The Kedmi Committee, charged with examining prices and competition in Israel's food and consumer goods market, published its conclusions Monday, saying that the market is centralized, non-competitive, consumer-unfriendly and that major players strong-arm small producers and suppliers.
The committee, a joint venture of the Industry, Trade, and Labor Ministry and the Treasury, and headed by Industry, Trade, and Labor Ministry Director-General Sharon Kedmi, published several recommendations on regulation and competition in the food market.
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According to the committee's report, the food market in Israel is an oligopoly – a system in which a few key players maintain control, resulting in high prices and unfair business alliances. In addition, the committee found that food prices are intentionally misleading, making it difficult for consumers to compare prices.
It also appears that the committee is pushing to increase competitiveness between supermarket chains. Despite the fact that a number of smaller retailers are gaining strength, the committee found that two main chains still dominate the market.
'Stop milking consumers' (Photo: Ohad Zwigenberg)
The Israeli food market, the committee reports, has become centralized since Clubmarket was acquired by Shufersal. In 2009, Shufersal and Mega held a 64% market share – the fifth-highest food market share in the OECD.
In examining how food prices in Israel compare to other OECD nations, the committee found that whereas in 2005, food prices were 10%-20% lower than in other OECD countries, by 2010 they had become 10%-20% higher.
Food prices in Israel have also risen unusually fast: From September 2005 to June 2011, food prices added 5% compared to 3.2% across the rest of the OECD nations.
Israel's food sector was also found to have the highest levels of market centralization: An analysis of centralization in 22 food categories indicated that Israel had the highest level in 11 of the groups and the second-highest in five more.
The committee's report attributes this to concentration in the supply and retail stages; problematic supplier-retailer ties; and a lack of transparency in prices to the end consumer.
The Kedmi Committee recommended the following solutions:
- Regarding small and medium-scale food suppliers, the committee is calling for legislation that would put supermarkets, not suppliers, in charge of arranging items on shelves; providing dedicated retail space for small food producers and businesses; regulation and/or financial incentives for small businesses; giving small businesses priority in government tenders; and support for small and medium-scale food exporters.
- In addition, the committee called to compile a list of specific food items whose prices and profit margins must be reported on a regular basis, at least quarterly. Should one of these items carry a profit deemed unreasonable, it will enter the list of price-controlled goods.
- The committee's recommendations included several points relating to retail chains, including removing obstacles to new chains entering areas with a high concentration of supermarkets; making more land available through policy change; legislation that would foster retail competition; encouraging new types of food retailers, such as online sellers; and encouraging local farmers' markets in which the produce growers sell directly to consumers.
- Transparency in food prices was also a major issue noted by the committee, which recommended increased consumer protection by the Israel Consumer Council and the establishment of an online price comparison database that would allow consumers easy access to a store of retail food prices, making it easier for them to compare.