By Shmuel Katz
If you are someone who has made regular visits to Israel over the years, your next visit will definitely come with some sticker shock. Over the last week or so, numerous major food suppliers and retailers have publicized plans to increase prices. From Osem to McDonalds, everything is going to cost more in the near future.
We have seen a lot of price increases because in recent months the cost of shipping has gone through the roof. I have seen this in my business as auto supplies have crept higher every couple of months. Much of our supply comes from Asia and Europe, and not only is the shipping cost in some cases 4 to 5 times what it was before COVID, it is often totally non-existent because of COVID-related port closures for sometimes weeks on end. That also forces an increase in price.
Historically, prices for consumer goods in Israel have always been high. A lot of this is because we do not trade much with our regional neighbors, but instead trade with countries that are much further away from us. We therefore pay a higher price for the costs of getting the goods from source to market.
In fact, didn’t Tel Aviv just get rated as the most expensive city to live in—in the world?
While I do not have hard data to quote, I do know that the media continually report on how the costs of basic goods seem much higher here in Israel than in other places. In some cases, Israeli products sold overseas are cheaper than the exact same product sold in Israel (I think Bamba is one).
I have a mechanic in my shop who comes in with mini cans of Coke all the time. They are (I would guess) about a third of the size of a regular Coke can. But he buys them for about 1 NIS per can, instead of anywhere from 5–15 NIS for the Israeli can of Coke. Why? Because he buys them in an Arab village that gets their supply from a Coke bottler in Ramalla instead of the Bnei Brak Israeli bottler.
Coke is not the only product with price inequalities.
The Times of Israel published a report a couple of years ago detailing how many of the consumer products sold here are distributed by a limited number of companies, who essentially control the marketplace and prices. The article (“Monopoly Nation,” TOI, February 26, 2020) explains how limited competition essentially forces the consumer to pay a high price because the retailers are forced to buy at inflated prices and the obstacles to importing competitively priced goods are extremely prohibitive.
And now, even domestic producers are getting itchy for a little more in their wallets.
This comes on the heels of some new taxes here that are also poised to send prices soaring. A plasticware tax went into effect in November. Forks, cups, and straws—they all saw dramatic price increases. I saw a report that plasticware sales are down as much as 50% because of the tax (which means it is effective, because it was intended NOT to generate revenue but instead to reduce the use of plastics).
Other taxes have been enacted as well. In my business, there is a huge tax on things like motor oil (which is being taxed an additional something like 25 NIS per gallon). Before COVID, we sold oil at 100 NIS per gallon. About 3 months ago, we had to raise the price to 120 NIS because of price increases. Yet, this new tax will add an additional 29 NIS to the price (25 NIS new tax + VAT sales tax on the new tax).
That’s just shy of a 25% increase because of new taxes. Yet, the total end rise from increased costs AND increased taxes is more like 50% in total. If it were only motor oil, we could deal with it. But it is across the board. Coolant. Brake oil. Transmission oil. Many filters. My entire industry is about to see huge price changes—just to keep up with costs.
Restaurants. Supermarkets. Anyone who sells products is going to be similarly affected.
Unfortunately for me (and other retailers), the consumer is not going to be happy with paying increased prices. We will have to eat some of the cost. So, even though our sales will be higher, it will affect our bottom line in a very not good way.
Shmuel Katz, his wife, Goldie, and their six children made aliyah in July 2006. Before making aliyah, Shmuel was the executive director of the Yeshiva of South Shore in Hewlett. You can contact him at HYPERLINK “mailto:shmuel@katzfamily.co.il” shmuel@katzfamily.co.il. Read more of Shmuel Katz’s articles at 5TJT.com.
