Israel's Food Market Dominated by Three Firms, Despite Free Market Rhetoric
A November 2024 state comptroller report reveals that three leading companies control over 85% of sales in 20 food categories in Israel, with 36 out of 38 categories examined remaining highly concentrated. In sweet cream, these three firms hold 99% of the market, and in instant coffee, 93%. This high level of market concentration directly impacts the cost of living, according to the comptroller, who criticized government inaction.
The Organization for Economic Co-operation and Development (OECD) noted in its 2025 review that Israel has among the highest price levels within the organization, despite a lower per capita GDP than the average. Food prices in Israel are approximately 51% higher than in the European Union and 37% higher than the OECD average. The OECD attributed these high prices to a combination of factors, including strict regulation, entry barriers, and geographical challenges, recommending less state intervention in the economy.
Despite the Likud party's platform advocating for free markets and competition, government policies have often protected the domestic market. In January 2024, the Knesset's Finance Committee approved freezing the reduction of agricultural tariffs, maintaining 2023 tariff levels instead of continuing their scheduled decrease until 2027. This decision was justified as protection for local agriculture but contradicts the stated preference for an open market.
Furthermore, a reform aimed at abolishing milk production quotas, published in December 2025, was reportedly removed from the Arrangements Law in March 2026 at the directive of Prime Minister Netanyahu, following significant opposition. This move preserved the existing production planning and regulation mechanisms, contrary to OECD recommendations.
Tax policies in the 2025 and 2026 budgets also deviated from a path of tax reduction. The 2025 budget included an increase in Value Added Tax (VAT) and a freeze on income tax bracket adjustments. The 2026 budget, analyzed by the Israel Democracy Institute, increased the deficit and included an unfunded widening of income tax brackets, alongside other tax measures. These fiscal decisions, while potentially necessary due to war expenses, contradict the narrative of consistent tax reduction.
