Two weeks before the High Holy Days, there are no aggressive bargains being offered by the retail supermarket chains. In contrast to previous years, the chains are in no hurry to do battle over the Israeli consumer at the price of their profit margins. The bargains being offered are focused and modest, with some of them being conducted through coupons; are not having an industry-wide effect; and are not drawing a response from competitors.
Market leader Shufersal Ltd. (TASE:SAE) is advertising fresh salmon for NIS 89.90 a kilo on television. Shufersal's pre-bargain price was NIS 100 a kilo, but the price in the bargain campaign is the same price at which fresh salmon is ordinarily sold at some of the large chains, so there is no real discount.
The fact that Shufersal put its campaign on television, however, together with a slightly more attractive bargain price of NIS 19.90 per kilo for carp, is aimed at a different target that can also be deduced from the chain's campaign in newspaper ads. Shufersal today published its holiday bargains, which are focused on perfume and toiletries, rather than food.
One retailer told "Globes," "It's not the competition we're used to. Shufersal is advertising toiletries and perfume as if it were competing with Superpharm, and it's clear that Shufersal is the most cautious player in the market."
"Globes": Does the announcement and the price of salmon in the campaign deliver a message that "We're not going wild, and neither should you"?
"Yes, you could definitely say it's a message."
This message has been broadcast for a long time already. Has it gotten through to the market?
"Yes, it got through."
Under CEO Yitzchak Abercohen, Shufersal has completely turned its policy around. While Shufersal initiated price wars in 2012 and 2013 in order to preserve its market share and avoid damage to its brand name, the past two years have featured an effort to preserve profit margins and to deliver a clear message to the market that Shufersal is not conducting any price wars. These messages have been delivered in Abercohen's media interviews.
"Mega collapsed and disappeared, Yeinot Bittan has made huge investments, Shufersal wants to maintain its profit margins, and most of the other chains have bought a lot of stores from Mega and have made investments. No one wants the same thing that happened to Mega to happen to them in two or three years," one retailer said, explaning the relative lack of competition.
"The holiday is coming with much less competition, because Mega, with all its components, is no longer with us. It therefore appears that the entire market is working on increasing its gross profit in order to make more profits, and it appears that the Israeli consumer will pay more," a former food market executive said.
Market cannot go down
Shufersal executive VP commerce & marketing Uri Kilstein says, "We have increased the personal coupons budget substantially through the app. We have 400,000 downloads of the app, and 70% are coming to us monthly. It gives us customer loyalty."
"Globes": Does this personalization render nationwide price wars unnecessary?
Kilstein: "That's not the purpose, but it gives me an opportunity to move large groups in a different way under the radar, without causing an industry-wide response."
Where have the food bargains gone?
"You don't see the crazy bargains there used to be for chickens because of the shortage there has been, and that's why there aren't any chicken bargains for NIS 7.90 a kilo or NIS 9.90 a kilo. Secondly, there is a shortage of locally produced fish because of the Eid al-Adha Muslim holiday that began last week. Thirdly, the quotas granted for the holiday last year, like the total exemption on customs duties for tilapia imports on Passover, have been only partial. The customs duties exemption for olive oil, for example, has not been renewed. Beyond all that, the standard products for the holiday - wine, pasta, canned goods, and chocolate - are being sold just as intensively or maybe 1% less. In the general weighted basket, there is no real price rise. It's not as if we told ourselves, 'There's no Mega, so let's raise prices'."
Despite what Kilstein said, however, the competitors and the campaign tell a different story. One retailer said, "Keep in mind that over the past year, this market has seen the collapse of one of the largest chains, and people have been reminded that it could easily happen to them. A business earning a 2% profit can easily slide into a 2% loss. The market can't absorb any more shocks - it can't do down any more.
"The Food Law has not been good for retailers, because it gives the suppliers all the power, and the retailers don't have financing. Add to that the high prices of vegetables in recent months, which have not been reflected in the consumer price. According to the prices for purchases from farmers and wholesalers, tomatoes and cucumbers should be sold to the consumer for 20% more than is actually being paid. The shortage of chickens last week also completely did away with competition in chicken products, and now, since there are still shortages, chicken prices are high. Furthermore, the minimum wage has also risen."
One chain that played a significant role in competition in the past, but to a much lesser extent this year, is Yeinot Bittan, which became the second largest chain after its acquisition of Mega. Yeinot Bittan VP marketing Erez Eisenberg said, "At first, holiday bargains would begin a month before the holiday. Then it shrank to three weeks, and now two weeks. There are always bargains for rice, beverages, applies, honey, and dates. Our emphasis for the holiday is on fresh products. We're selling fresh chickens without bones for NIS 29.90 a kilo. Six bottles of Coca Cola for NIS 29.90 and real chicken soup from Uniliver are bargains that everybody has. We're focusing on products in which no one can match us."
Eisenberg is portraying the motive for Yeinot Bittan's strategy as a search for differentiation, while ignoring the fact that it is much easier to pay for bargains of the type that the chain is offering, in which the quantity sold is limited, and some of which are not money losers, compared with bargain campaigns for fresh chicken.
Victory CEO Eyal Ravid said, "I don't think prices can come down any further from their current level."
Published by Globes [online], Israel business news - www.globes-online.com - on September 20, 2016
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