more at ease [about raising prices] because they thought that perhaps the protests had been forgotten.”
In the face of the price rises, consumers cut back on the volume of their purchases and also went to the supermarket less often. On average last year, shoppers bought 14.9 items per supermarket visit and also went to the supermarket slightly less frequently - 125.5 times over the course of the year.
Among the apparent beneficiaries of the cost-of living protests were the discount food chains, whose market share, at 49%, was up somewhat at the end of 2013, compared to 47% before the demonstrations.
Consumers have been gradually shifting from the larger chains, Super-Sol, Mega and Co-op Shop, to privately-owned ones such as Rami Levy, Yenot Bitan, Victory and Osher Ad.