A storm in a pudding cup

The ‘Milky Affair’ proves that in Israel, social protest, like Napoleon’s armies, marches on its stomach

By SHLOMO MAITAL
Naor Narkis sparked off the Milky war (photo credit: Courtesy)
Naor Narkis sparked off the Milky war
(photo credit: Courtesy)
A QUESTION ARISES regarding Jewish dietary laws: Is social and economic pro - test in Israel milchig (dairy)? Or fleishig (meat)? On which dishes does one serve it? The answer is now clear.
Milchig ! First, it was cottage cheese.
In the summer of 2011, Itzik Alrov, a res - ident of Bnei Brak, launched a small pro - test group on Facebook asking people to stop buying cottage cheese because it was outrageously expensive (eight shekels, or $2.35, for a small container). The focus of the protest was the venerable Israeli dairy company Tnuva, later acquired by a Chi - nese firm, Bright Foods, but Strauss Elite, the Israel-based global food, chocolate and coffee company, was involved, too.
Tens of thousands joined the group and, as a result, retail food chains slashed the price of cottage cheese dramatically to below six shekels ($1.75). The Antitrust Agency began an investigation and a class action suit was launched against Tnuva.
Huge social protest rallies, including tent camps, took place in towns and cit - ies throughout the country demonstrating against the high cost of living, and espe - cially housing. For a time, it even seemed that the Netanyahu government might be brought down by the protests.
Now, it is Milky, the chocolate pudding cup topped with whipped cream, a favorite of generations of Israeli children and adults alike, that sells for about three shekels (90 cents). The pudding wars bring new mean - ing to the phrase “Only in Israel” where social protest, like Napoleon’s armies, marches on its stomach.
A young Israeli mounted a Facebook page, like Alrov, but anonymously, on September 29. Appropriately, it was during the 10 Days of Penitence, when we reflect on mending our ways. The provocative title of the page was “Olim l’Berlin” (literally, going up to Berlin), using the word that normally describes the praiseworthy act of “going up” to the Land of Israel. The author said he was immigrating to Berlin, be - cause of the high cost of living in Tel Aviv.
But what caused his Facebook page to go viral, attracting (like Alrov) many thou - sands of Facebook “likes” (86,000 joined in the first 24 hours!), and sparking a national debate, was his posting of a shopping receipt. It included a receipt for several food items, including the Berlin version of Milky. The price? Less than a shekel – 0.19 euros, or about 0.81 shekels – less than a third of the going Israeli price.
Nothing spurs journalists’ adrenaline more than an anonymous person at the cen - ter of a controversy.
The Washington Post tracked down the Facebook protester. He is 25-year-old Naor Narkis, who designs applications (“apps”) for mobile phones. And the fact that he is encouraging more young Israelis to move to Berlin, in the land of the Holocaust, has caused a furor. A later post by Narkis showing a Berlin rental contract was joined by 160,000! Israeli politicians were not amused by the storm in a pudding cup. Agriculture Minister Yair Shamir, son of former prime minister Yitzhak Shamir, told The Jerusalem Post, without cracking a smile, “I pity the Israelis who no longer remember the Holocaust and abandoned Israel for a pud - ding.” Other Israeli leaders called Narkis an anti-Zionist traitor and a shame to his countr y.
The main local discount supermarket chain, Rami Levy, put Milky on sale, though it still charged 2.80 shekels (three times the cost of the Berlin version).
The ‘Milky Affair’ has become a cause célèbre in Germany. “A Berlin revolution in Israel!” trumpeted the German tabloid Bild, “because of... chocolate pudding!” Der Spiegel proclaimed Berlin “the pud - ding paradise” on its website.
Narkis told The Washington Post he received death threats on his Facebook account following his Milky posting. Narkis, who moved to Berlin six months ago, said, “Israel is too expensive for young people, and if that doesn’t change, it will lose a generation of us who will move away.”
He said he was dropping his anonymity to start promoting his message publicly.
NARKIS’S MOTHER and father originally immigrated to Israel from Paris, like Berlin a vibrant city. Narkis, who grew up in Ramat Gan, a city alongside Tel Aviv,  tried Paris before Berlin. He was repelled by what he calls “virulent anti-Semitism” but says he found a warm welcome for Israelis in Berlin. “I think young Germans and young Israelis share a lot in common.
We both grew up in the shadow of the Ho - locaust. And, in that sense, we understand each other,” he told The Washington Post.
“I don’t understand how in a country, which is constantly under missile attacks, an apartment costs 1.5 million shekels (about $400,000) while in the most advanced economy in Europe an apartment costs 600,000 shekels.” He says his posts have made the Israeli public more aware that their problem does not lie with people like himself, who leave the country, but with those who are causing them economic hardship.
Proof that Israeli social protest is milchig lies in the key role played by dairy products in social protest.
In February 2012, Israelis traveling in New Jersey were shocked to find that a favorite chocolate bar made by Strauss Elite, called Pesek Zman (Time Out) and sold at ShopRite, cost half its price in Israel, despite the cost of shipping. This protest, too, was launched on Facebook.
Strauss Elite responded coldly at the time. Its spokesperson told the business daily TheMarker that “Strauss, as a man - ufacturer, is not responsible for setting the final prices that consumers pay. This is set by retailers in Israel and in other countries.
We found that the New Jersey Shop-Rite decided to sell the candy bars at a sale price of NIS 2.70 due to excess supply. This is not the product’s official price. You can find discount sales in Israel as well.”
The Milky flap is a bit hard to take seriously, but it does have a serious factual basis. Let me try, as an economist, to find the truth behind the Facebook furor.
First, it again proves how powerful social media have become as instruments of social protest. My Singaporean friend, former deputy foreign minister Bilahari Kausikan, argues that social media are destabilizing democracy by making an end run around the ballot box. Others might argue that social media protests are actually strengthening democracy by giving a voice to those otherwise mute. It is easy to misunderstand Facebook protests. They become viral over things that seem rather trivial, like Milky. But the issue is not Milky. It is what Milky represents – a part of our lives that is loved and is extremely expensive, creating profits for monopoly capitalism.
Second, the role of Milky’s producer, the multinational Strauss Elite. Ironically, Strauss originated with a small backyard dairy in Nahariya set up by Richard and Hilda Strauss, who emigrated from Germany to Palestine in the 1930s. They struggled to make a profit from milk, so they began to make cheese and, later, ice cream.
In 2004, Strauss acquired the chocolate company Elite. Strauss Elite is led by Board Chair Ofra Strauss, granddaughter of Richard and Hilda, a strong business leader who has successfully made Strauss a global giant that employs 7,000.
Milky was launched by Strauss in Israel in 1980. It is regarded by marketing experts as one of the most successful dairy innovations of all time. It was a knockoff imitation of a German product made by Danone, known as Dany Sahne.
Milky often has been controversial. In 2003, a young Technion student named Elad Yair found that the gelatin used to make the Milky whipped cream topping was in fact rennet-based (hence, for the religious, decidedly and distressingly fleishig). Religious people and vegetarians launched a boycott campaign. As a result, Strauss announced it henceforth would use only vegetable-based gelatin.
And Strauss has always been clever in advertising Milky. Strauss’s first video commercial in 1986 featured “Milky girls” – three models who later became celebrities, Sandi Bar, Hila Nachshon and Bar Refaeli. There are several variations of Milky, including one with sprinkles; one with the whipped cream on the bottom; and one with vanilla rather than chocolate pudding. But the original version remains the most popular.
I glanced at Strauss Elite’s financial statements. It has annual revenues of about eight billion shekels ($2.3 billion), making it one of Israel’s premier global firms. More than half of its revenues come from sales abroad. It has succeeded in popularizing, for example, its humus brand in America.
And, most significantly, Strauss has a gross profit margin of 40 percent. That means it makes 40 cents of gross profit on every sales dollar. This is exceptionally high for a food company – such margins are more commonly found among high-tech firms.
How does Strauss make so much money? In part by building strong brands, using expensive and sophisticated marketing, so people want to buy despite their high price.
And, in part, by practicing good old-fashioned profit-maximizing capitalism.
A BASIC economic principle taught in Economics 101 says companies should charge prices inverse to the price sensitiv - ity of demand. Abroad, Strauss competes fiercely with a great many products from other countries. Consumers have many choices. So prices must be kept low. But, at home in Israel, choices are far more limited and in many ways imports are restricted.
Therefore, price sensitivity is much lower than abroad so prices can be kept higher – you charge what the market can bear.
Regularly, Israel’s business press runs comparison of prices at home and abroad.
They find, for instance, that Emmental cheese in Israel is double its price abroad; packaged ravioli is three times higher and schnitzel is more than double.
What the social protest movements have done, leveraging social media, is to increase awareness of, and sensitivity to, the high price of some products we buy in the course of our daily lives – cottage cheese, Milky, housing. It has had, however, a very modest impact on actual market prices and the cost of living.
Inevitably, the lawyers got into the act. A class action suit was filed against Strauss, led by Attorney Golan Mishali. The claim: Milky is not really “chocolate” pudding as advertised, but is made with cocoa powder.
Strauss agreed to change its label and provide 300,000 shekels worth of its products to the plaintiffs.
When responsible adults think clearly about the Milky flap led by young people, some conclusions emerge.
Berlin is indeed an attractive city for young people, though it is far from cheap.
And, indeed, it does have a vibrant dynamic community of entrepreneurs who act like a magnet, attracting ambitious young people from everywhere, not just Israel.
And yes, the young generation is no longer put off by the link between Berlin and the Holocaust.
It is, indeed, difficult for young people to buy or rent housing in Tel Aviv and, of course, young people want to live in the city that never sleeps – not in out-of-the-way places like Ofakim or Kiryat Gat, where housing is affordable.
All over the world, young people are migrating in droves from countries in trouble, like Spain and Greece. For Israel, where young entrepreneurs drive the economy forward, this must be prevented at all cost.
The Milky mess has shone a valuable spotlight on the problem of the out- migration of the youth, even though the numbers of those leaving are still small.
It is also true that Strauss Elite is a global company that acts in the interests of its shareholders to maximize its profits. But Israeli consumers do have a choice. They can buy or refrain from buying Milky if they think it is too expensive.
In an economic democracy, people vote with their wallets. In the end, this is one of the most powerful weapons for social protest.
In a strange twist, Naor Narkis posted the following on his Facebook page: “This is not just about me. This is about our country. The way I see it, there are two op - tions for those who care about Israel: To go abroad or try to change it.” Then he wrote that he will move back to Israel in November.
The writer is a Senior Research Fellow at the Samuel Neaman Institute, Technion