Fresh meat scarce as Israeli consumers push up prices

Adom Adom meat

Tnuva and Shufersal have published low prices, but the beef is often unavailable in stores.

One week before Rosh Hashanah (the Jewish New Year), despite the media hype about lower meat prices, Shufersal Ltd. (TASE:SAE) has a shortage of the fresh meat that it is importing under a private brand.

Tnuva Food Industries Ltd., on the other hand, has imported only 100 tons from Poland, which is far from satisfying the demand for meat on the holiday, which is estimated at several hundred tons in a single week.

The Victory Supermarket Chain Ltd./ (TASE: VCTR), which sells imported Tnuva meat, is already reporting that is has only marginal quantities left. Limited imports, combined with the shortage of fresh meat at Shufersal, is enabling Tnuva to keep the prices for its Adom Adom brand meat high.

In any case, competition for meat is expected to intensify. Sources inform "Globes" that Baladi has begun the process of importing fresh meat from Poland, and is declaring that its prices will be 10% cheaper than Tnuva's prices for imported meat. At the same time, the meat imported by Baladi will go on sale in Israel only starting next November.

Competition in fresh meat began in mid-August, when Shufersal launched fresh meat from Argentina under the Angus brand at prices 11-41% lower than the price of fresh meat in the market. In response, Tnuva announced that it would import fresh meat from Poland and sell it at prices lower than Tnuva's meat prices, and similar to those for defrosted meat.

Last week, supermarket chains Mega and Victory announced lower prices for fresh meat imported by Tnuva, which has also reached agreement with Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI) and Yeinot Bitan . The agreed prices include NIS 100 per kilogram of entrecote steak, NIS 50 per kilogram of ground beef, and NIS 69 per kilogram of shoulder roast.

The prices at which Tnuva is selling the imported meat to the supermarket chains really are close to the prices of defrosted meat. For example, it is selling chuck steak at NIS 42 a kilo (not counting VAT), compared with NIS 42 a kilo for defrosted meat; eye steak at NIS 65 a kilo, compared with NIS 40 a kilo; ribs at NIS 40 a kilo, compared with NIS 35 a kilo, etc.

The supply in the market, however, is limited, and the chances of buying the imported meat at the prices published by the chains are therefore not good.

According to a retailer, "Everyone is busy at the branches. What is actually happening is that people come to the shelf, see that half of the products are not there, and are left with no choice. They bring Adom Adom, and the price is much more expensive than what they published and said on television two hours earlier."

The Mega chain is benefiting from cooperation with Adom Adom on the hind quarters, which are being sold at NIS 70-80 a kilo. These prices are not exceptional, but now that Shufersal is selling its private brand, it does not benefit from cooperation from Adom Adom on these cuts by Tnuva.

"Tnuva will have to lower its profit"

The real competition in meat in Israel is expected to begin after the holidays. According to Baladi owner Erez Dahabani, "There's a lot of hot air designed to show Shufersal that Tnuva has a solution, even though the actual quantity that Tnuva is importing is insufficient. We'll provide the solution."

He added, "The Adom Adom prices are exaggerated. Tnuva said that it was selling a brand, not meat, and the consumer pays for the brand, even though meat is a commodity."

"Globes": What will it do in the long run to the profits of Tnuva and Adom Adom?

Dahabani: "Tnuva makes a 9% net profit, while most of the companies in the sector work on a net profit of 2-2.5%. That means that Tnuva will have to lower its profit to our rates."

According to Victory Supermarket owner and CEO Eyal Ravid, "The consumer will start consuming more beef than chicken. At the butcher's today, beef is responsible for 30% of sales, and chicken for 70%. I predict that this will lead to an equal division between beef and chicken. In addition, to the extent that the Ministry of Finance increases fresh meat import quotas, the prices of Adom Adom and imported beef from Poland will converge."

Published by Globes [online], Israel business news - www.globes-online.com - on September 6, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Adom Adom meat
Adom Adom meat
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