Survey Finds Huge Markups for Fresh Produce Sold Online

The survey looked at prices on the websites of Mega and Super-Sol, the two biggest chains in the country.

Mega reaps the biggest profits on fresh produce sold over its Internet site, with pumpkin selling for more than five time what the retail chains pay farmers.

That was the main finding of a survey conducted by the Farmers Association on the cost to consumers of fresh fruit and vegetables, compared to what the growers themselves are getting. The survey looked at prices on the websites of Mega and Super-Sol, the two biggest chains in the country.

It found that pumpkin was priced for shoppers on the Mega portal at NIS 10 a kilogram, while the wholesale price was just NIS 1.80, a difference of 455%. The second-biggest gap was for sweet potatoes, where the price differential was 400% and the third for red peppers at 309%. The differential was 233% for cucumbers, 215% for melon and 175% for green grapes.

Super-Sol's website also sold fresh produce at high markups. The difference between the wholesale and retail price of pumpkin was nearly as steeps as at Mega - 400%. Sweet potato was sold at a 344% mark-up, cucumbers at 288% and red pepper at 263%.

Among 12 fruits and vegetables, Mega was charging a higher mark-up on eight items and Super-Sol on two. The other two were sold at the same differential.

In defense of their pricing practice, a senior retail executive told TheMarker that the survey was misleading because it didn't take into account the complicated and rigid cost structures of the big retailers.

"Labor costs, for instance, don't fall with the [wholesale] price of cucumbers. The chains can't fire workers whenever the price of bananas, zucchini and fish goes down," the executive said, speaking on condition of anonymity.

He cited other fixed costs, such as municipal taxes, rent, electricity and refrigeration. "Also the fuel costs of refrigerated trucks that deliver fresh farm products from the field and packing house to the store doesn't go down when pumpkin prices fall at the height of the season."

He said the retail chains would collapse if they passed on all changes in wholesale prices to the consumer. "Presenting the markups as exploitation and theft from the consumer is cheap and insufferable demagoguery."

Dov Amitai, president of the Farmers Association, said the markups were especially hurtful to the lowest income groups. He cited a Knesset report from earlier in the year that found that the poorest 20% of the population spent 22.3% of their income on food, while the wealthiest 20% spent just 13.8%. That Knesset report found that between 2005 and 2011, fruit prices rose 60% in Israel while in Organization for Economic Cooperation and Development countries, the rise was only 20%.

Mega responded to the survey by saying the wholesale prices cited by the Farmers Association were only partial, and do not include the charges from packing houses and other expenses. "These costs double, and sometimes even triple the price that the chain is paying," Mega said in a statement. Super-Sol declined to comment on the survey.