This way you will skip a barn in the supermarket and save a lot of money

The Swiss company owned by the Swiss Nestle was the first of the major food companies to announce this week a price increase of up to 7%. Among the hundreds of products of the third largest food company in Israel, which will soon become more expensive, are popular snacks such as Bamba and Beasley, pasta, Coffee Tester’s Choice, ketchup, cakes, soup almonds and more.

Price updates are expected to take effect starting February 1, but chances are that eventually in the price range of most products will soon balance out and remain similar to those we knew until the rise in prices. There are several reasons for this. First, we as consumers buy all the products we are used to buying in the retail chains at a cheaper price than what appears in the basic retail price list. In practice, these products are not sold to chains at full price, and according to the size of the customer, there are discounts and promotions for retailers.

Barn products (Photo: Avshalom Shashoni)

Will not lose market share

Dr. Hezi Gur Mizrahi, CEO of the Institute for Retail Research: “In practice the final consumer buys products whose price is cheaper than the manufacturer’s base price, because retailers usually get the products at a discount. “Something to do better with the consumer and also to get people to come to his store.”

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Second, although the price increase is expected to take place on February 1, in March the price war will begin before Passover. Dr. Gur Mizrahi: “Like every year, all the chains will fight for customers, there will be bigger deals and the retailers will give up a certain percentage of their profitability to attract customers. “When there is a price war in the leading categories, the price begins to balance.”

If we look back a few years, for example, we will find that in 2019 there was a certain price increase in some barn products, but in the end we saw that prices returned to be very similar to the prices before the increase. In addition, Dr. Gur Mizrahi adds: “If, for example, after the upcoming price increase, Osem sees that it is losing market share in a certain segment – for example in pasta – it will start developing a retail support strategy so that the benefit will eventually reach the consumer to start earning market share again. , And start narrowing gaps in that segment. “

Barn factory (Photo: PR)Barn factory (Photo: PR)

It is important to note that in the end the consumer is the one who influences everything. Once a supplier starts to lose market share, it will do everything to reduce gaps. If, for example, a consumer who was used to buying pasta for NIS 5, decided not to buy it at a more expensive price and switched to another brand, then the supplier would have no choice. In practice the consumer is the one who will influence whether there will be a rise in prices or not. But where is the problem with us? That many times our memory works on average for 72 hours.

Consumer laws

It should also be remembered that the Pareto Act, also known as the “80-20 Rule”, works on all major suppliers. That means 20% of their products make up 80% of their turnover. This means that once the consumer starts to squint at other brands among the products that are within this 20% category, the supplier will have no choice but to lower the price.

Dr. Gur Mizrahi: “I suggest that consumers start to get excited about the announcement of the price increase from the moment the price rises itself and not wait for months. Once the consumer sees that prices have become more expensive, he will respond immediately and decide that he is not paying more money for Osem’s pasta but moving to another brand, so very quickly we will see all sorts of promotions. As mentioned, it is important to emphasize again: in practice, what will determine whether prices will become higher is how much the consumer will continue to consume the specific products whose price has increased. “

For example, instead of paying NIS 6.5 for Osem pasta, they will buy Tomer pasta for NIS 4; Or instead of barn flakes for NIS 8, they will squat into Sugat flakes that cost NIS 4. If Bassem sees that consumers are starting to switch to cheaper substitutes, they will understand that the money they will earn as a result of rising prices becomes small money compared to the revenue they will lose as a result of consumer squinting towards other brands.

Acquired flavors

If pasta or flakes have reasonable substitutes at a more affordable price, then there are brands that are harder to replace with competing brands. This refers to products that are characterized by acquired flavors. This is the segment where some barn products have no substitute. For example: in the coffee category, for example, those who are used to the taste of Tester’s Choice will not want to switch. The same goes for ketchup, soup almonds and of course snacks like Bamba, Beasley Apropo and others.

But here, too, it is possible that even if the process takes longer, we will be able to find a replacement that suits our taste. Dr. Gur Mizrahi: “One of the absurd things, for example, is that the world’s leading product of the Heinz brand is not as leading in the country as Osem’s ketchup. A very high percentage of ketchup use in the country is among teens and children who are loyal to this specific flavor. So in the end, the main effect of the price increase will be to concentrate on products that the consumer is very used to for their specific taste. “In the other products – pastas, cakes, cookies and also in the whole culinary world of sauces and seasonings – there is no problem in finding products from cheaper competitors.”

It is important to note that even in cases of products whose taste is characterized, there may be a change in consumption habits, especially among populations that consume more and maintain competitive prices, for example in the ultra-Orthodox and Arab sectors. In sectors such as these, past competitors of an iconic snack like Bamba have had great success compared to the beloved brand. Those who are willing to pay more may find loyalty to a brand manufactured or imported by Nestle Barn, but those who prefer prudent consumption may cause it to pay a high price.

For example, a popular snack like Beasley, which is in an environment that is (relatively) without direct competitors. Those who “sell” a snack, may prefer to pay and enjoy the familiar and beloved taste. Anyone who tries to find other options may find other snacks, even if they are not similar in taste, and will eventually take a step that will make it difficult for a barn to bring it back.

Everything is possible

Finally you can look at the previous time Osem asked to raise prices. The company’s representatives were then summoned to the office of the Minister of Finance, Moshe Kahlon – and at the end of the meeting, they withdrew from the intention to price some of the products. why? Perhaps because they realized that what they would gain as a result of the rise in prices would hurt them elsewhere, more painful – and as a business entity that makes the profit and loss account, they chose to give up the profits that were supposed to be made.

Moshe Kahlon (Photo: Hadas Porush, Flash 90)Moshe Kahlon (Photo: Hadas Porush, Flash 90)

Then yes now: Although the Minister of Finance broadcasts that he tends to interfere as little as possible in the struggle between market forces, but this policy may succeed in educating the Israeli consumer to be his master: wise consumerism will make it clear to Nestle Barn that even in segments where they have no competitors Consumers of similar brands, even if not identical – and if there is anything more difficult than achieving dominance in a particular market segment, it is only to conquer it back.



Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.

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