A consumer looking to purchase a Dove face wash at the Super-Pharm in Jerusalem’s Hadar Mall might be surprised to find that just 500 meters away, a quick walk around the block, the exact same face wash is being sold at Lior Adika for about half the price.
While it’s a little sobering to think that Super-Pharm is likely able to sell this product at this price point despite other options available to consumers, it’s also an important reminder – consumers are not completely powerless.
A series of price increases from major food companies over the last year of the war, a VAT increase from 17% to 18%, increases in utility prices, and more cost-of-living hikes have left many feeling helpless in the face of these skyrocketing costs.
The economy is characterized by a high degree of centralization, which contributes to the cost of living as it quashes competition, giving a few companies outsized power over prices. The food sector is a good example, with just a few major companies controlling a huge share of the market.
Just three suppliers control more than 85% of the sum of sales for 20 categories of food, a State Comptroller Report from November 2024 found.
The same report also found that the purchasing power of consumers is up to 300% lower than that of consumers in the US, UK, and France in terms of wages for products the comptroller checked.
Economic pressures for Israelis
The war has created economic pressures – multiplying the amount of reserve duty done, impacting interest rates, making debt more expensive, impacting taxes, and more.
It has also captured public attention, quashing society’s backlash against corporations raising prices as people are focused on hostages, worried over loved ones in the IDF, and more. They don’t have the capacity to object to price hikes or pressure elected officials to fight the rising cost of living with legislation and regulation.
Additionally, tax increases have created a smoke screen, enabling companies to raise prices beyond the tax increase amounts – consumers are expecting price increases and likely are not calculating exactly how much the prices of products should actually have gone up.
Despite these challenges, now is a good time to remember that consumers still have the power to make choices that can show their objection to price hikes and encourage suppliers to avoid these.
Companies don’t have to raise prices even as taxes increase. Corporate responsibility programs don’t need to begin and end with charity; they can include making conscious choices in their operations to help consumers.
Carrefour, for example, announced last week that it will absorb the VAT increase and not raise prices on 1,700 different products.
The chain stated that Carrefour “will absorb the additional costs resulting from the VAT increase on all Carrefour products, including food, pharmaceuticals, toiletries, cleaning items, and fresh products in the butcher’s section and fishery.”
Higher profits
Importers, retailers, and producers in the food sector have seen significantly higher profits during the Israel-Hamas War, according to a report by financial advisory firm Fair Value Group released last month.
These profits mean that companies in the sector have the ability to absorb tax hikes and other costs.
It’s a choice companies will likely not make, however, without pressure from consumers. If enough customers show that price increases will impact sales, it will force companies to react and could curb rising prices.
This isn’t always truly feasible for Israeli consumers, who are operating in such a concentrated economy, where so many choices are limited and competition does not always exist.
Shoppers do have some power, though, and they can keep this in mind as they make choices in this new, more expensive reality – prioritizing companies that absorb tax increases, that cut prices when production costs lower, or, at the very least, don’t raise prices beyond tax hikes just because they can.
Liat Ron/Walla contributed to this report.