Rami Levy Claims His Stores Are Subsidizing Materna Formula

Manufacturers can set a suggested retail price but the retailer does indeed set the final price.

Supermarket mogul Rami Levy blasted the Materna baby formula company for raising prices.

In a letter to Materna CEO Efrat Gilat, Levy contested the company’s statement that retailers set prices.

Rami Levy, founder and chief executive officer of Rami Levy Chain Stores Hashikma Marketing 2006 Ltd., Israel's largest discount food retailer, sits on a row of shopping carts outside a Rami Levy Supermarket in Jerusalem, Israel on Sunday, Nov. 23, 2014.

Levy’s letter comes after consumers noted Materna prices were up 7% last month. When questioned, Materna stated: “Materna prices are set by the retail chains. There has been a recent price increase due to the substantial increase in the cost of raw materials around the world.”

Manufacturers can set a suggested retail price but the retailer does indeed set the final price.

In his letter to Gilat, Levy shot back: “The truth is that the Rami Levy [Shivuk Hashikma] chain has been subsidizing Materna and Similac baby foods by tens of percent for many years.”

In a related matter, Levy has taken exception to Antitrust Commissioner Ronit Kan’s approval of Osem’s 2009 purchase of 51% of Materna. If the acquisition had been blocked, Nestle, which controls Osem, would have entered the baby formula market itself and competed with Materna and Similac, he said.

Business-to-business commerce website StoreNext reports that Materna controls Israel’s baby formula market with a 66% market share, and Similac has 33%. Similac raised its prices 5% in October, and says it doesn’t plan to do so again for the time being.

Materna declined to respond. The Antitrust Commission said in response that Osem’s acquisition of a controlling stake in Materna followed a thorough investigation by the commission, which found that Nestle was unlikely to enter the Israeli baby formula market on its own due to the characteristics of the Israeli market and the limitations imposed by kashrut.