Readers of the weekly review by Ministry of Finance chief economist Yoel Naveh were surprised at the beginning of the week to find there the names of new-old players in the food and beverage market: brother and sister Esti and Miki Akkerman, joint CEOs of a family business founded in the 1960s by their late father, for importing wine and hard liquor.
Without attracting much attention, Akkerman Alcohol and Wine has become one of Israel's largest importers of alcoholic beverages. Naveh's review could give the impression that fine vodka, beer, and wine do good things for both your wallet and your bank balance - especially with an unbelievable profit margin of no less than 40%.
What 40% profit? The Akkermans spent the week at an exhibit permeated with alcohol fumes in Cannes, read the reports in the economic press, and said they didn't know anything about it. A source close to them made a joke about it, saying that someone in Jerusalem had apparently had a little too much to drink.
The Akkermans have nothing to complain about. Sources close to them told "Globes" that they are in quite good spirits. They sell to pubs and entertainment centers, stores, and supermarkets willing to do business with them as the exclusive importers of over 60 brands, including the popular Finlandia vodka brand, which according to some reports is the best-selling brand in Israel; Grey Goose vodka, considered a super-premium brand, which has been attracting growing demand in recent years among Israeli boozers; the renowned Jack Daniels whiskey; Bacardi; and many more brands tempting drinkers to indulge themselves.
Akkerman Wine and Alcohol's logistics center is located in the Polge industrial zone near Netanya. The company employs a staff of 70. "This company is much more secretive than others," says an alcoholic beverages merchant who claims to be on very good terms with the Akkerman employees. "They keep a low profile, but they really know the market."
Other than the Akkermans, prominent vodka importers include the Central Bottling Company (Coca Cola Israel) with the veteran Smirnoff brand, Tempo Beer Industries (TASE: TMPO) with the Absolut brand, and Hakerem Wine and Liquor, which imports the Van Gogh and Stolichnaya brands. "The market is competitive, sometimes aggressively so," say sources active in the Israeli alcohol market.
A past review by Dun and Bradstreet shows that parallel imports in the sector are increasing competition between the distributors, and forcing distributors and retailers to refrain from steep price increases unrelated to the tax rate. At the same time, the review shows that despite parallel imports, direct importing by an importer enjoying exclusivity contributes to the distributor's name and brand, strengthens the connection between the distributor and those consuming the imported brands, and boosts the sales of these brands. Although they are prominent importers and key players in a bustling market, associates of the Akkermans made it clear this week that the stunning profit margin reported in the Ministry of Finance review is totally divorced from reality.
A source said that the Akkerman's profit margin was only 10% - a profit margin also considered reasonable by other major hard liquor importers. "The price of the brands in Israel is in the same range; there's no outrageous pricing by any one company. The beverage prices in Israel, compared with other places around the world, including the US and EU countries, are not exceptional. In most cases, the prices in Israel are even lower."
A check this week by "Globes" in a large beverages store in central Israel showed that a bottle of Grey Goose vodka was sold to a wholesaler for NIS 139, and the consumer pays NIS 150; a bottle of Finlandia was sold for NIS 85 to a wholesaler, and the consumer pays NIS 95; a bottle of Jack Daniels was sold to a wholesaler for NIS 132 and the consumer pays NIS 145-150. For the sake of comparison with the overseas prices of the same products, Akkerman Alcohol and Wine said that a bottle of Finlandia was sold for $20 in the US and €20 in Europe, and a bottle of Grey Goose was sold for $35 in the US and an average of €40 in Europe. "No one in the Ministry of Finance bothered to take any notice of the volume of parallel imports in alcoholic beverages since 2010, which currently accounts for 30-35% of imported beverages. There are parallels imports to the official imports; they're alive and kicking. The importers in this sector earn much less than the Ministry of Finance thinks," an informed source in the field said.
Coming soon: Easier wine imports
The Ministry of the Economy Industry Authority plans to relax regulations in the coming months to permit wine imports, while adopting standards from overseas laboratories. Currently, imported wines must undergo testing at the Standards Institution of Israel. When the new regulations being prepared by the Ministry of the Economy are implemented, the tests conducted for the same products at other recognized standards institutions around the world will be sufficient. In addition, the Ministry of the Economy plans to allow parallel wine imports.
Ministry of the Economy Industry Authority director Yair Shiran said, "These measures will facilitate greater competition in the wine market, while easing the current procedures."
Published by Globes [online], Israel business news - www.globes-online.com - on October 25, 2015
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