Consumer power

The same grassroots pressure that brought about Cohen’s resignation, Tnuva’s price cut will inevitably lead to more changes in the dairy market.

By JPOST EDITORIAL
milk bags 298 (photo credit: Ariel Jerozolimski )
milk bags 298
(photo credit: Ariel Jerozolimski )
The Great Israeli Cottage Cheese Uprising has taken a new and promising turn. Itzik Elrov, the haredi man from Bnei Brak who started it all back in June, could not have imagined that his lone Facebook call, spurred by shock at the jacked-up price of cottage cheese at his local grocery store, would set in motion a revolution in the local dairy market.
The latest chapter in a saga demonstrating the tremendous power that can be wielded by engaged and united consumers is the resignation of Zehavit Cohen, head of the dairy giant Tnuva. The resignation, pending an investigation by the Israel Antitrust Authority into allegations that Tnuva might have hidden documents revealing that it abused its monopoly status to gouge prices, was accompanied by an announcement by Tnuva, which controls well over half of the NIS 8.6 billion dairy market, on a 15 percent price cut starting Tuesday. White cheeses, hard yellow cheeses and pudding are some of the products that will become more affordable.
But while it is encouraging to know that the grassroots protest started by Elrov and picked up by several university student unions in recent months succeeded in getting the attention of big businesses, the impact made by Elrov et alia might be even more farreaching, resulting in no less than a complete revamping of the entire dairy market.
It has been an open secret for some time that the prices of dairy products here are disproportionately high. But it took the Great Israeli Cottage Cheese Uprising to push this fact to the forefront of public consciousness.
For instance, in July, just weeks after the uprising began, Prime Minister Binyamin Netanyahu made headlines when he expressed astonishment during a visit to Romania that Tnuva cottage cheese sold for NIS 2 less in Bucharest than it did in Beersheba.
Reports released by the Treasury and by the Knesset research department over the summer provided data on the 45% hike in cottage cheese prices between 2006, when price controls were removed, and January 2011, when a 250-gram container cost more than NIS 7. In June, Elrov’s grocery store charged NIS 8. In contrast, the wholesale price of milk increased by less than 10% during the same period.
These reports, and a thorough study published in July by Keren Harel-Harari of the Jerusalem Institute for Market Studies, listed the reasons for the price distortions in our dairy market. Tnuva, Tara and Strauss – the three largest dairies – as well as other producers of agricultural products – were said to be exempt from the sorts of anti-trust laws that applied to most sectors of the economy. Also, various tariffs and obstacles to imports – such as a 150% to 200% tax on imported milk powder and butter – protected the local dairy and agricultural market from international competition.
But perhaps most disturbing was the revelation that in March this year, the Netanyahu government – usually so strongly pro-free market – pushed through the Law for the Planning of the Dairy Market. In the 50-0 vote, the Knesset ratified legislation reminiscent of now-defunct centrally planned economies. Instead of allowing free market forces to sort out supply and demand in the market, a special “quota committee” would determine annual dairy output.
Though the law gives the industry, trade and labor minister the authority to open up the dairy market to international competition, Shalom Simhon, the present minister who is seen as representing the interests of moshavim, many of which are big producers of milk, has said publicly that doing so would be ineffective and would take too long.
It appears, however, that the forces set in motion by Elrov’s Great Israeli Cottage Cheese Uprising are unstoppable. The same grassroots pressure that brought about Cohen’s resignation and Tnuva’s hasty announcement of a price cut will inevitably lead to more substantial and desperately needed changes in the dairy market. And it all began with one disgruntled consumer who refused to be taken advantage of any longer.