What happens to the stocks of food companies on days when shopping at the supermarket has turned from a family pastime into a frustrating experience? (Photo: ShutterStock)
The introduction of the restriction of food and toiletry importers to importing products from only one large company to the Law of Arrangements, shook parts of the local capital market after it introduced uncertainty to what was until now considered a safe stock, that of the giants of the field in Israel.
The largest importers of food and toiletries in Israel are the Diplomat and Shastovich companies.
The first of these is a public company traded on the Tel Aviv Stock Exchange with a value of about NIS 1 billion, after its stock fell by about 10.6% since the Treasury's announcement on the introduction of the restriction to the Settlements Law until its examination (see table).
Diplomat controls the import and distribution of a number of well-known international brands such as Gillette, Tuna Star Kist, Illy Coffee, Heinz sauces, Pampers diapers, Oreo cookies, Tampax hygiene products, Fairy dishwashing liquid, Bonzo pet food, Dorsal batteries and more.
Although the reform has not yet actually matured, but with the entry into force of the new limit, a diplomat will be forced to say goodbye to some of them.
The assessment in the capital market is that the possibility of parting ways with some of the brands that contribute to the company's profit margin led to a drop in the stock, which cut about NIS 120 million from Diplomat's value in two days.
Food producers are also in the crosshairs
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The three food importers that trade in Tel Aviv have lost in the past year, but Willy Food has risen since the announcement of the reform (photo: Walla! system, without)
A diplomat is not alone;
Neto Melinda, which is traded on the Tel Aviv Stock Exchange with a value of approximately NIS 1.8 billion, is also attached to it, after its stock has fallen by approximately 2.73% since the plans of the Ministry of Finance and Economy became known, cutting off its value by approximately NIS 52 million for this period.
Neto Melinda is one of the five largest food groups in Israel, and its brands include: Delidge, Williger, the Three Bakers, Tivon Will, Rich, Chef Segev, and more.
The Willy Food company, however, which is traded on the Tel Aviv Stock Exchange at a value of NIS 416 million, has risen by about 2.5% since the Treasury announcement.
The company imports a number of products that compete with the big names and are known mainly in the field of cheeses and preserves, such as Euro, Valio and various products under the Willipod brand, and this is also one of the estimates for the reason for the increase in its stock on the background of the announcement.
The declines of food importers were also joined by those of food manufacturers, some of whom also import products and brands themselves.
The prominent traded companies among them, such as Strauss, Snow and Carmel Corp, fell by 1.80%, 2.18% and 4.91% respectively, just two days after the announcement of the expected reform.
The percentages may seem low, but it is a value write-off of approximately NIS 190 million among the shareholders of Strauss, and 65 million NIS written off the value of Sano.
The decline in food manufacturers is part of the uncertainties that the entire sector has entered into due to the Treasury's announcement, which, as mentioned, should lead to a decrease in the prices of food and toiletries in Israel, along with a clarification by the Treasury that the reform does not refer only to one or another company, but to the entire Israeli food market.
Yesterday it was exclusively published in Vala that the Minister of Economy, Nir Barkat, intends to act not only against the food importers but also to weaken the monopoly position of some of the local producers - and hence it is not only the stockholders of the importers who fear what will happen to the companies' profits.
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And not only the importers: the big manufacturers are also in the crosshairs - and the market is reacting nervously (photo: Walla! system, without)
Money has a price
It should be noted that not only decisions on reforms of one kind or another fuel the declines, but also the growing public indignation regarding the cost of living in Israel, which flares up even more due to price comparisons made there compared to identical or similar products abroad, when the finger is pointed at Israeli manufacturers whose products are sold at a lower price in supermarkets abroad and against importers whose prices for the brands they import to Israel are tens of percent higher than the prices of the same brand abroad
. An apartment, educational frameworks and more, meaning - as long as interest rate increases continue, the assumption is that eventually the reduction will also reach the shopping cart, the last place where we like or know how to save.
It is evident that the companies are not excited by the recent decline in their shares, and an examination of their shares in 2022 can explain why, since despite the rise in the cost of living at the top of the public agenda during the previous year, which led to their decline by tens of percent (for example, Netto, Diplomat, Sano, and Carmel Corp. -22%, 21%, 34% and 46% respectively, during the year 2022) and the deletion of hundreds of millions of shekels from Shwein, the feeling is that in this film they were already there.
We will recall that only a year ago the previous ministers of finance and economy, Avigdor Lieberman and Orna Barbibai, sent a letter to Israeli food importers and producers following statements by many of the latter about their intention to raise prices.
Their letter then stated, among other things, that "we will continue to monitor the prices for the Israeli consumer with the required national responsibility, and in this context we will not hesitate to take the necessary steps to ensure a competitive and fair economy."
The ministers even noted in their letter the unusual rate of profitability of the Israeli companies compared to their counterparts abroad, and all this in combination with the strengthening of the shekel against the exchange rates of the major currencies in the world.
However, they are not the first. Already in 2017, a plan was presented to lower the cost of living by limiting the major importers on the road different by the Minister of Economy at the time and now Minister of Foreign Affairs, Eli Cohen. In one of the interviews with him, Cohen referred to the struggle with the large companies and said that to his knowledge, one of them held a discussion aimed at initiating an investigation aimed at removing him from his position.
Cohen, like Lieberman and Rabiai after him, also addressed in writing the leading importers who import in a manner exclusive of toiletries, and then requested their reference to the price differences found in the inspection by the Ministry of Finance and the Competition Authority for leading products in Israel and the price of those products abroad.
Minister of Economy, Nir Barkat.
Yesterday we revealed here his ministry's plan to limit the power of the major food manufacturers (Photo: Reuven Castro)
conditions of uncertainty
The importer restrictions that are expected to be included in the Arrangements Law are actually a continuation of this work, which was already conducted about 6 years ago.
However, as mentioned, the problem is not in the plans, but in their implementation, which is postponed every time due to lobbying work and pressure on the decision makers who operate some of the companies.
It is true that the government ministries will have more power vis-a-vis the importers, certainly when the move is fueled by sweeping public support, but among the local manufacturers - the next target of the economic ministries, the task will be doubly difficult, since these have tools in their arsenal such as the threat of firing thousands of workers, if their profitability is harmed.
Be that as it may - even in their case, it must be remembered that if there is anything that the investing public hates even more than risk, it is only uncertainty.
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