Israel’s largest supermarket chain Shufersal has inked an initial deal to set up a chain of stores in the country for the Dutch-owned international supermarket SPAR vowing to compete and bring down rising food prices.
According to the memorandum of understanding, Shufersal will invest tens of millions of shekels to open at least 10 SPAR stores in Israel over the next three years, as well as sell SPAR products exclusively in its stores. The Dutch-owned chain has 13,600 stores and operates in 48 countries around the world.
“Shufersal is examining and promoting a number of growth engines, one of which is cooperation with an international network,” said Shufersal CEO Ori Watermann. “Global SPAR products will be marketed at fair prices that are significantly lower than those in Israel, thereby contributing to lowering the cost of living in Israel.”
The move comes as Shufersal is facing increasing competition with the entry of French supermarket chain Carrefour and 7-Eleven in Israel in the coming years. Carrefour and 7-Eleven are set to open hundreds of stores between them in the next few years, which is intended to fuel competition in Israel’s highly concentrated food retail market.
The top three supermarket chains account for over half of the Israeli food retail market, limiting competition and putting upward pressure on prices.
Israel’s cost of living is one of the highest among countries in the OECD, which has been generally attributed to a lack of competition among local importers and manufacturers, who are therefore able to raise prices, as well as import restrictions that keep out international firms.
Israel’s inflation rate accelerated to 5.3 percent in November over the previous 12 months, hitting a new 14-year high, while local food retailers have been hiking food prices, drawing consumer outrage and calls for boycotts.
Food prices in Israel have risen 50% over the past two decades and are between 25 and 80% above the OECD average, with dairy products, soft drinks, and grain-based products particularly expensive (as of 2017 data, according to the OECD).
As part of the initial franchise deal, Shufersal will become a shareholder in a joint corporation controlled by Israeli businessman Amit Zeev which will enter into a license agreement with SPAR.
The license agreement includes the right to establish SPAR stores in Israel as well as the right to import and market 10,000 products under the private SPAR label. Zeev will serve as the CEO of the joint corporation.
“I am confident that together we can bring about real change, to give the customer a new shopping experience that includes the quality of the products and service that we all know from Europe alongside prices that surprise every Israeli when he visits a supermarket across the continent,” Zeev said.
The agreement is subject to the approval of the global SPAR corporate and the approval of Israel’s Competition Authority.