Rivals Grow Jittery as Israeli Mega-market Super-Sol Extends Its Reach

Supermarket giant making rapid forays into wholesaling, pharma, travel and insurance

A shopper in Super-Sol takes her pick of chocolates.
Ofer Vaknin

Super-Sol has long been Israel’s biggest supermarket chain, but the last several months have shown its ambitions don’t just stop there.

The chain has acquired the New-Pharm drug store chain from Hamashbir Lezarchan for 130 million shekels ($36.9 million), launched a wholesale unit called Cash & Carry to supply small grocery stores and minimarkets and formed a joint venture online travel service with Gulliver.

Its private-label food line boasted sales of 2.5 billion shekels last year, making it Israel’s fifth-largest food supplier and is moving into areas once considered off limits to private label, like dairy products, baby formula and diapers. Next on the list is a joint insurance venture with AIG Israel. With the threat of Amazon launching operations in Israel, Super-Sol is also planning a platform for people to order products online.

Super-Sol’s expansion is worrying the competitors it’s now taking on in these new sectors – although it’s hard to get anyone in the industry to speak on the record (and sometimes even for background) out of fear of offending such a powerful player.

Its Cash & Carry wholesale business is in many cases selling goods wholesale for lower than other wholesalers do, giving food makers and importers the willies. Now that it has New-Pharm under its wing, Super-Sol is starting to demand discounts and special deals from cosmetics suppliers, industry sources said.

Foodies Food-retail market share in 2017.

Rivals say Super-Sol is building its new business on the market power and cost efficiencies of its supermarket operations without facing the same kind of antitrust scrutiny other big players face.

“If I want to distribute another company’s products, I have to go to the Antitrust Authority to get approval, and here Super-Sol can distribute its whole line of products, including its private label, to grocery stores without the need for any approvals,” said the senior executives at a major food company, who asked not to be identified.

The executive predicted that if Super-Sol succeeds in its new wholesale business and its private-label line grows, it could emerge as one of the top three food companies in Israel. “A brand that’s so big can dictate other prices and terms,” he warned.

Super-Sol is already a food giant. It has 11.8 billion shekels in turnover in the 12 months to September 30, making it bigger than its next two biggest rivals – Yinot Bitan, with 5.8 billion of sales, and Rami Levy with 5 billion.

Moreover, Super-Sol has a spotty record when it comes to fair competition. A former CEO, Effie Rosenhaus, was sentenced to jail in 2014 for violating antitrust conditions the company had agreed to when it was allowed to take over rival Club Market.

“Anyone who isn’t bothered by Super-Sol is an idiot,” said a manager at a medium-sized grocery chain. “Today’s there’s really only one significant player in the market, who dictates terms for nearly everything. The problem with Super-Sol is that unlike [the dairy maker] Tnuva and [Coca Cola bottler} Central Bottling, it’s not deemed a monopoly.”

Super-Sol responds that its market power and forays into new sectors will only benefit consumers.

“In the private-label segment, Super-Sol has shaken up the market by entering categories that were highly concentrated and were characterized by high prices, like baby formula, soft drinks, milk and others,” said Zvi Baida, Super-Sol’s vice president for customers and service.

As for entering the wholesale business, Baida said its job wasn’t to protect suppliers but to help shoppers, who will benefit from lower prices at their neighborhood grocery stores and minimarkets.

A spokesman for the Antitrust Authority said the New-Pharm takeover was only approved after a lengthy investigation into its implications for competition showed there was no need for concern.

Super-Sol’s competitors are fighting back by copying its expansion strategy. TheMarker has learned that Rami Levy plans to enter the travel business in the coming year and is expanding its private-label line, which now accounts for 16% of its turnover.

Meanwhile, Yenot Bitan in planning to enter the wholesale business and make its logistics center available for smaller food retailers.