Nestle Raises Israeli Ice Cream Prices Up to 7% Ahead of Winter

Nestle is increasing the prices of its ice cream products in Israel by up to 6.8%, effective in December. This follows similar price hikes by major ice cream companies last winter. The price increases are strategically timed for the end of the summer season, when consumer demand typically decreases, making the price adjustments less likely to face immediate public backlash. For example, the "Extreme" family pack will rise from a supplier price of NIS 27.76 to NIS 29.65, a 6.8% increase, and the "Oreo" mini pack will go from NIS 17.90 to NIS 19.10, a 6.7% rise. These are supplier prices before VAT and retailer markup, suggesting the final shelf price will be even higher. Notably, the steepest increases are on strong brands, raising questions about whether this reflects genuine cost increases or an assumption that brand loyalty will absorb the higher prices.

The move by Nestle is seen as a potential price leader for the entire industry. In a competitive market, one company's price hike can be an opportunity for rivals to maintain their prices, offer promotions, and gain market share. However, the ice cream industry has previously seen a different pattern, where one company's increase serves as a signal for others to follow suit. This phenomenon, known as price leadership, occurs when a dominant company sets a new price level, and competitors, understanding that consumers are less likely to switch brands and that the ground has been softened by media and retailer negotiations, are tempted to follow. This dynamic allows competitors to benefit from the momentum and timing, often without providing detailed justifications beyond general statements about rising input costs.

The Israeli ice cream market is substantial, estimated at approximately NIS 1.125 billion annually, with significant portions from supermarkets and impulse purchases. While ingredients like milk, cream, sugar, and cocoa, along with a costly cold chain, contribute to production costs, the article notes that commodity prices, currency exchange rates, and shipping costs fluctuate. The author argues that while some justifications for price increases may be legitimate, a more convincing explanation than the standard "rising production costs" is needed, especially given the lack of similar announcements when costs decrease. The article also points to the silence of retailers, who set shelf prices and could mitigate increases or promote private labels, and the quiet acceptance by consumers, who are less focused on ice cream purchases in November and December due to other end-of-year expenses.

The upcoming price adjustments are expected to become the new norm by February or March, when consumers will have largely forgotten the previous prices. Consumer behavior studies indicate that recent price exposure shapes our price reference points. By the next summer season, the memory of the taste is likely to be stronger than the memory of the previous cost. The article concludes by stating that Nestle's move is a test for the entire sector. If major competitors like Magnum Israel and Feldman maintain their prices, Nestle's increase will present a competitive opportunity. If they follow suit, consumers can expect further price hikes across the board, with the previous summer's prices unlikely to return.