The battle between Israel's largest supermarket chain, Shufersal Ltd. (TASE:SAE), controlled by Nochi Dankner and independent retailer Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI) has shifted from Ashdod and Beersheva to Beit Shemesh and Maaleh Adumim. While it is difficult to see what has triggered the cut-throat competition in Maaleh Adumim, in Beit Shemesh the opening of an Osher Ad branch two weeks ago seems to have sparked off an unrestrained battle.
In contrast to Ashdod and Beersheva, prices in Beit Shemesh and Maaleh Adumim are among the lowest in the market. In the new battlefronts, Shufersal has launched a price war not only for flagship products, which are sold at rock-bottom prices, but for all products. Shufersal CEO Yitzchak Abercohen and top executives have visited both towns to lead the battle in person.
A local retailer in Maaleh Adumim says, "Prices are insane. I can't imagine what interest is served by them. It looks like a personal war by Shufersal against Rami Levy. There is a man at the entrance to Shufersal and a man at the entrance to Rami Levy who are constantly on the phone to compare prices. There are no buying pre-conditions; it's a joke. If you were to buy a truckload of tomatoes off the farm, you couldn’t get such prices. When you sell tomatoes at NIS 0.30, it means that you're subsidizing them by NIS 4 per kilogram. The cost of Similac Advance infant formula is NIS 30 more than the selling price. Last Friday, a six-pack of Coca-Cola was sold for NIS 15. They're simply distributing money."
A local retailer said, "This looks like a move by Shufersal to take a huge bite out of Rami Levy's market share. They've decided to kill Rami Levy at the points of sale, and please note that they're doing this at points where the media does not go. They're sacrificing points of sale over time. It's hard to keep such price levels for one week, and at Maaleh Adumim it's been going on for three weeks. They've targeted Rami Levy." He adds, "The prices are delusional and loss-making. It's like killing a store. Whoever is doing this is losing a lot of money."
At Shufersal and Rami Levy supermarkets in the Maaleh Adumim industrial zone at Mishor Adumim it is possible find vegetables for NIS 0.30-1 per kilogram, a whole chicken for NIS 2.90, chicken thighs for NIS 6 per kilogram, chicken schnitzel for NIS 12.90 per kilogram, whole chicken breast for NIS 12 per kilogram, Huggies diapers for NIS 38, a 900-gram can of Similac Advance for NIS 56, and a 700-gram can of Materna infant formula for NIS 42.
A few days ago, Coop Israel Ltd. asked the Antitrust Authority to urgently intervene to stop Shufersal's conduct. Coop mentioned one of the clauses in Shufersal's merger with Clubmarket that it could not sell products at a clear loss to the chain, subsidiary chain, or any specific store in an area where an independent store operates.
In recent days Shufersal has mounted a fierce battle in Beit Shemesh. Shufersal has Shufersal Deal and Yesh branches there and there are also outlets of rivals Machsenei Kmat Hinam and Mega's Haredi chain Zol B'Shefa in the city and now the new branch of Osher Ad.
Machsenei Kmat Hinam owner Adi Zim said, "There is a very fierce price war in Beit Shemesh and everyone is fighting for the consumer. Osher Ad opened another branch and they expected things would go better but we've stopped them. Prices are rock bottom. We are fighting to the finish. We won't surrender."
Rami Levy said, "Shufersal is targetting me not only in Maaleh Adumim but everywhere. What's new? I'm a bother for them."
Shufersal said in response, "The words 'to kill" have no place in the business world, and certainly do not appear in Shufersal's values. Competition in the food retail market has intensified lately, and Shufersal is adjusting its operations to the current competitive environment. Shufersal will do whatever is necessary for the benefit of its customers, while remaining in full compliance with the law."
Published by Globes [online], Israel business news - www.globes-online.com - on June 12, 2012
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