Dairies Aren't Milking Consumers This Shavuot

Shavuot may commemorate the giving of the Torah to the Jewish people, but it is also the annual salesfest of the Israeli dairy industry.

Sales of dairy products can rise by as much as 50% in the week around Shavuot. Given that the dairy business has a NIS 7 billion annual turnover, the week before the holiday, which begins tonight, is typically the most important one of the year for the industry.

So why is this Shavuot night different from all other Shavuot nights? Because this year the dairy industry isn't introducing new products to titillate the palate, or even giving out prizes with the standard products. It seems the big firms - Tnuva, Strauss and Tara (owned by the Central Bottling Company ) - have decided to save their ammunition for other battles between them. Most of the this week's special offers are limited to reductions in price or increases in package size.

"For the eight days around Shavuot, dairy sales rise 70% on average," said Michel Ben-Weiss, the health and wellness division general manager at Strauss, who participated in a TheMarker panel in honor of Shavuot. "There are also categories where the increase is even higher. Sales of soft white cheeses, for example, grow by 150%."

Because dairy products have become such a central part of the Shavuot holiday experience for Israelis, it seems that the dairies are not afraid their restrained sales strategy will lower sales before, or after, the holiday.

"All in all, it is only a few days of holiday," said Harel Haiken, the deputy CEO of Tara Dairies. "Refrigerator space in the supermarkets has not grown significantly this year, so in practice it's impossible to introduce new products only for a few days. Nonetheless, we see that every dairy is trying to do something special for the holiday."

Strauss is also gearing up for post-holiday sales. "Immediately after the holiday we will start to plan our actions for 2011," said Ben-Weiss. "In the meantime, we are adapting what we are doing for the consumer and what we feel they want. The past two years were characterized by a consumer tendency to examine prices very carefully."

Illogical deals

The Israeli dairy products market is controlled by the three main players: Tnuva, Strauss and Tara, with 58%, 23% and 10% market share respectively.

Together, the three biggest dairies control more than 90% of the dairy products business, according to data from StoreNext Israel, which compiles figures on retail sales.

Over the past few months, the price war in the industry has heated up as total sales have stagnated and the dairies have invaded each other's core territories. Tara has started making its own brand of soft white cheeses to compete with Tnuva and Strauss; Tnuva has moved into puddingst to compete with Strauss; and Strauss is expanding into milk with its Yotvata brand. But competition hasn't necessarily helped consumers: even as the companies put select their products on sale, they have been raising the standard prices.

"I'm glad we're not in a battle over prices. In general, we are selling products the other dairies don't have," said Ezra Cohen, the CEO of the small Gad Dairy. Gad has slightly less than a 3% market share.

The Israel Dairy Board, the central institution that deals with the planning and regulation of milk production, says Isrelis consumed about 176 liters of milk a year per person in 2009, down just 0.3% from 2008.

Over the past decade, Israeli milk consumption has risen by 2.4% per capita, a rather low growth rate considering the millions of shekels the dairies spend on marketing every year.

Israeli milk consumption is low by Western standards, given that Scandinavian and Western European countries average some 300-350 liters per person per year. Americans make do with 210 liters. Israeli consumption is about the same as in Argentina, though not as low as countries like Japan, whose residents consume an average of 100 liters per person every year.