Final week Israel’s largest meals producers raised costs. Over the previous two years, meals costs have risen sooner than housing costs and the (CPI) client worth index. Between March 2023 and March 2025, meals costs in Israel (excluding contemporary fruit and veggies) rose 8%, greater than the CPI (6.2%) and greater than housing costs (7.6%). When fruit and greens are additionally taken under consideration, meals costs have jumped by 9.5%.
Producers, for his or her half, level to a rise in inputs, however information present that costs from a few of the inputs are literally lowering. Add to this different components like restricted competitors, ineffective worth controls and a concentrated market, and Israel has a recipe for worth will increase.
The most recent wave of worth hikes remains to be in full swing. Final week, inside a number of hours, Unilever, Strauss, Central Bottling Co. (Coca Cola Israel) and Gad introduced worth will increase for dozens of merchandise and this week meals conglomerate Tnuva and importer Diplomat have hiked costs. The worth will increase have an effect on quite a lot of merchandise from breakfast cereals and soups to dairy merchandise and smooth drinks, and vary from a number of % to about 15%, within the case of a Diplomat, which amongst many manufacturers imports Heinz.
Meals is turning into costlier as enter costs fall
As with nearly each worth hike, producers complain they have to pay extra for inputs, and should move on a minimum of a few of these worth will increase to customers. Panda Chocolate CEO Daniel Barkat says, “Our foremost uncooked materials cocoa has skyrocketed.” Certainly, international cocoa contract costs have greater than tripled within the final two years. As well as, he says that different inputs have additionally turn out to be costlier, “together with air freight, power and, in fact, wages for staff.”
Throughout these two years, air freight costs have risen 25%, electrical energy charges have risen nearly 5%, and nominal wages have additionally been rising persistently, together with the minimal wage that was up to date final month. Nevertheless, sea freight, which is related to different producers and importers, is slowly returning to pre-war ranges. Transport costs jumped in 2024, reaching nearly $8,000 for transport a container from China to the Mediterranean final summer time, after the closure of Bab al-Mandab by the Houthis. As of early Could 2025, the worth has fallen to round $3,000.
There have additionally been worth reductions in commodities, after the dramatic surge that started in 2020 as a result of international commodity glut. Some fundamental meals commodities like sugar and corn are nonetheless tens of % costlier than in 2019, however their costs have been minimize considerably within the final two years, as has the worth of soybeans.
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Wheat costs have additionally fallen in recent times, and but bread costs in Israel have truly risen. A coverage doc from the Producers Affiliation exhibits that whereas international wheat costs have fallen 18% since 2021, the wholesale worth indices for white flour and whole-meal flour have risen by 23% and 38%, respectively.
Utilizing power out there to dam competitors
The worth will increase on grocery store cabinets aren’t uniform. In line with Aviv Hatzbani, director of the Meals Industries Affiliation, it’s merchandise whose costs are below authorities supervision which have risen at a a lot sooner price: “The supervised merchandise and those who rely on managed inputs from the federal government have risen in worth at the next price than different meals merchandise, as a result of the method requires the federal government to look at the associated fee basket of producers and replace the worth accordingly.”
He provides, “The worth will increase going down in Israel in the present day are similar to these seen in OECD international locations.” The answer, in his view, is to maneuver past direct subsidies to farmers, as an alternative of a “goal worth” that units, for instance, a minimal worth that persons are obligated to pay for milk and eggs. However whereas the speed of meals worth will increase is just like that within the OECD, costs in Israel are increased to start with in comparison with different OECD international locations, with Israel nearly all the time rating first or second within the OECD’s price of residing index, together with the a lot wealthier Switzerland.
In line with public foyer NGO Foyer 99, “The phenomenon of continued rises within the product worth index, regardless of the decline in commodity costs, stems from the ‘stickiness’ and rigidity of costs within the meals market, which characterize non-competitive markets.” The NGO explains that there’s a important lack of competitiveness within the Israeli financial system amongst meals producers, with producers utilizing their market power to dam opponents and preserve excessive costs.
Quite a lot of reforms have proposed to ease the price of residing, particularly in meals however did not penetrate all of the regulatory hurdles and permit importers to freely usher in merchandise from overseas. The “What’s good for Europe is sweet for Israel” reform promoted by the present authorities additionally goals to do precisely that, however within the meantime, its exceptions committee remains to be assembly, and it is too early to know whether or not it would achieve bringing about important change.
Both approach, meals costs in Israel are at the moment rising at a sooner price than within the US, for instance, the place meals costs have risen 5.3% within the final two years, in contrast with 8% in Israel for meals excluding fruit and greens and 9.5% with fruit and greens, that are a part of the American index, are additionally thought-about.
Buying energy of Israelis is being eroded
So whereas many inputs have certainly elevated, meals costs are additionally rising dramatically in comparison with different costs. The CPI is moderated by different sectors akin to clothes and furnishings, that are nearly fully imported, and their competitiveness is clear and is mirrored in a fall in costs within the final two years.
The results of this pattern is that actual wages, i.e. the worth of wages in buying energy, have hardly modified up to now two years. In line with the Central Bureau of Statistics, the typical actual wage in Israel fell by 1.4% in February 2025 in contrast with February 2024. In different phrases, though the typical wage is rising, costs have risen at a fair sooner tempo up to now yr, in order that the typical wage in Israel is ready to purchase barely lower than final yr. The Financial institution of Israel famous in a presentation it printed that “actual wages are increased than their pre-war degree, however proceed to stay under the long-term pattern.” In any case, when nominal wages rise, that is one other enter that meals producers must bear in mind, and it’s typically the one which fuels worth will increase in a phenomenon known as the “wage-price spiral.” Within the meantime, Israelis’ buying energy is eroding whereas costs proceed to climb. Until there’s a revolution in competitors or inputs, the worth spiral will proceed.
Revealed by Globes, Israel enterprise information – en.globes.co.il – on Could 6, 2025.
© Copyright of Globes Writer Itonut (1983) Ltd., 2025.
