Bloomberg News

Israeli Facebook Protest Targets High Cottage Cheese Prices

June 20, 2011

(Adds Tnuva and Strauss comments in 11th, 12th paragraphs.)

June 20 (Bloomberg) -- Across the Arab world people have used Facebook to organize demonstrations against their regimes. In Israel, the social networking site is being used to protest about the rising cost of cottage cheese.

More than 90,000 Israelis have joined a Facebook group calling for a boycott of the dairy product whose price is now almost 8 shekels ($2.33) for a 250-gram container, compared with 4.91 shekels in 2006, when government price supervision was lifted. The public outcry has prompted Interior Minister Eli Yishai to request a price-fixing probe and Finance Minister Yuval Steinitz to threaten permitting dairy imports.

“Every mother and father who buys cottage cheese pays a lot more than anywhere else in the world,” Carmel Shama- Hacohen, who heads the parliament’s Economics Committee, said on Army Radio yesterday. “This is a very clear signal for the government.”

Israelis eat 1.5 billion shekels ($440 million) worth of cottage cheese a year, according to Shama-Hacohen’s figures. Sales of the cheese that Israelis most associated with their country, based on a June 5 survey by the daily Yedioth Ahronoth, are 70 percent controlled by Tnuva Food Industries Agricultural Co-Op in Israel Ltd. Bank Leumi Le-Israel Ltd. agreed to buy a 13.5 percent of the company in March.

Tnuva, based in Glil Yam, Israel, isn’t publicly traded. Strauss Group Ltd., which shares the remaining 30 percent slice equally with Tara Dairy according to industry officials, has fallen 1.5 percent since the protest started, compared with a 1.4 percent drop for the benchmark Tel Aviv Stock Exchange. Osem Investments Ltd., another food manufacturer that doesn’t sell dairy products, has gained 0.2 percent.

‘Intolerable’

A fifth of Strauss’s revenue comes from dairy sales, according to data compiled by Bloomberg. The Petah Tikva, Israel-based company trades at 18.9 times estimated 2011 earnings, compared with 7.8 times for its British peer Dairy Crest Group Plc, the data show.

Shama-Hacohen’s panel is calling on the government to re- impose price supervision and to establish a parliamentary committee to investigate food prices and the concentration of suppliers, according to its e-mailed statement yesterday.

“If it’s true that the price of cottage cheese is double the price of products in Europe and the western world, this is intolerable,” Finance Minister Steinitz said at an Israeli economic conference yesterday. “If it doesn’t work itself out, we will consider a number of steps.”

Britons pay 75 pence ($1.21), or the equivalent of 4.17 shekels, for 300 grams of light cottage cheese at Tesco Plc, according to the U.K. cost-comparison site mysupermarket.co.uk. The price was 1.05 pounds for a 235 gram tub at Marks & Spencer Group Plc stores in London yesterday.

Examination

In Israel, the product is the second-best selling cheese after soft white cheese, according to the Israel Dairy Board.

“We propose that there should be a thorough examination of of all the cost components and we will cooperate fully with such an examination,” Eyal Malis, the chief executive officer of Tnuva’s Dairy Division, said at a parliamentary meeting yesterday, according to an e-mailed statement from the committee spokesman. “The profitability of the food sector in Israel is at an acceptable level and doesn’t represent an imbalance.”

Strauss Israel’s chief executive officer Zion Balas said at the meeting that all of the interested parties in the issue should join hands to find a solution to the problem, according to the statement.

Tahrir Square

The Manufacturers Association of Israel rejected suggestions that the Facebook protest should prompt a policy rethink.

“Where are we? Tahrir Square?” said Shraga Brosh, head of the association, refering to the site of the Egyptian protests that led to the February resignation of President Hosni Mubarak. “If we import cheese we will increase unemployment and if we start importing dairy, let the prime minister import a finance minister from abroad as well,” Brosh said in remarks broadcast on Army Radio yesterday.

Israel’s unemployment rate declined to 6 percent in the first quarter, its lowest level in more than two years. In the U.S., unemployment rose to 9.1 percent in April, according to Labor Department figures released June 3.

Regulatory Focus

Food manufacturers have been hit by increasing commodity costs including fuel, coffee and sugar, pushing up consumer prices. Excluding fruit and vegetables, food has climbed 5.1 percent in the past 12 months, compared with 4.1 percent for consumer prices generally, the Jerusalem-based Central Bureau of Statistics said.

“Nothing good will come of this” for Strauss, said Tsahi Avraham, an analyst at Clal Finance Brokerage Ltd. “In the best case scenario, the regulatory environment will stay the same, in the worst case it could catch regulatory attention. The dairy segment is a very profitable segment for Strauss and that is a risk factor.”

Avraham rates Strauss “market perform” because of pressure from rising sugar and coffee costs, he said.

--With assistance by Susan Lerner in Jerusalem. Editors: Riad Hamade, Gavin Serkin

--Editors: Riad Hamade, Gavin Serkin

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

To contact the editor responsible for Claudia Maedler at cmaedler@bloomberg.net


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