Food company Osem Investments Ltd. (TASE: OSEM) today announced that it is raising prices for products by 3.5-6%, following a similar move by Unilever Israel Ltd. earlier this month.
Osem notified retailers that the price hikes would not apply to all products, and that it would not raise the price for Materna infant formula.
The price for breakfast cereals will rise by 3.7%, for pickled vegetables by 2.3%, baked goods by 5.6%, Tzabar humus and other dips and salads by 4.1%, coffee by 6.1%, culinary goods by 3.6%, snacks by 5.8%, and Tivall vegetarian meat substitute products.
Osem said that the price hikes were due to rising global commodities prices. "Since January 2011, prices for commodities used by Osem, including corn, soy beans, and oil, have risen by tens of percent. Prices for fuel, water, electricity, and arnona (local property tax) have also risen sharply, adding tens of millions of shekels to production costs," said Osem in a statement.
"Osem has been able to absorb a substantial part of these rising prices through streamlining measure, and to delay price hikes. These activities have helped the company avoid raising prices for almost two years, but the measure has become essential in view of the latest wave of commodities price hikes. The rise in prices only partly covers the company's higher production and operating costs."
A top retailer told "Globes", "Osem should absorb the higher cost of flour, such as for the production of pasta, and absorb Bamba and not raise its price. The cost of producing one kilogram of pasta is only NIS 3, and a 500-gram package of Osem pasta costs more. We buy an 80-gram package of Bamba from non-brand manufacturers at NIS 1.10-1.15, before VAT. Osem's price is more than double that - over NIS 3."
"Globes": There is competition for pasta, and consumers have alternatives, which cost NIS 2.50 per package.
The retailer: "True, but grocery stores don’t stock imported pasta."
Retailers appear to be resigned to Osem's price hikes. The retailer said, "This was expected. There's no doubt at all that it's insane, but what can you do? Can we really manage without Osem and Unilever products? How many consumers compare prices on the shelves? People are worn out. The moment that Unilever was able to raise its prices, with no social protest, it was all over. The dogs barked and the convoy moved on."
Published by Globes [online], Israel business news - www.globes-online.com - on September 27, 2012
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