Elite facing censure over Cadbury move

Israel's leading confectionery maker Elite​ has been accused of abusing its dominant position and attempting to block the entry of UK rival Cadbury into the market, according to a report in the Ha'aretz​ newspaper.

Late last year, Cadbury​ announced that it was to form a joint venture with Israel's Carmit group in a bid to tackle the dominance of Elite, which controls more than 70 per cent of the local market.

With local chocolate consumption currently around a fifth of the worldwide average of 10 kg per capita, there is significant potential for growth in Israel, and when Carmit - since renamed Cadbury Israel - launched the British group's products there in December, it made its intentions clear from the outset: a 12 per cent market share in the short term, rising by 25 per cent by 2005.

With this in mind, the two companies had set aside up to $5 million (€4.6m) for advertising and marketing, and consumers were bombarded with images of Cadbury's brands through almost every possible advertising medium.

Despite its dominant position, Elite was clearly disturbed by the potential threat, announcing shortly after Cadbury's arrival that it was to cut the prices of those products which competed most directly with Cadbury's brands, the report said.

But Carmit is a small company with little leverage with supermarkets and grocery retailers, and found it hard to persuade them to stock Cadbury's brands. Even if they did, the antitrust regulators discovered, they would often refuse to stock them next to Elite brands, and Carmit was frequently obliged to provide its own in-store stands, Ha'aretz reports.

The report said that the Commission is yet to decide whether there is sufficient evidence to bring a lawsuit against Elite and its CEO, Giyora Bar Dea, but that it was clear to the investigators at least that Elite had broken competition regulations by offering discounts and benefits to retailers prepared to sell its brands and remove rivals' from their shelves.

Elite has been classified as a monopoly since 1988, and while dominant companies such as this are still allowed to exist in Israel, they are also obliged to follow strict regulations designed to prevent the monopoly from being abused. These regulations include a ban on exclusive agreements with retailers designed to block competition.

Other factors combined to make Cadbury's entry into Israel difficult - it was unable to obtain Kosher status for its chocolate before the important Passover season, for example - but the abuse of power by Elite is clearly seen as the principal reason for the company's failure to reach its ambitious targets.