Or Fass, co-owner of the microbrewery Fass Beers on the Golan, pours a pale ale at the Jerusalem Beer Festival..
(photo credit: IGOR FARBEROV)
Will the summer of 2015 be forever remembered as the summer of the beer protests?
Since anger over the high price of cottage cheese in 2011 laid the groundwork for massive street rallies, Israelis have been sensitized to news that they pay more for the same products than other people do. Last year, a Facebook post showing the price differential between Milky and a similar German pudding product went viral, and prompted calls for Israelis to “make aliya” to Berlin.
On Tuesday, a travel company called GoEuro released its annual report
on which destinations have the most expensive beer, and out of 75 cities, Tel Aviv came in third, just behind Geneva and Hong Kong. Beer here was 10 percent more expensive than in New York City (fifth place), while London was comfortably in 13th place.
The average price for a third of beer (330 ml.) in Tel Aviv’s supermarkets was $2.06, while at a bar it cost $9.53. Compare that to Berlin (as Israelis are wont to do): $0.79 and $4.37, respectively. Why is beer so expensive in Israel? “Largely it’s because of the taxation here in Israel, but all the products in Israel are expensive,” said a representative of International Beer Breweries, which sells Carlsberg and Tuborg in Israel.
She noted that the price of beer in, say, Sderot, would be far lower than in cosmopolitan Tel Aviv.
In July 2012, when the government’s budget deficit had exploded to twice its target, then-finance minister Yuval Steinitz imposed a slew of new taxes, including a near-doubling of the beer tax from NIS 2.18 to NIS 4.19.
“At the time that Israel doubled the beer tax, the production tax became the second highest in the world after Singapore,” said David Cohen, founder of the Dancing Camel Microbrewery in Tel Aviv.
“When you stop to factor in the tax as a percentage of all the production costs, they are the single largest factor, by far, of the cost.”
While the tax accounts for a significant chunk of the price of beer, there is another element at play: market concentration.
Together, the International Beer Breweries company and Tempo, a larger competitor that produces Israel’s most popular beer, Goldstar, account for an estimated 95% of the beer market. A spokesman for the Antitrust Authority – possibly too busy with a more pressing issue in the headlines – did not respond to a question on whether the beer market had ever been investigated for monopolies. The tax, however, may be partly to blame for the market concentration.
“The tax structure doesn’t have a graduated rate for smaller microbreweries,” said Cohen.
Unlike other countries, which give a break to the small breweries that cannot take advantage of the benefits of scale large brewers can wring out of the production, Israel’s beer tax is uniform. That, Cohen noted, may be a reason that smaller companies have not grown.
“Before the tax [hike], microbreweries were on a growth trajectory.
Five new ones opened up the year before. Now, there’s no growth, and at least three of them are on the ropes,” he said. In a market with just a handful of microbreweries, the loss of three would be significant.
But unlike cottage cheese, beer is hardly a cause célèbre among Israelis, who have one of the lowest alcohol consumption rates in the non-Muslim world. According to GoEuro, Tel Avivians drink an average of 23 liters of beer a year (Carlsberg estimated 12 liters on average for the country).
Next to New York’s 85, London’s 79, and Sydney’s 99 liters of beer guzzled per capita each year, it might not be worth the effort for Israelis to mount a protest on Tel Aviv’s Rothschild Boulevard.