Are parallel imports an effective way of lowering the prices of international food brands in Israel? A few months after parallel imports hit the headlines, difficulties seem to prevent them from becoming a reality. Merchants dealing with parallel imports claim that manufacturers - influenced by official importers or their Israeli branches - use kosher certificates to prevent imports.
These efforts, which have gradually expanded, have resulted in a significant reduction in the parallel import of international food brands with kosher certificates, imports which led to lower prices for consumers. Most of Israel's retail chains have a kosher business certification, which means they are not allowed to market products without a kosher certificate or even products with European or US kosher certifications, since they are unable to receive validation that the products are kosher directly from the factories.
The latest such case concerns Nutella chocolate spread. The Victory supermarket chain had sold the parallel import product at lower prices and was blocked. Victory CEO and controlling shareholder Eyal Ravid said, "We had sold an 840 gram package for NIS 24.90, the same price asked for a 750 gram package of the product. We imported Nutella from the factory in Poland, the same factory producing for Israel today. The Rabbinate knows that the merchandise originates in this factoryt in Poland, because there is only one factory producing Nutella in Poland and it is entirely kosher. As long as Ferrero Rocher did not have a representative office in Israel, from May to October this year, the plant's management had no problem providing us with a kosher certificate and they did not mind parallel imports to Israel. On the contrary. But once the international firm took control in Israel and established an office, the kosher certificate vanished into thin air." Ravid refers to the interim period between the marketing of Ferrero Rocher products in Israel by Leiman Schlussel and marketing by the company's own Israel branch.
It seems that while the regulator works to make parallel imports easier, international manufacturers and their official representatives manage to prevent it using simple means and with the indirect support of religious authorities. The "cornflakes reform" allows for parallel import of products authorized by certified kashrut authorities in the country of origin, with no need for further certification in Israel, while transferring responsibility to the importer. As far as the import of international food brands is concerned, this reform seems to have had little to no effect.
I do not understand what are you trying to say here
Dudu Pitzhadza owns a parallel import business named Dudu Hadil. He imports food and beverage brands into Israel, but cannot receive kosher certification for them. He said, "Kosher certification is the biggest problem. I import Corona beer from the brewery in Mexico, and although the beer is made at the same brewery as the kosher beer, I do not have a kosher certificate. I import all Ferrero Rocher brands, including Ferrero Rocher chocolate and Nutella, Snickers, Mars, Twix, Pringles. None of them receive the kosher stamp. Leiman Schlussel imported Ferrero brands from the same factory I import from, and yet I have not received a kosher certification.
"As far as I know, once the plant is kosher, all products are kosher. If this was not the case, the product would have been marked as 'special production line', and they are not marked in any manner. The same products could be sold in chains at much lower prices, but retail chains and consumers are being shafted because of kosher certification."
Have you managed to import and receive kosher certifications in the past?
So how does the cornflakes reform help us?
"The reform would have helped if it had provided us with a legitimate way of fast-tracking kosher certification. Now, they force you to send someone to the factory to inspect the production line, but no one with representation in Israel will agree to let a rabbi in to check."
Why do you believe that parallel imports are being blocked?
"Since the doors have been opened, many products have come in from Europe. The international firms probably noted that products were arriving, and not via the official importer, and since the official importer sells at high prices, this could influence the consumer not to buy at these prices. For example, a Kinder Bueno bar was sold to consumers for NIS 5.9 and now a store can easily sell it for NIS 3.0. A 24-bottle Corona beer crate was sold at a price of over NIS 200 and today it is sold for NIS 115-120. Before parallel imports, a carton of Kinder Bueno cost NIS 82 wholesale and now it costs NIS 65.
Ravid says, "Once, the Israel rabbinate was willing to compromise and accept European or US kosher certifications, such as a triangle U, K or OU. Now, the rabbinate demands that all products be certified by the Chief Rabbinate of Israel. It has become more strict. When religious Israelis travel to the US, they do eat food with such kosher certification, since none of the food in Europe or the US has a Chief Rabbinate of Israel stamp but only local kosher certification.
How do you explain this?
"In parallel importing, you buy products from dealers, because the factory will not sell to you, since they have exclusivity agreements with a branch or representatives in Israel. If the product has a European or US kosher stamp, the Israeli rabbinate demands to see a document issued by the supervisor who has signed the factory's kosher certificate, in order to verify that the certification is valid. The stamp is not enough. In such a case, the dealer contacts the factory and the factory's rabbi goes to ask for the approval of the plant's management, because the management pays the factory's kashrut supervisor, and their agreement is usually not granted."
Is this innocent?
"There is no such thing as innocent in business. When parallel imports start coming, the official importer turns to the manufacturer and tells him: 'give me tools to handle this' and then he has to provide him with further discounts. It is simpler for the manufacturer abroad to block parallel imports, rather than give discounts."
Sasi Kuperly, whose family, among other things, controls the Hatzi Hinam retail chain, owns a business named S.K. Spirits Ltd., which deals in parallel imports. He says that he has been blocked from making parallel imports several times due to kosher certifications. "This has happened to me, for example, with Grey Goose vodka from the factory in France. I had a kosher certificate for one year and I marketed throughout Israel. I sold at a lower price. When I lowered prices, the official importer in Israel also lowered prices. He did not want to lose. Later on, they went to the rabbi and told him that he cannot give me (the kosher certificate -I.H.) any longer. Since then, I have imported without a kosher stamp but I cannot sell to banqueting halls and other kosher businesses."
Are official importers the ones blocking this?
"Of course. They go to the rabbi and tell him not to provide the kosher certificate. That it belongs to them. They tell the person who provided kosher certification that he cannot give the certificate to anyone else, other than the official importer"
Theoretically, you could have imported from the same production line?
"Yes. Once the plant has a kosher certificate, it is kosher all of the time. The same thing happened with Finlandia vodka in the distillery in Finland. I had a kosher certification for one year and then they told me that they couldn't give me the certification any longer."
Even when parallel imports are made, they encounter difficulties in retail chains. "It is very difficult to market to retail chains. If you have one Unilever product, will retail chains start a fight with Unilever, which has dozens of products? If you supply all of the products, they will talk with you."
It is impossible to deny that parallel imports have brought down prices of toiletries and cleaning brands, as well as food brands. A retailer told "Globes", "Corona beer has become one of the best selling beers because of lower prices. A six pack was sold in the past for a list price of NIS 70 and now it has a list price of NIS 45-50, and when there are discounts prices go down as far as NIS 35-40. Parallel imports caused Always and Fairy brand prices to drop 20%. The price of an Always product, sold to consumers for NIS 23 in the past, has dropped to NIS 18-19. These might be discount prices, but there are almost always discounts. Parallel imports caused prices to drop and in response Diplomat, which markets Procter and Gamble products in Israel, offers much better discount prices. They do not always equal parallel import prices, but this is still a significant improvement."
As "Globes" found, the Antitrust Authority, headed by Adv. Michal Halperin, has been checking whether importers and suppliers have been making efforts to block parallel imports. The authority has been examining instances in which official importers or suppliers bought parallel import food products, only to destroy them. It is alleged that in these cases the deal was made directly with the parallel importers and the goods were bought before they left the port. They are also examining whether official importers and suppliers threatened to reduce product variety for retailers selling parallel import products.
Published by Globes [online], Israel business news - www.globes-online.com - on November 16, 2016
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