Daily Israel Report

Israelis Prepare to Shell Out as Osem Hikes Prices

Osem on Thursday announced a sharp increase in the price of nearly all of its 2,000 products
By David Lev
First Publish: 9/27/2012, 2:49 PM

Osem's Bamba
Osem's Bamba
Designer's Forum

After weeks of threatening to do so, Osem on Thursday informed its wholesale customers that it was raising the price of its products. The new prices will go into effect in November.

The price increases will affect the full gamut of Osem products from soup nuts to prepared cakes, snack foods, and cereals. The new wholesale prices on all items will range between 3.5% and 6%, for an average of 4.8%. Osem said, however, that a few products would be exempted from the price increases; for example, the company said, prices for Materna baby formula will remain unchanged.

It was unclear how much supermarkets would raise retail prices. In recent weeks, the heads of Israel's major supermarket chains have said that they expect prices to rise, but that they would do everything they could to ensure that the increases were not too onerous.

Osem is currently 51% owned by Swiss conglomerate Nestle. Besides products with its own logo, Osem markets Nestle's cereals in Israel, along with Sabra salads, Nestle ice creams, and Beit Hashita canned products. Altogether, Osem markets about 2,000 products in Israel – with prices on the vast majority of them to jump.

It should be noted that Osem is far from the only food company raising prices. Unilever announced recently that it was increasing prices on most of its products by 6%. The company markets over 600 products in Israel, including products with many of Israel's most popular brand names, including Telma, Strauss Ice Cream, Knorr, Lipton, Cif, Lux, Dove, Beigal & Beigal, and many others. Osem is also Israel's largest exporter of kosher food, so chances are that some prices for Israeli products sold in the U.S. and Europe will rise as well.

Both companies attributed the wholesale price increases to the rise cost of raw materials and transportation costs in the world. Because of drought conditions this past summer in many parts of the U.S., prices for corn, wheat, and many other commodities have jumped, as have transport costs, due to the ongoing high price of oil and gas.

Although it has not made a formal announcement, dairy company Tnuva, too, is expected to raise prices after the holidays. Industry analysts say that raw milk prices have risen 8%-9% in recent months, also due to the cost of raw materials – specifically, feed prices for cows that produce milk.

However, the analysts, Tnuva is likely to be far more cautious in raising prices than its sister food conglomerates, having already felt customers' wrath last year, when many Israelis boycotted Tnuva products en masse because of the high cost of cottage cheese. The result of that boycott was a wide-ranging cut in prices on Tnuva products. Many of the prices, however, have since returned to their pre-boycott levels – which consumers boycotted in the first place after numerous reports emerged about how Israelis were paying significantly more for dairy products that consumers almost anywhere else in Europe or the U.S.

Tnuva, too, is no longer owned by Israelis; formerly a cooperative of kibbutzim and moshavim, it is now 51% controlled by London's Apex Partners investment firm.