More than seven months have passed since the outbreak of the cottage cheese boycott, and it sometimes seemed that Strauss Group Ltd. (TASE:STRS) never got the message. The food company does not understand that the Pesek Zman chocolate bar is a symptom, not the disease. The consumer protest is not about a candy bar that we can do without; but a candy bar can be, as it turns out, a trigger for something much deeper.
After the massive consumer boycott that spread across the country last summer, it turns out that the price cuts made by Israeli companies were marginal. Even now, a shopper cannot go to the supermarket and buy basic goods at sane prices, and even now Israelis are paying far higher prices than their Western counterparts.
Strauss is one of the companies that chose to cut prices, and it should be praised for that. But the price cut was insufficient, and the strategy to lower prices on items with few sales is infuriating.
For example, Strauss cut the price on 500-gram packets of cocoa powder, when it mostly sells 150-gram packets. Unilever Israel Ltd. cut prices on mustard, a product with especially low sales, along with other products with very low sales. Osem Investments Ltd. (TASE: OSEM) lowered the price on its largest package of Bamba snacks, while leaving the price on its smallest package, which has the heaviest sales, unchanged.
Both Unilever Israel and Osem opted not to lower prices on many important product categories, such as their highly profitable breakfast cereals, where they dominate the market. Bottom line, despite the protest, prices for most cereals soared in 2011. The average price per kilogram that consumers pay for Nestlé's Fitness cereal is NIS 52.
Under these dismal circumstances, it is amazing that the food companies continue to complain that the social protest was "out of all proportion", as Strauss Israel CEO Zion Balas said earlier this week.
A protest in time
It is not clear where the consumer protest against Strauss will go, but there is no doubt that its timing serves the Israeli consumer well.
Behind closed doors, some Israeli food companies had begun to talk about the next price hike. "We absorb the rises, but we cannot continue to absorb for long. In the end, we'll have to raise prices," said a food company executive. There is a feeling that they were preparing the groundwork. Some executives thought that the protest had abated, that consumers had moved on to talk about the next thing, and that it would very soon be possible to turn the clock back to the gay days of rising prices.
It seems that, this week, these companies received a loud and clear message from the consumer: raising prices will cost you dear.
Published by Globes [online], Israel business news - www.globes-online.com - on February 23, 2012
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