Tnuva will establish a logistics center in Modi'in, sources inform "Globes." The board of directors of Tnuva, Israel's largest food company, controlled by Chinese corporation Bright Food, approved a NIS 500 million investment program for 2019.
A substantial proportion of this investment will be allocated to building a logistics center in Modi'in, which will be used for the group's activity non-dairy activity, such as Mama Of, delicatessen products, and frozen vegetables. The rest of the investment will be allocated upgrading equipment and buying new equipment and machinery for its various plants, approving information systems infrastructure, and upgrading the company's service and sales center in Ashkelon.
Since Tnuva was acquired four years ago by the Chinese company from Apax Partners and Mivtach Shamir for over NIS 8 billion, matters have not proceeded according to Bright Food's plans. In addition to the high price and lack of investment under the previous owners, a number of regulatory changes in recent years have challenged Tnuva's control in certain markets and its profits in others. Among other things, quotas for imports of yellow cheese and beef exempt from customs duties have been increased. The Ministry of Finance has refused to raise the prices of price-controlled dairy products, even though milk prices rose. Bright Foods plans for exporting dairy products to China are also being delayed, and its activity in the US has been unsuccessful so far.
Nevertheless, this is the second consecutive year in which Bright Food has approved an investment on this scale. At this stage, at least, it appears that the company still sees potential in Tnuva. A year ago, Bright Food appointed Haim Gavrieli, an Israeli, as chairperson of the company, in the hope that he would achieve the hoped-for results. Tnuva finished 2018 with a large increase in sales. In any case, Bright Food's willingness to invest in Tnuva, despite its declining market share in recent years and the regulatory changes, indicate the owner's confidence, at least at this stage, despite the uncertainty in the dairy industry, Tnuva's main field.
Concurrently with its investment, Tnuva is waiting for a change in regulation. Over the past year, Tnuva's management, headed by CEO Eyal Malis, has been conducting a prolonged struggle against Minister of Finance Moshe Kahlon over prices of price-controlled dairy products. Tnuva is demanding price hikes in response to higher prices of raw materials.
In a Knesset debate, Malis asserted that his company suffered damages totaling NIS 200 million in 2017-2018. Tnuva petitioned the High Court of Justice in the matter, which ruled a month ago that the minister of finance had to sign an increase in controlled dairy prices. As of now, however, the minister of finance has not signed the order, and Tnuva itself announced that it would not raise the prices of its products until after the Passover holiday.
Published by Globes, Israel business news - en.globes.co.il - on March 31, 2019
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