Baby food is one of the largest expenses for young families. The lowest price at which a 700-gram can of Materna, Stage 2, can be found, even in deep promotions, stands at about NIS 47.50, while the regular price ranges between NIS 54 and NIS 59.
At the initiative of the Ministry of Economy, hundreds of thousands of units at rock-bottom prices are entering the market, at Rami Levy and Machsanei Hashuk.
In Israel, about 180,000 babies are born each year, and many of them consume milk substitutes for long months. For families that rely on Materna on a regular basis, any reduction of a few dozen shekels per can quickly adds up to hundreds of shekels.
An unusual tender
The Ministry of Economy published an unusual tender to sell hundreds of thousands of cans of Materna from the state’s emergency stock, with one of the central conditions being that the consumer price would not exceed NIS 37 per can. The tender weighted two main parameters: The price at which the chains purchase the stock from the state, and the price at which they commit to sell it to the public, with priority given to bidders that committed both to take a significant volume of the stock and to present the lowest price to consumers.
At the end of the tender, the winners were announced: The Rami Levy chain will receive about 320,000 cans and sell them at NIS 34.90 per unit, and Machsanei HaShuk will receive about 250,000 cans and sell them at NIS 37. In total, this amounts to about 570,000 cans – a dramatic gap compared to the regular shelf price and even compared to the deep promotions parents have grown accustomed to.
On January 1, the two chains collected the merchandise, and it is expected to begin appearing on shelves in branches across the country, according to the distribution rollout.
The background to the move is the confrontation between the Ministry of Economy and Osem, first reported in Walla. Since 2011, the company has held the tender to supply infant formula to the emergency warehouses, and each year received about NIS 2 million for refreshing the stock, to ensure it did not include expired packages. Walla has learned that as part of the transition to a leasing model, the state proposed that Osem purchase the Materna stock at the price at which it sells it to retailers. This is a deal on the scale of about NIS 30 million, excluding VAT. Osem refused and agreed to pay only about NIS 13 million.
“Osem is profiteering from the emergency warehouses and from public funds,” a source familiar with the details told Walla at the time. “It was the only company that could meet the quantities, and it exploited that to the fullest. Since 2011 it has pocketed about NIS 28 million for refreshing the stock, clean money it doesn’t want to give up. Now it is flexing muscles and threatening not to bid in the leasing tender if they don’t sell it the stock at the price it is asking. This is not just profiteering, it’s extortion.”
The Ministry of Economy sent Osem and the market a firm message. Flooding the market with hundreds of thousands of cheap Materna units will hurt the company’s sales in the coming month, and its insistence on purchasing the emergency stock at a high price will cost it dearly.