A week after Shai Babad took up the post of CEO, food company Strauss Group (TASE: STRS) has joined the wave of price increases and announced that it will raise prices for some of its products by 2.9%.
Strauss said in its announcement, "Following rises of tens of percentage points in prices of raw materials, energy, packaging, and other inputs, the effect of which is estimated at about NIS 300 million, Strauss is revising its prices to retailers in Israel.
"After twelve years in which it has refrained from raising prices in Israel, and after significant streamlining moves, the company is announcing a moderate revision to its price list for some of its dairy products, salads, savory and sweet snacks; the average price of all the company’s products will rise by 2.9%."
Strauss’s announcement added: "The company will not raise prices of a range of products, among them all Elite Coffee products, cottage and Symphonia cheese, some Elite chocolate snacks, and olive oil."
Although Elite Coffee products will not rise in price, the Elite Espresso Bar café chain operated by the group will revise prices upwards.
"The price rise, which will come into force on December 19, stems from, among other things, a rise in raw materials and input prices in Israel and globally, chiefly of milk, sugar, oils, cocoa, energy and packaging," the company said. "For example, the target price of milk has risen by nearly 30% in the past two years; corn, wheat, and soy oil process have risen by about 200% in the past two years; the price of fuel has risen by 70% in the past two years; the price of electricity in Israel has risen by 10% and is due to rise by another 8.2% shortly; and packing material process have risen by up to 45% in the past two and a half years. Sugar has risen 140% in two years, and cocoa by 125%. The UN’s food price index has registered a rise of 135% from the start of the Covid-19 pandemic until now."
Strauss Israel CEO Eyal Dror said, "It’s clear to us that this is not a simple move, and that every home in Israel is coping with the cost of living. That said, we believe that carrying out a proportionate price rise is a condition for maintaining a balance between the needs of the public, the company’s employees, its suppliers, customers, and thousands of public investors through pension funds and provident funds, in an environment in which the high rate of inflation around the world and in Israel is clear and known to everyone."
Should Strauss fear a boycott by retail chains or consumers? Not necessarily. Only this week, Israel’s largest retail chain Shufersal accepted the price rises in some of Tnuva’s basic products, after two weeks of shortages in its stores’ refrigerators, as other dairy firms also raised prices.
Strauss Group has also announced that it will not pay a dividend for 2022. It estimates the hit to its profit from the recall of products affected by the discovery of salmonella contamination at its confectionary factory in northern Israel at NIS 290-310 million.
The company also reported that its board of directors has decided to examine the possibility of raising NIS 400 million debt in the next few months, mainly to repay bank credit and to finance its regular operations.
Published by Globes, Israel business news - en.globes.co.il - on December 8, 2022.
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