Importers, retailers, and producers in the food sector have had significantly higher profits amid skyrocketing food prices during the Israel-Hamas War, according to a report by financial advisory firm Fair Value Group.
Overall, the gross profit margin of companies operating in the food sector increased 15.4% from October 2023 until September 2024, said the report, which was written by Fair Value Group CEO Eli El Al.
Gross margin increased 9.5% for food retailers and 23.8% for importers and producers, the report said.
Earnings before interest and taxes (EBIT) for the entire sector increased 44.8%, it said.
“The increase in demand for essential food products during the war led to a sharp rise in revenues,” El Al wrote.
“High inflation contributed to price increases, but in some cases, it seems that prices rose beyond actual expenses, and many companies also implemented operational efficiency measures during this period.”
“It is impossible to ignore the fact that the increase in operational profit margins in the industry largely reflects its high level of concentration,” he added. “It seems that the right balance between encouraging business activity and tempering the cost of living has yet to be found.”
Companies facing criticism
Companies that raised prices on food products have been criticized over the past year. Some of the biggest firms in the sector, including Tnuva, Osem, and Strauss, have raised prices – in some cases multiple times.
Last month, Strauss said it would increase its prices on chocolate and coffee as much as 18%. Unilever quickly followed suit, announcing price hikes of 12% to 16%. In June, Unilever raised its prices for chocolate and other products.
Some companies have cited increased costs of raw materials to justify the higher prices. Their critics have said decreases in the prices of raw materials did not result in lower prices, adding that some of the increases in the cost of raw materials seemed to be unrelated to subsequent price hikes.
“Because of an increase in milk prices, Tnuva has increased the price of schnitzel,” social lobby Lobby 99 CEO Linor Deutsch wrote on X/Twitter. “What do those have to do with each other? They don’t have to be related when you are a mega-monopoly.”
Centralization in Israel’s food sector has hurt competition, she said.
The high and rising cost of living has caused trepidation for Israelis as the new year brought with it tax and price hikes and increased utility costs. The war has been one of several factors that have created an environment that enables companies to increase prices as public and political attention is elsewhere, according to critics of the price hikes.
Liam Adiv/Maariv contributed to this report.