Consumer power

Rokach-Penn’s Facebook picture of a 'Pesek Zman' bar in the US selling for just 74 cents compared to NIS 6.29 in Israel, quickly went viral.

Chocolate (photo credit: Courtesy)
(photo credit: Courtesy)
Yoav Rokach-Penn probably did not imagine he would breathe new life into the grassroots consumer uprising first launched this summer. But that is precisely what he did when he walked into his local Shop Rite in New Jersey, took a picture of an Israeli-made candy bar, and posted it on his Facebook juxtaposed with a picture of the price-tag for the identical candy bar in Israel.
The price for Elite-Strauss’s Pesek Zman candy bar in New Jersey was just 74 cents (including taxes) compared to NIS 6.29 (about $1.70) in Israel. Rokach-Penn’s Facebook picture quickly went viral over the weekend.
On Saturday evening, in a feeble and somewhat disingenuous attempt to defuse the situation, Elite-Strauss’s PR people posted a message on the firm’s Facebook page citing the high cost of living in Israel as justification for the higher prices charged here. Fuel is more expensive in Israel, claimed Strauss, as are housing, transportation, production costs and taxes.
But consumers were not buying Elite-Strauss’s lame excuse and the market was unforgiving. On Sunday Strauss’s shares dropped 3.5%, representing a NIS 170 million decrease in market capitalization in active trading.
Unfortunately, candy bars, a product we can all easily do without, is not the only food item that is significantly more expensive in Israel than most places in the world.
Food prices in Israel in 2008 were 15 percent higher than the average for OECD countries, according to a Bank of Israel study released a month ago. And in the years since the situation has probably gotten worse by about ten percent, estimated Bank of Israel economists.
Some of the reasons for our ridiculously high prices are obvious and eminently solvable. For instance, it is widely known that the milk, fresh meat and fish markets are protected from foreign competition by high tariffs (there is a 150% tax on imported milk and butter) combined with cartel-like price fixing inside Israel.
This government has taken steps in the right direction.
Finance Minister Yuval Steinitz signed a directive December abolishing customs duties on hundreds of imports.
The changes, recommended by the Trajtenberg Committee, created in response to this summer’s demonstrations, went into effect on January 1 and are expected to cost the government more than $100 million annually in lost revenue while saving consumers that same amount.
But counterproductive steps have been taken as well.
Last March, the Netanyahu government, usually so strongly pro-free market, passed the Law for the Planning of the Dairy Market. In the 50-0 vote, the Knesset approved legislation reminiscent of now-defunct centrally- planned economies. Instead of allowing free market forces to sort out supply and demand in the dairy market, a special “quota committee” would determine annual dairy output. Though the law gives the Industry, Trade and Employment minister the prerogative to open up the local dairy market to international competition, Shalom Simhon, the present minister who is seen as representing the interests of moshavim (many of which are major producers of milk), has said publicly that doing so would be ineffective and would take too long.
The olive oil and honey markets are governed by a similar combination of price collusion and protection from foreign competition via tariffs. For instance, a study published by the Jerusalem Institute for Market Studies showed that due to tariffs and price collusion an average one-liter bottle of olive oil, at NIS 17, costs three times more in Israel than it does in Spain and Greece.
Other factors contribute to high food prices, such as the strong demand for kosher products, which makes it more difficult for non-kosher imports to compete.
Israelis also seem to be more willing than their foreign counterparts to pay more for imported brand-name products.
This might be because Israelis attach more importance to brands or because they have become accustomed to paying exorbitant prices for staple products.
But the tide is turning. People like Rokach-Penn or Itzik Elrov, the haredi man from Bnei Brak who launched the Great Israeli Cottage Cheese Uprising via Facebook in June or a group of retired men and women based in Even Yehuda called the Club for Smart Consumerism who monitor and publicize prices charged by local supermarkets are developing a more informed and mature consumer culture.
Our society is fed up with the sort of price gouging perpetrated by a host of food manufacturers, brand-name importers, and various other opportunists. Business people who fail to note the sea change taking place in Israeli society and change their greedy ways will be punished by a new generation of enlightened consumers.
The drop in Strauss’s share price is just a taste of the potential influence an angry and mobilized consumer populace can wield.