Israel's 'Basket of Israel' Initiative Fails Amidst Rising Food Prices

A government initiative aimed at lowering food prices, spearheaded by Economy Minister Nir Barkat, has concluded in failure just before upcoming elections. The "Basket of Israel" project, designed to offer 100 discounted products, will not be extended by the incoming CEO of the Carrefour supermarket chain, marking a significant setback for Barkat's efforts to combat the rising cost of living.

Barkat, who has been criticized for neglecting the issue of high living costs throughout his term, is now facing responsibility for the surge in food prices. The initiative, reportedly developed with his brother Eli, involved a NIS 50 million advertising campaign funded by taxpayer money. The plan was to incentivize one supermarket chain to lower prices on specific goods, expecting competitors to follow suit, thereby increasing market competition.

However, the project faced immediate criticism for promoting products from major monopolistic companies rather than fostering competition by supporting smaller brands. Instead of encouraging competition, taxpayer funds were used to subsidize products from the most concentrated players in the food market. Furthermore, the "basket" primarily consisted of processed foods high in sugar, salt, and saturated fat, while excluding essential fresh produce like fruits, vegetables, meat, and fish.

Despite initial skepticism from experienced retailers, Carrefour was led to believe by ministry officials that at least three other chains would bid in the tender. Fearing a competitor might win, Carrefour submitted a bid promising a 30% price reduction on basket items in discount stores. However, no competitors responded, and the anticipated domino effect did not materialize. The advertising campaign, which positioned Carrefour as the cheapest option, was misleading as the discounted prices were only available in a third of its stores, not its 100 urban branches.

Investigations revealed significant discrepancies, with 95% of "basket" products costing approximately 53% more in non-participating Carrefour City stores compared to participating ones. The chain reportedly raised prices in other sections to offset losses from the discounted items. This strategy failed, as Carrefour's sales dropped by 7.2% in the second quarter, accompanied by a decline in gross profit margins. The initiative is now seen as a cosmetic public relations stunt, with prices expected to rise further upon its conclusion.