'Food prices have risen more than 50% faster than Europe'

Report: Food in Israel has risen 31% since 2005, while in EU it has risen 20% in same period; billions of shekels on Israeli consumer in six years.

Supermarket_521 (photo credit: Illustrative:Reuters)
(photo credit: Illustrative:Reuters)
The price of food in Israel has risen 31 percent since 2005, while in the European Union it rose by about 20% in the same period, according to a report released Monday by business information group BDI-Coface.
Billions of shekels of extra costs had been rolled onto the Israeli consumer over the past six years by the food industry, with everyone – “the state, the manufacturers and large supermarket chains” – profiting at their expense, BDI-Coface CEO Eyal Yanai said.
According to the report, the gross profits of the leading Israeli supermarkets from the sale of food was between 23%-30% from 2005 until today, just above the 22%-28% in the rest of the world. It also found that gross profits of Israeli manufacturers and importers were 2%-3% higher than those of their European counterparts.
“This might not sound like a lot, but in a market worth about NIS 100 billion, each one percent is akin to a turnover of about NIS 1 billion,” Yanai said.
Import costs rose by about 10% in the first quarter of 2011 compared to the corresponding period the previous year, the report said. This was mainly due to global developments such as the rising price of oil, higher demand for food and natural disasters in Australia, Russia, China and the United States – all important food suppliers, it said.
Israeli and European manufacturers suffered equally from the high cost of raw materials, and this had nothing to do with the extra profits being enjoyed in Israel by the state, manufacturers and supermarkets, Yanai said.
“The drastic price increase in the Israeli food industry in the past few years is not shaped by the rise in the cost of raw materials, as has been pronounced through the relatively low rise in the CPI of 20% of European Union countries since 2005, compared to 31% in Israel,” he said.
Surprisingly, despite popular opinion that market concentration is to blame for high prices, as expressed Monday by Bank of Israel Governor Stanley Fischer, the report found that the big supermarket chains did not dominate the market as much as in certain other developed countries.
Measuring concentration by calculating revenues of the four largest companies in the food industry as a proportion of the overall market, the report found that in Israel the four largest retail chains enjoyed 52.3% of revenues. This was much higher than in the US (27.7%), but lower than in Britain (65.4%) and Australia (70%).
Meanwhile, the results of a companies survey for the first half of 2011 conducted by the Federation of Israeli Chambers of Commerce revealed that about one-quarter of retailers foresee an increase in the price of their products and services and in the number of people they employ.
Uriel Lynn, the federation’s president, said the survey was indicative of the continued growth of the trade and services branch. Expectations of a price rise could be attributed mainly to the presence of state monopolies such electricity, company property taxes, gasoline and the ports, he said.