In economics it is called “geographic price discrimination”. Buy a Pesek Zman candybar in the USA and you’ll pay NIS 2.70 ($0.69). Buy a Pesek Zman candybar in the UK and you will pay NIS 3.85 (65p). Buy the same candybar in Israel and you will pay anywhere from NIS 5.50 to NIS 6.29, dependingon the store.
Even retailers can’t get the price paid by the American consumer: Strauss-Elite sells the candybar to Israeli stores themselves at NIS 3.50. It refuses to say what the wholesale price is abroad. However, it appears to be much less. HaAretz interviewed the owner of a New Jersey store, Amira. He says that he is buying the Pesek Zman candy bars from a distributor and is still making a profit at his regular price of NIS 2.70($0.69).
The price discrimination came to light over the weekend when Yoav Rokach-Penn posted a photo of the Pesek Zman candybar on his facebook page. On the left side of the photo was Mega’s online shopping page for the candy bar; on the right was the store shelf at a Shoprite in New Jersey with the price clearly marked.
In response to the photo a group of mothers who had protested Strauss prices early last summer sent a letter of complaint to Strauss. The letter demanded that Strauss lower its prices immediately. Failing that the mothers planned to organize a boycott starting on March 1.
It seems that your company is exploiting its dominance and monopolistic power, and the lack of government regulation to allow yourselves to sharply raise prices even when it is clear that the only reason is your insatiable appetite for consumers’ money… Israel’s people are paying a scandalous price for your products, while foreign consumers pay a substantially lower price. This conduct creates an intolerable situation in which the public is forced to pay exorbitant prices for food products, reducing its consumption to the absolute minimum. (Source: Arutz Sheva)
In addition the protest group is planning a demonstration outside of Strauss chairwoman Ofra Strauss’s house on Thursday, February 23. Should that demonstration fail to convince Strauss, they plan to hand out flyers in front of supermarkets. This will be the second time the group has demonstrated outside of her Tel Aviv home. One of the mothers, Batssheva Alkobi of Ramat Gan, said this time around they would be much more demanding:
“Ofra Strauss’ charm does not work on us any more,… A few months ago we protested outside her house and she came out and sat with us for two hours. But that was a different time, exactly when the tent [protests] on Rothschild [Boulevard in Tel Aviv] started, and it was something new… We can’t be bought off with a smile any more.” (Source:HaAretz)
Retailers are also suggesting that consumers consider other brands. Foreign candybars such as Mars, Snickers, and Twix are all priced at between 4.00-4.10, less than two-thirds of the price of Strauss-Elite’s candybars. Rami Levi, the founder of the Rami Levi chain of supermarkets, told HaAretz:
There are many food products that cost more here than in other parts of the world, and the only reason is that when manufacturers see that there’s demand, they raise prices … I recommend that consumers don’t buy expensive products just because they saw an advertisement, but rather choose competing goods with better prices.
An unspecified retailer told Globes:
Israeli consumers need to step back and take stock. Why do they always need to buy the Elite brand? Do you realize how stupid this is? The problem is not just with the companies. If you, as a business owner, knew that you could take advantage of someone, it could be that you might do so. And that is exactly what the large companies are doing.
In recent days Strauss has made several unsuccesful attempts to defend its pricing policies. First, it tried to claim that the price that Yoav Rokach-Penn had photographed was a special sales price. Yoav responded by visiting a second store, Amira (mentioned above), and posting his sales receipt. The price was the same and the owner confirmed that it was the regular price.
When both those failed to quiet the issue, It explained that the higher prices in Israel are due to higher costs of production and delivery: electricity, transportation, and taxes. However, a senior executive at a competing candy manufacture said that the Pesek Zman candybar takes less than a shekel to make and could be sold at a profit even if the price were 2NIS.
Strauss has also tried to blame retailers, pointing out that it sells the candybar to the retailers at NIS 3.50. However, even Strauss recommends a retail price of NIS 5.25. This is still close to twice the price in the USA.
Markets and Retailers taking Boycott Threat Seriously
So far Strauss has refused to lower the candybar prices in any permanent fashion. Initially, it pointed to upcoming Purism sales. It also tried to deflect attention from the issue by pointing to past price cuts, including a reduction in the cottage cheese. However, during that same period, Strauss actually raised the price of the candybar by 5%.
Strauss is sending out mixed messages about its plans. According to Globes, Strauss insists that it has done all it can to cut prices. However, the Times of Israel reported that Strauss plans to cut prices 10% on 50 of its core products. Even if Strauss does carry out the price cuts, it won’t be enough to satisfy the protesters. The markup for the candybar in Israel compared with countries outside of Israel ranges from 160%-230% depending on the country.
Stores are already offering discounts and sales in hopes of selling off their current stock of Strauss candybars before the boycott starts. Several chains are offering discounts to encourage customers to purchase. Investors are also taking the threat of a boycott seriously. By close of trading on Sunday, Strauss’s share price had dropped 3.5%. Strauss’s main competitor Osem also fell, but only one tenth as much: 0.3%. The TASE-25 index, which includes both the Strauss Group and Osem rose 0.57% .
The threatened boycott will start a week before Purim (March 8), when people are buying food and candy for their Purim baskets. If consumers chose other candy brands, the loss of sales during this period could be significant.
- Israeli supermarkets rush to sell Strauss candy in wake of consumer unrest, HaAretz, 2012-02-21.
- “Strauss CEO: We’ve done all we can to cut prices”, Globes, 2012-02-20.
- Sun: Consumer Boycott Spooks Strauss, Globes, 2012-02-20.
- Boycott threat aims to sweeten chocolate prices, The Times of Israel, 2012-02-20.
- Israeli candy makers raise prices despite cheaper imports , HaAretz, 2012-02-20.
- CustomersBlast Strauss after Finding Candy forHalf Price in New Jersey, HaAretz, 2012-02-19.
- ‘Cottage Cheese’ Boycott Takes on Chocolate Wafers, Arutz Sheva, 2012-02-19.