Carrefour Israel May Exit Government Price Initiative Amid Financial Woes

Carrefour Israel is reportedly considering withdrawing from the "Israel Basket" government initiative aimed at lowering prices on essential goods due to significant financial losses. The supermarket chain's sales plummeted by 7.6% in the second quarter, a stark contrast to competitors like Yohananof (down 1.6%) and Rami Levy (down 2.4%).

Despite offering substantial discounts of up to one-third on approximately 100 staple items, the initiative, reportedly spearheaded by new CEO Inbal Herzon, failed to attract new customers and instead created a substantial budget deficit. The company had projected a revenue increase of 214 million shekels from the program, but the reality has been the opposite.

A final decision is expected after the upcoming Jewish holidays, but preliminary results have already alarmed management. The potential exit could deal a significant blow to Economy Minister Nir Barkat, who launched the initiative with 50 million shekels in state funding for advertising.

Concerns about the program's effectiveness were raised earlier. An independent study by Tel Aviv University in June indicated that while Carrefour reduced prices on listed items, it simultaneously increased prices on other products within the same categories by 6% to 18%, potentially negating savings for consumers. Major competitors like Shufersal and Osher Ad did not participate in the initiative.

If Carrefour withdraws, prices on "Israel Basket" items would revert to market levels. This outcome would place Minister Barkat in a difficult position politically, especially with elections approaching.