The Ministry of Industry, Trade and Labor so-called "secret report" by the Kedmi committee on the dairy market blames national supermarket chains for the high prices for dairy products. Minister of Industry, Trade and Labor Shalom Simhon submitted the report to Prime Minister Benjamin Netanyahu yesterday.
The report says that the supermarket chains receive payments from suppliers not to move goods, thereby driving up consumer prices. A committee member told "Globes" today that the root of the prices problem was at the supermarkets, not the dairy companies. "I'm not saying that there isn't a problem at the dairy producers," he said. "Shufersal Ltd. (TASE:SAE) or Alon Holdings Blue Square - Israel Ltd. (NYSE: BSI; TASE: BSI) can open a supermarket without investing a shekel. How? From either the suppliers or the consumers. Between the supplier and the consumer is a huge hole, and I don’t know how much this activity is fair."
The committee member criticized various payments to the supermarkets, including payment for opening stores, discounts on converting stores or opening new ones, bonuses, payments for introducing new products, and so on. "A small dairy told us that it buys raw milk from Tnuva Food Industries Ltd. on a current plus 14 days basis, and sells it products to supermarkets on a current plus 120 days basis. A large producer told us, 'The supermarkets give me a hard time too, but because I'm big, it's difficult for them. Small suppliers are waging the intifada. The rules of competition are very amorphous. The supermarkets pressure the small producers."
The committee member said that these payments do not clearly appear in the retailers' financial reports, and that this should be investigated.
A large producer said in response, "This is utter drivel. These are public companies and that's a totally amateurish thing to say. Even if it does not appear in the gross profit line, but below it, a business has a bottom line. Companies pay taxes on all its income, net all its expenses, so it doesn’t matter where it appears."
"No one is clean in this matter," A former food industry executive told "Globes". "The suppliers pay for the opening of supermarkets to maintain their position on the shelf. The supermarkets are also pampered because they enable the producers to remain the big players in the market and they don't put competitors in a really aggressive place. One hand oils the other and everybody makes a profit. They also stab each other. There's constant tension and friction between the supermarkets and the producers, but this friction is part of the rules of the game, which are clear and convenient for everyone."
Published by Globes [online], Israel business news - www.globes-online.com - on July 21, 2011
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