Wild Card in Bailout: Will Supermarket Chains Switch Suppliers?

The deal shaping up for Hetzi Hinam's purchase of Vita Pri Galil is drawing mixed reactions from marketing professionals and the fruit-and-vegetable processor's competitors.

The first, and immediate, effect of the sale will be on Vita Pri Galil's relationships with other supermarket chains. About 30% of the company's sales are of its private-label products for the Super-Sol and Blue Square chains. Vita Pri Galil also sells to other grocery chains and to the institutional market, including restaurants and catering companies.

Marketing professionals were split yesterday over whether Super-Sol and Blue Square would continue their contracts with Vita Pri Galil for their own-label products, or switch to rival companies such as Sanlakol or Miluot.

"Super-Sol and Blue Square will stop working with Pri Hagalil and move over to their competitors," said Rafi Sheffer, the CEO of Brand for You, the private label of a group of small grocery chains. "These supermarket chains won't want to strengthen Hetzi Hinam and won't want Hetzi Hinam to know how much they're paying for their merchandise.

"I worry about Super-Sol and Blue Square turning to Sanlakol, which might then stop manufacturing for us. I assume that all the supermarket chains and groceries would prefer that a manufacturer be acquired not by a retail company but by another manufacturer or non-retail operation."

Blue Square CEO Zeev Vurembrand, however, promised that an ownership change will not affect his company's cooperation with Vita Pri Galil.

"If Hetzi Hinam succeeds in saving the company we'll do everything to continue purchasing our private label from it," Vurembrand said. "The fact that they rescued an Israeli firm is admirable and it shouldn't affect our future work with the company."

Super-Sol CEO Ephraim Rosenhaus also said his company doesn't look at the identity of the owners when it buys products for its stores.

"Pri Hagalil is very important to employment in the north and we welcome any successful solution because it will save the economy in the north of the country," Rosenhaus said. "Super-Sol was the first to pitch in on behalf of Vita Pri Galil, offering all the company's products at a 25% discount and absorbing the price cut."