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(photo credit: Ariel Jerozolimski)
Amid a public uproar over higher bread prices that came into effect over the weekend, Ministry of Industry, Trade and Labor defended the hike Tuesday, saying that it could have been much higher.
The ministry said that without controls requiring fair dealing among retailers and bakers, the 7.11-percent rise would have had to be doubled.
It found that bakeries were losing 27.4 agorot on each shekel worth of regulated bread sold, due partially to large discounts the leading supermarket chains were extorting from them.
"The vast majority of the discounts were not being passed on to the consumer," said Zvia Dori, the ministry's director of the interior commerce administration.
She said that the supermarket chains were generally selling the bread at the full price allowed in any event, boosting their profits by 12% to 35%.
Bakeries were partially compensating for the loss by charging higher prices on unregulated products so that the price rise needed on the regulated goods came to 14.1%, the ministry said.
To enable a smaller price rise, the ministry decided to bar bakeries from giving discounts to the retailing sector, in an unprecedented move approved by an interministerial council headed by the Finance Ministry.
Further calculations determined that the new rules would cut the bakeries' loss by 8.3% of the value of the bread so that the price of regulated bread items could then be lifted by just 7.11%.
"The decision was purely professional," stressed Dori, adding that it was naturally approved by the ministry's political leadership before being brought before the interministerial council.
"The situation created reflected an extreme imbalance between the [supermarket] chains and the bakeries, and indicates the lack of complex competition between, since in [sufficiently] complex competition both sides must earn a reasonable profit," Dori said.
"The lack of balance hurts the consumer public as a whole and the weaker segments in particular," she added.
Bread prices are evaluated occasionally in accordance with inflationary pressure, but there is not a fixed schedule for the price changes, Dori said, noting that in the past the price had been cut at least once to her knowledge.
Her department also regulates the prices of salt and yeast, while other government bodies regulate the prices of margarine, butter and other items.
"There is no such thing as appropriate timing for raising bread prices," Dori commented, adding that the current price hike "should have happened long ago."
Under the interim government, the ministry's legal counsel had recommended that the rise be postponed because of the sensitivity of the matter, leaving it to the last minute, she said.
"[Former Industry, Trade and Labor Minister Ehud] Olmert had to handle the matter before he left [the ministry]. Otherwise it wouldn't have been fair to his successor," she added.
The price hike was attacked this week by social activists and politicians, who accused the government of reneging on its election promises to help and not harm the poor.
"This latest rise in the price of basic food staples takes the plight of the needy one step backwards," said Eran Weintraub, chairman of humanitarian aid organization, Latet.
Incoming Industry, Trade and Labor Minister Eli Yishai (Shas) pledged to reconsider the decision.
Yishai said he sees the ministry's job as protecting consumers while allowing the bakeries to work and earn a reasonable profit for their products, noting that he himself had worked for both Angel and Berman bakeries when he was younger.
"It is important to remember the thousands of workers dependent on the bakeries for their livelihood," Yishai said.
Yishai asked ministry experts to find a "creative solution" to the matter that would not hurt the bakeries or poorer consumers within the next couple of months.
But he left the decision standing in the meantime, Dori said. In a statement on Sunday, Yishai raised the possibility of reinstating government subsidies on bread.
Following the announcement of the bread hike at the end of last week, the price of the five regulated breads rose by between 25 and 40 agorot. Including value added tax (VAT), the price of a 750-gram loaf of dark or white bread rose to NIS 3.70; the price of a 500-gram challah or yeast-based baked good rose to NIS 4.05; the price of a 750-gram loaf of sliced dark bread rose to NIS 5.60; and the price of a 500-gram loaf of sliced and wrapped white bread rose to NIS 4.95.
Rolls, considered non-essential goods, are not subject to price regulation.