Carrefour Likely to End Discount Basket Initiative Ahead of Elections

Carrefour Israel is reportedly set to discontinue its "Israel's Basket" discount initiative, which offered around 100 products at a 30% discount in one-third of its stores. The incoming CEO, Inbal Harson, is not expected to exercise the option to extend the program for another six months, a move that would have required an additional 25 million shekels in public funding for a marketing campaign.

The chain's commitment to the Ministry of Economy ends next month, just before the October 27th elections. Carrefour is assessing the impact of the discount basket during the upcoming holiday season, including Rosh Hashanah and Yom Kippur, anticipating lower sales compared to last year due to increased travel abroad by Israelis. The timing of the holiday eves falling on Fridays is also expected to lead to smaller, consolidated shopping trips.

Carrefour's second-quarter financial reports showed a significant decline, with same-store sales dropping 7.6% year-over-year and gross profitability shrinking. While the timing of Passover was cited as a factor, competing chains like Yohananof and Rami Levy experienced much smaller sales decreases, suggesting the deep discounts on the "basket" items negatively impacted overall sales and profitability.

The initiative, launched with the expectation of boosting sales and public exposure, has not met Carrefour's projections. The company had anticipated that increased sales volume and reduced marketing costs would offset the lower profit margins on discounted items. However, initial interest waned after the first two months, and Carrefour has faced both industry-wide sales declines and the pressure of its own deep discounts.

The "Israel's Basket" program was a flagship initiative of Economy Minister Nir Barkat, who sought to lower the cost of living. After failing to persuade food companies to lower prices, Barkat launched the unprecedented tender offering public funds to a private chain for a promotional campaign. Carrefour was the sole bidder, offering a significantly lower price than the ministry's benchmark. The program faced criticism for its funding model, the composition of the basket, and the limitation of discounts to only a third of Carrefour's stores.