The Victory supermarket chain has started parallel imports of products, by-passing the official Israeli distributors, and selling them at prices far below the normal price of the same brands in Israel. The prices that Victory is offering raise questions about the margins charged by the importers of these products, and at any rate demonstrate that parallel imports are a way of cutting the prices of many products.
For example, the chain has started selling Skippy peanut butter for NIS 15. The Skippy brand is distributed in Israel by Diplomat, which, according to Eyal Ravid, CEO of Victory and one of its controlling shareholders, sells to the supermarkets at NIS 17.4 before VAT, and these sell the product to the consumer at NIS 23.
Other products distributed by Diplomat that Victory has started to import on its own account are Toblerone chocolate and Kikoman soy sauce. "We sell 100 gram Toblerone to the consumer for NIS 6.60, when the price in the main supermarket chains is NIS 12-13," - a gap of 80%. Ravid says that Diplomat's price to the supermarkets is NIS 8.20, before VAT, and that while Diplomat imports only one flavor, Victory imports four flavors of Toblerone: milk, dark, raisin, and white chocolate.
Victory sells Kikoman soy sauce at NIS 14.90 for a 269 milliliter bottle. "This is the best-selling soy sauce in the world, and particularly in Israel. Anyone who sells through the authorized importer, sells at NIS 25. Diplomat's price to us is NIS 14.40 before VAT."
The chain has also started selling Listerine mouthwash at NIS 40. "I sell a one liter bottle at a price lower than the price at which a half-liter bottle is sold elsewhere," says Ravid, "The authorized importer sells us a half-liter bottle for NIS 37 before VAT."
Victory sells Mars, Snickers and Bounty snacks for NIS 2.5 for a 51 gram bar, which is exactly the wholesale price charged by the authorized importer, before VAT.
"I sell a 500 gram tin of Quaker Oats for NIS 11, which compares with a market price of NIS 17. Strauss sells the product to retailers for NIS 10.80, plus VAT," Ravid adds.
And you still make a profit?
"My consumer benefits from 30% lower prices, and I also make a higher profit than I made via the leading supplier. You can take it that I also sell much more, and I'm talking about gaps of hundreds of percent in sales. That's the idea, that I should improve my margin."
How?
"It's possible to import much more. I have more goods on the way, and I can reach crazy volumes from what I'm about to do. The problem is that while the Ministry of Finance and the Ministry of the Economy talk about an open market, they really have to open the market in practice. Today, there are limitations of customs duties, standards, and kashrut. There are European standards for all non-food items. Any product that has received standards certification in one EU country is approved for sale in the whole of the EU, but not in Israel. The Listerine waited six months for approval. Does that make sense to you? What's good for Europe isn't good for Israel?"
Published by Globes [online], Israel business news - www.globes-online.com - on October 27, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014