Who is to blame for the high milk prices in Israel?

What is happening in the dairy market? Unbelievable, but the Israeli public has become the producers' cash cow. The Ministry of Finance presents apparent solutions, but the inconsistency and supervision make it difficult to fully implement them, and the results are only visible in the headlines and do not reach the milk fridge.

Here it is, precisely in Israel, "the land of milk and honey" the prices of dairy products and their substitutes are among the highest in the world. The differences do not amount to a few percentages, but reach tens or even hundreds of percentages, even in those brands that are imported to Israel and sold overseas.

The consumer goods market is the most dynamic in the global economy, and leads to many fluctuations. Every market has limitations and barriers, but alongside them are hidden and visible solutions that can lead to significant changes.

In 2011, one buyer noticed a 250 gram cottage cup whose price was NIS 7. When you translated this price into a kilogram, it turned out that it is higher than the price of fresh chicken and even roast beef. This caused astonishment and led to the cottage protest, which swept away more than 100,000 online shoppers and dragged the entire country into protest.

As a result, the price of the cottage stabilized at NIS 5.50, and from then until today, its average price is NIS 6 - an increase of only 10% in 13 years.

Despite the success of the cottage protest, it did not lead to more widespread change. Today, the prices of many products continue to rise illogically and without matching the economic reality.

Between enriched and rich

Dairy products and their substitutes make up more than 13% of household expenses, with an annual expenditure of about NIS 5,000 on these products. Any significant price increase affects household expenses and burdens consumers.

The consumer's consumption patterns and the decision-making process in the purchase of dairy products, fresh animal and plant products, such as vegetables, fruits, chicken and meat, behave differently from those behind other products.

For example: we can stand in front of the sauce shelf and make a decision whether to purchase Asam or Knorr soy sauce, based on a price difference of a few percent, or whether to put Fun hand soap or the private brand that is 20% cheaper in the cart. But with dairy products, vegetables, fruits, chicken and fresh meat, we behave differently.

If a tomato costs NIS 5 or NIS 7, or if a chicken breast costs NIS 25 or NIS 35, this is seen as normative for us. Price differences of tens of percent from day to day managed to penetrate our awareness and we will not be excited to the level that would create buying barriers, but at the most we will make a decision whether to buy a larger quantity, which will last in the refrigerator or freezer, or just the daily portion.

In dairy products, the reality is different. There is an effect on the validity of the product and the way it is used is different from meat products that can be frozen or vegetables that can be pre-cooked and frozen. The prices of dairy products are not fluctuating, but if we pay NIS 3.90 or NIS 4.80 for our yogurt, we will not be really excited.

This may momentarily anger those who are familiar with prices, but even they can be deceived: the number of product launches in the milk segment is one of the highest in food and consumer products. If they reduced sugar, it is natural to add to the price. If it is a product to which protein has been added, it is natural to add to the price. If we add the word "enriched" to our milk, you can be sure that someone will get rich from it, and not us the buyers.

In the classic butter shortage crisis, the Ministry of Finance found solutions to open the market and removed butter from the list of supervised products. The opening of the market was supposed to provide a solution to the availability and cost of living problem, but once again, an unsupervised process led to an extreme increase in the price of butter in Israel. If possible then why not? After all, if we just put the butter in a fancy box, we will be able to lead the consumer to pay twice its price.

The finance and economy ministers tried to deal with the cost of living through reforms and temporary processes. Don't think the main problem with the cost of living is that it is a "disease" that only has a name, but no diagnosis, treatment or cure.

The price differences between Israel and Europe in dairy products are among the highest, and the concentration in the dairy market is severe. The conglomerates Tnuva, Strauss and Terra hold the entire market, with Tnuva leading in basic products and market shares. This situation allows these companies to deter the government and consumers through actions to create deficiencies that arouse public concern. We have already seen more than once that every price increase was preceded by a preliminary action that led to shortages on the supermarket shelves.

The Ministry of Finance tried to deal with the situation by opening the market and increasing competition by eliminating tariffs. But even here these are temporary actions and superficial solutions that do not really cure the problem. The Israeli public continues to face high product prices, without a long-term solution that will help ease the economic burden.

The fight against the cost of living requires consistent and systematic actions, not temporary solutions and band-aids. There is a need for structural reforms in the market, opening it up to real competition and reducing centralization in order to create a free and competitive market that the Israeli consumer will benefit from. Only in this way will it be possible to effectively deal with the cost of living and provide sustainable solutions that will benefit the public.

As part of its attempts to deal with the cost of living, the Ministry of Economy has often worked to eliminate tariffs and open the market to encourage more companies to enter and increase competition. An example of this is the Vilipod company, which managed to lead change and innovation in the dairy products market through regular imports and wide branding of many products.

However, its influence did not reach the basic staple products, and as always, such solutions disappear over time when the new players start to behave like the food giants, and identify where they can earn another shekel and another percentage quickly.

Another example is Rami Levy, who imported milk from Poland and sold it to the consumer for one shekel less. However, this reality cannot exist without government regulation and support, and the process became a momentary gimmick that gave the Minister of Finance permission to raise prices for dairies. The basic products such as Niger milk, white cheese and cottage cheese have a short shelf life, therefore the import process by sea is a barrier to the level of freshness due to the transport time.

As part of the process, Willi-Food managed to launch a wide range of dairy products, delicacies, soft and hard cheeses for import to Israel under the "Euro" brand.

One of the most influential products in our shopping basket is the yellow cheese, as this market generates more than NIS 1.2 billion a year and is dominated by the Tnuva company with the Emek brand. The market was opened to yellow cheese products of private brands, with an emphasis on Willi-Food products which initially presented significant price differences.

The significant change started with the butter crisis in 2020, when the unavailability and high price of the product that were under supervision led to the opening of the market. After the market opened, they flooded the market with butter products, and since then butter prices have only gone up. This pattern is also observed in the cheap dairy products. The price differences between the imported products and the local products have decreased significantly.

Compromise

For example, 400 grams of Willi-Food Golden yellow cheese was launched at a price of NIS 13.90 per consumer and was on sale for a long time at NIS 10-11 per pack. Today the product is sold at an average price of NIS 22 (and sometimes also for NIS 25).

On the other hand, Emek Tnuva cheese in an equivalent package of 400 grams is currently sold at an average price of NIS 32 per package. In the period corresponding to the start of parallel imports, its average price was NIS 26, which marks a 23% increase compared to a 50% increase in the alternative brand.

The price gap was reduced from 135% to 45% - a significant increase in price. Cream cheese 200 grams with extra was also sold a year ago at an average price of NIS 10, and today it is sold at an average price of NIS 12.50 - an increase of 25%.

The problem of the cost of living is spreading wherever the consumer public is not vigilant and accepts any price increase with understanding. It is the buyers' consumption patterns that determine who will rise and who will fall, and how much we will end up paying for the products. The power to lead change is in the hands of consumers, therefore we must be more vigilant and demand long-term and comprehensive solutions.

Examples and price comparisons:

We will now examine a number of examples and price comparisons that can illustrate the disparities and price increases that have occurred in the dairy market:

1. Yellow cheese 400 grams of Willi-Food Golden:

o Launched at a price of NIS 13.90 per consumer.

o Sold in a long sale for NIS 10-11 per pack.

o Today, the product is sold at an average price of NIS 22 (and sometimes also for NIS 25).

2. Emek Tnuva cheese 400 grams:

o Its average price in the corresponding period was NIS 26.

o Today it is sold at an average price of NIS 32 per package.

o A 23% increase compared to a 50% increase in the Willi-Food replacement brand.

3. Cream cheese 200 grams with the addition of Euro and Willi-Food:

o Sold a year ago at an average price of NIS 10.

o Today it is sold at an average price of NIS 12.50.

o 25% increase.

4. Cream cheese 225 grams with added Napoleon Tnuva:

o Sold a year ago at an average price of NIS 13.

o Today it is sold at an average price of NIS 13.50.

o An increase of 4%.

The data are based on the reports of the marketing chains to the website of the Ministry of Economy and are processed through pricing and CHP systems according to average prices for the consumer in the leading marketing chains E&OE.