(photo credit: REUTERS)
Supermarket chain Shufersal intends to compete in Israel’s exceptionally concentrated dairy market, introducing products in four categories: fresh milk, chocolate milk, yellow cheese and whipping cream.
The company is already planning an expansion into fortified milk, lactose-free milk, Gouda, mozzarella and cream cheese. The milk and cream products are to be manufactured at the Golan Heights Dairies, while some of the cheeses will be imported from Netherlands-based Campina (Gouda), Italy- based Zanetti (Parmesan) and Austria-based Berglandmilch (Edem).
The products will be priced lower than the current going rate and will bring down dairy prices for all Israelis, Shufersal CEO Itzik Abercohen said.
“We consider the entry of the private brand for dairy products a strategic tool for reducing the cost of living in Israel,” he said.
The prices Shufersal presented Sunday were 10 percent to 25% lower than the government- mandated supervised prices for the various products.
Israel’s dairy market is notoriously concentrated, with just three companies accounting for the vast majority of market share. In the NIS 7.5 billion milk market, for example, Tnuva controls 55%, while competitors Strauss takes in a quarter and Tara another 15%. Shufersal hopes to control 20% to 25% of the market by year-end.
Even though Israeli cows are the most productive milk producers in the world, the lack of competition keeps local prices high: 40% to 50% higher than the OECD, according to a Shufersal executive.
But there are other problems in the market. The government controls a convoluted system of quotas and guaranteed prices to the more than 1,000 small dairies that work in consortium to supply the big companies. While European cows feed on abundant grass, their Israeli counterparts eat expensive grain due to climate differences.
Steps have been taken in recent years to lower barriers to importing dairy products, for which some import duties had been as high as 125%.
Dairy prices hold a particularly important place in the political psyche. The massive cost-of-living street protest of 2011 were preceded by outrage over the price of cottage cheese. The cost of the staple, which had been removed from price supervision in 2008, rose 45% in three years.