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Israel Food and Drink Report 2009
Business Monitor International, March 2009, Pages: 58
Israel Food Drink Report provides independent forecasts and competitive intelligence on Israel's food and drink industry.
Growth of the Israeli economy is expected to slow dramatically in 2009 due to falling demand for Israeli exports, sluggish consumer spending and negative investor sentiment. As we see private consumption growth slowing down considerably in 2009 to just 1.5% (in real terms), compared with an estimated 4.6% in 2008, the country’s leading mass grocery retail (MGR) operators will adjust to this changing environment, as discussed in BMI’s recently published Israel Food & Drink Report for 2009.
The Israeli MGR market is essentially a duopoly, dominated by the country’s two leading retailers Super-Sol and Blue Square. In 2008 both retailers announced their intentions of launching new stores under the discount store format, which were previously unpopular in the Israeli market. First market leader Super-Sol announced its plans to roll out a new discount store concept under the Yesh banner, with an investment of ILS70mn (US$19.6mn), which would be supported by a ILS7mn (US$1.96mn) advertising campaign. The company has said that it plans on launching 48 branches under this format, which will be tailored to the needs of the ultra-orthodox Haredi community as well as to Arab shoppers. Super-Sol has said that it plans on opening another eight branches by the end of 2009 under the Yesh banner and will offer private label products with kosher certification. Number two operator Blue Square quickly followed suit with its announcement of a new growth strategy which includes plans to set up stores under a hard discount format and the introduction of a new private label line.
Currently BMI is forecasting sales growth of 20.2% in the country's MGR sector to 2013, which, although solid, is low in comparison to the country's neighbours as a result of its higher level of development. Although we had previously forecast a decline in the discount store format, we have amended our forecasts in line with these planned investments, and are now forecasting a slight rise in sales of just over 5.4% between 2008 and 2013. The previous decline in discount store sales was the result of increasingly fierce price wars in other retail formats, such as supermarkets, which had taken away the role of the traditional discounter. However, such aggressive price-cutting tactics are no longer as common. Low prices will remain popular, although consumers, who are developing increasingly sophisticated tastes, will not want perceived 'discount' products and will instead want quality products at low prices, which is also fuelling the growth of private labels.
We see private consumption growth slowing down considerably in 2009 to just 1.5% (in real terms), compared with an estimated 4.6% in 2008. Rising unemployment – jobless figures rose to 6.4% of the civilian workforce in Q308, up from 5.7% the previous quarter – will constrain spending in some households and encourage greater prudence even in those not affected by job cuts. With these economic difficulties and the consequent belt-tightening set to continue for some time, Israeli retailers and food and drink producers will have to cater to new frugal tastes.
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