Retail Chains in No Hurry to Raise Prices

The new price lists submitted by suppliers to the large supermarket chains in the past week include hikes ranging from 3-30 percent, but retailers have been reluctant to raise prices to consumers.

"There's been a flood of price hikes in every category," Blue Square-Israel CEO Gil Unger said recently.

"Blue Square makes it difficult for the suppliers, asking tough questions about the need for raising prices," Unger explained. "The suppliers have to find creative ways of lowering prices and of not making the Israeli consumer shoulder all the costs. They keep asking the chains to increase their efficiency, but maybe they should do their homework and take their own productivity measures before hurting consumers in their pockets," Unger concluded.

A spokesman for Tnuva Food Industries said that the supermarket chains had approved the company's request for a 3 percent rise in the price of their dairy products that will be going into effect in a few days.

The demand for higher prices is particularly strong in the detergent and soft drink categories, where higher fuel prices have a direct effect on manufacturing costs. Observers point to the increased cost of raw materials coupled with stiff competition among the retail chains - leading to deep discounts for consumers and higher production costs.

Rises in the cost of fuel have also hiked shipping costs. Suppliers report that Zim recently raised its shipping rates by 25 percent.

Industry officials says that many suppliers have not raised prices and have cut their profits. Some suppliers claim they have reached their limit. They say the chains do not realize that price hikes are necessary to ensure the continued profitability of the chains themselves.

Some of the industry sources say that the chains will have to raise prices eventually, but no one wants to be the first to do so. A few of these observers say that the management of Supersol, the country's largest supermarket chain, has already begun to approve certain price rises.

"The entire market is looking at Supersol Deal, which today sells products at the lowest prices in the market and offers products to consumers at prices that are below cost. For this reason, Blue Square is refusing to raise prices," one senior industry official said.

According to a study carried out two years by the Antitrust Authority, consumer prices have remained steady for several years, while suppliers have continued to raise prices, resulting in smaller profits for the big retail chains. Some suppliers claim that the chains are now attempting to exploit their power and prevent suppliers from raising prices in order to regain some of their lost profits.

Supersol refused to comment on the reports.