Study Finds Israel’s State Basket Lowers Prices at Carrefour but Raises Others Elsewhere

A new study from Tel Aviv University's Faculty of Management reveals a complex impact of Israel's state basket program on food prices. Launched earlier this year by the Ministry of Economy, the program fixed prices on about 100 popular products sold at Carrefour stores nationwide in exchange for a 25 million shekel marketing campaign. Carrefour was the sole retailer to participate, committing to sell the basket for 1,098 shekels, down from an average pre-launch price of 1,700 shekels.

The research, conducted by Prof. Itay Atar and colleagues from Pompeu Fabra University in Barcelona, analyzed daily price data over two months from Pricez, covering around 70 retail chains and 2,000 stores across Israel. It found that prices of basket products dropped by approximately 35% in Carrefour stores participating in the program, with a smaller 6% decrease even in Carrefour stores not in the program, indicating some spillover effect. However, other supermarket chains showed only minor price reductions averaging 3%, with significant variation among discount chains.

Outside Carrefour, the study uncovered notable price increases in dozens of product categories not included in the basket. In physical Carrefour stores, 46 out of 76 examined categories rose in price, with 23 increases statistically significant. Online, the effect was more pronounced, with 55 categories increasing and 31 significantly so. Examples include a 9% rise in laundry gels, 7% in puddings and adult shampoos, and up to 14% increases in some online categories. Even popular non-basket products showed average price hikes of 1.5% in stores and 2% online at Carrefour.

The researchers also tested whether competitors adjusted prices locally in cities with Carrefour basket stores but found no significant differences, suggesting pricing is set nationally rather than locally. Prof. Atar summarized, "The program succeeded in lowering basket product prices at Carrefour and somewhat among competitors, but there are no free lunches in economics. Price increases in many other categories mean consumers may pay more overall despite savings on basket items. The true test is the total bill at checkout."

Carrefour's response to the study was pending at the time of publication.