Israel-based food and beverage business Strauss Group is raising its food prices by an average of 2.9% in a “last resort” to tackle inflation.
The increases will come into place on 19 December and will affect some dairy products, salads, salty snacks, sweets and Yad Mordechai jam.
Strauss said the “moderate update of the price list for retailers” was its first hike in 12 years. But it admitted other “painful efficiency measures” such as staff redundancies had failed to make enough of a difference in the face of soaring inflation.
Products not affected include Elite coffee products, various kinds of cheese, some Elite-brand chocolate bars and olive oil.
It said the rise was due to rising raw material and energy costs, “primarily the prices of milk, sugar, oils, cocoa, energy and packaging at rates of more than 10% in the last two years”.
The group added the price hikes were not a consequence of profit losses following the closure of plants in the city of Nof HaGalil due to salmonella concerns – a saga that led to the largest product recall Israel has seen.
Following an initial chocolate recall in February, Strauss Group pulled all confectionery products made at the factory, including cakes, cereal bars and chewing gum, in April. The Israeli government then suspended production at the plants.
Strauss was given the all-clear to resume production in August but the affair took a chunk out of the company’s market cap.
Today the group said there was “a complete separation between the recall damages… and the price increases”.
It also said the price increases only “constitute a small part of the total price increases that the company is absorbing”.
Eyal Dror, the CEO of Strauss’s business in Israel, CEO, said: “We believe that carrying out a proportional price update is a condition for maintaining a balance between the needs of the public, the company’s employees, its suppliers, its customers and the many public investors – the pension funds and provident funds – in an environment where the high inflation in the world and in Israel is clear and known to all.
“Over the past 12 years, Strauss has made many moves, including significant streamlining moves. During these years, the company absorbed the increases in the prices of raw materials and overheads for the industry and refrained from raising prices in Israel.
“The company’s approach over the years was that it would do as much as possible in order to improve and become more efficient, and that price increases would be the last resort and this is indeed how Strauss has operated until now. Recently, we even carried out painful efficiency measures that included layoffs.
“However, due to the high inflation rates in Israel and around the world and the rising prices of many raw materials and inputs, and in light of the expectation that this trend will continue in the coming months, we are forced to announce the update of some of our products to retailers, which compensates for a small part of the total price increases suffered by the company.”
The price cut news comes after the group last month announced efforts to save costs in Israel as well as a new strategic focus on investments in Israel, Brazil, the US and China.
Under the StraussOne plan, the company revealed plans for “flattening the organisation and reducing management layers to strengthen organisational flexibility, streamlining and effectiveness”.
It also announced efforts to streamline production in Israel as plants and supply chain in the country will come under their own divisions in the future.
The new operating model will contribute to estimated annual savings of ILS65m-80m (US$18.3m-22.5m) before tax and one-time costs.
In October it announced the appointment of Shai Babad, a former director at Israel’s Ministry of Finance, as its new CEO.
