After the announcement that fixed-price cafe chain Cofix is setting up a chain of supermarkets that will sell products for NIS 5 each, today, the first branch was opened of new supermarket chain Ehad, which also has pretensions of offering something different in the retail sector.
The chain will be based on own-brand food and other products, along the lines of successful European chain Aldi, products from small suppliers, and parallel imports. The chain says that the products of the big manufacturers, such as Strauss Group Ltd. (TASE:STRS), Osem Investments Ltd. (controlled by Nestle SA (SWX:NESN)) (TASE: OSEM), and Unilever, will not be found on its shelves, and that it will be based on small manufacturers only.
The chain's first branch opened today in Ra'anana, and the plan is to open three further branches by the end of this year, one of them in Petah Tikva. The branches will be small, each covering 700 square meters, which is about the size of a minimarket, and does not allow goods to be stored in large quantities or in a wide variety. Supermarkets generally cover 2,000-6,000 square meters, and some are larger than this.
Iri Shahar, who formerly headed the Fishman Group retail division, and who is behind the new venture, said, "In each category, the chain has selected for the consumer the product that represents the fairest return for their money. At Ehad there are not different manufacturers for the same product, as it does not want to create the illusion of imaginary variety and competition."
Shahar accuses the big companies of being responsible for the high prices in Israel in comparison with Western countries. "The main reason for the gap," he says, "is the domination by the large food companies: Osem, Strauss, Unilever, Tnuva, Neto and others, which do not allow genuine competition in the market, and elbow out the small suppliers who can offer their products at low prices. Expensive is no guarantee of quality. Advertising, marketing and PR don't mean anything other than the economic strength of the advertiser."
The doubts about the new venture actually come from the small suppliers themselves. Liora Birnhack-Marcus, owner of Manamim Food Industry Ltd., says, "One of the biggest problems of the small manufacturers is distribution. Unless Ehad has a central warehouse that helps the small manufacturer, there is no chance of the small manufacturers reaching it, because they have no distribution network that can reach small points of sale. What will they unload? Two crates of biscuits? Five crates? It's not profitable either.
"It would be great if there were a distribution company specializing in distribution for small enterprises. We at Manamim distribute to small stores via Wissotzky, but many small suppliers have no distribution solution like that. I welcome supermarket chains that place emphasis on the small supplier, but without a supporting distribution network or a central warehouse, that might not be enough."
Published by Globes [online], Israel business news - www.globes-online.com - on January 19, 2015
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