Boosted by the recent acquisition of Clubmarket Marketing Chains Ltd., Super Sol (NYSE:SSLTF.PK; TASE:SAE) has decided to make a display of power against multinational Unilever plc (NYSE:UL; LSE; XETRA:ULVR). Super Sol today began removing Unilever products from shelves following a recent contract disagreement with Unilever over higher margins and better terms of trade for the supermarket chain in 2006.
Super Sol today removed leading Unilever brands, including Dove, Beigel & Beigel, Click brand snacks, and Telma brand mayonnaise. Super Sol took action after it received a negative response from Unilever Israel CEO Moti Keren about increasing Super Sol's profits at Unilever's expense.
Last Thursday, Super Sol removed a significant number of products imported by L&S Leiman Schlussel Ltd., such as Mentos candies and Loacker wafers, after L&S refused Super Sol's demands for better trade terms a 2% rise in the annual bonuses paid to it by L&S.
Industry sources stated today, "Super Sol is attempting open and aggressive warfare against manufacturers, in order to prove that it protects consumer interests by blocking price hikes." However, the sources said, Super Sol's increased demands from manufacturers were actually being made to finance its NIS 1 billion Clubmarket acquisition.
The suppliers further claimed that Super Sol's wanted to break the manufacturers' collective will so that it could increase margins by 2% on an NIS 8 million annual turnover in selling price terms, or NIS 5.5 billion in purchase price terms. This would add NIS 100-120 million to Super Sol's annual profit, and cover the cost of the Clubmarket acquisition within eight years.
Several suppliers said today that they had already incurred losses by forgiving part of Clubmarket's debts. Meeting Super Sol's demands would turn it into a monster, they said, and damage them even further.
According to AC Nielsen data, Super Sol and Clubmarket held a 40.5% market share in December 2005, meaning that its power was such that no supplier could afford to operate without the merged chain.
A spokesperson for Unilever said today, "We are negotiating with Super Sol, and trying to reach an understanding that will benefit consumers." Super Sol's spokesperson said in response, "We do not comment on our company's relations with its suppliers."
Meanwhile, Super Sol continues to sell Unilever's most popular products, such as Telma cereals and Blue Band margarine. Removing these items from supermarket shelves could drive customers to shop at competing chains.
Super Sol has already gone head-to-head with suppliers; past conflicts resulted in the removal of items from major suppliers such as Central Bottling Co. (Coca-Cola Israel), and Strauss-Elite (TASE: STEL).
Published by Globes [online], Israel business news - www.globes.co.il - on Sunday, February 05, 2006