Strauss faces chocolate price hike accusation in Israel

29-Feb-2012 - Last updated on 29-Feb-2012 at 17:38 GMT

Related tags Marketing Consumer protection

A consumer group alleges Strauss' Cow Chocolate is more expensive than leading brands in other countries

Israel’s antitrust authority has received a complaint alleging that the country’s number two food manufacturer The Strauss Group is exploiting its monopoly on the domestic chocolate market by overcharging consumers.

The allegations were raised by consumer group Emun Hazibur (Public Trust), which claims Strauss’ prices are an unfair reflection of chocolate prices worldwide.

Strauss commands a 60% share of the Israeli chocolate market, according to Leatherhead Food Research.

Allegations of ‘overcharging’

Emun conducted a study where it compared prices for Strauss’ chocolate in Israel to leading brands , such as Hershey, Cadbury and Milka, in other markets.

It claimed that Strauss’ Cow Chocolate (Shokolad Para) was around a third more expensive than other brands in developed countries such as Britain, Germany and the US.

Emun has issued a letter of complaint to the company and to the Israel Antitrust Authority.

The Antitrust Authority toldConfectioneryNews.comthat it had received the complaint yesterday and would examine it.

“The antitrust authority is investing a lot of efforts and resources regarding competition in the food industry,” added Noa Zvi, senior assistant to the director general at the Authority.

Strauss reacts

Mirit Cohen, director of external communications at Strauss told this site: “A preliminary review indicates many inaccuracies, and its findings seem to be based on incomplete data.”

The company added in a statement: “As for product prices abroad, it should be noted that the final consumer price is set solely by the retailers, and is not under our control.”

Asked if the company would be changing its prices, Strauss said it had made price cuts averaging 10% on 50 of its core products over the past few months.

“These are permanent cuts, not a marketing gimmick, one-time discount, or ‘sale’, but regular discount list prices,”it said.

Consumer group Emun was contacted for its reaction, but a response was not forthcoming before publication.

Implications

Leatherhead Food Research market analyst Jonathan Thomas said: “The fact that the market leader has been accused of overcharging may lead more people to seek out slightly cheaper products in response.”

A Facebook boycott of Strauss products has already begun, but the company suggested it has not impacted sales.

Thomas added that major players such as Kraft and Mars may soon look to up their stakes in Israel after recently investing in nearby markets.

Previous investigation

In 2007, Israel’s antitrust authority found that Strauss-Elite used illegal practices to hinder the market penetration of British imported chocolate brand Cadbury by withdrawing discounts from wholesalers that distributed Cadbury products.

Strauss was forced to pay around €947,000 (ILS 5m) to the state treasury.