Dairy Shortages Highlight Israel's Highly Concentrated Food Market and Regulatory Failures
Fifteen years after the 2011 cottage cheese protest that mobilized hundreds of thousands of Israelis against repeated price hikes, the iconic dairy product has returned to the spotlight due to a persistent shortage. The shortage, linked to a logistical malfunction at Tnuva affecting the loading and transportation of cottage cheese cups, has sparked consumer outrage as supermarket dairy shelves have grown increasingly sparse. This scarcity has extended beyond cottage cheese to include white cheese, yogurts, and other dairy products, as consumers shift to substitutes amid the unavailability.
The emotional attachment to cottage cheese, a uniquely Israeli product developed by Tnuva, and the broader cultural expectation of abundance help explain the public's strong reaction. However, the root cause lies in the extreme market concentration in Israel's dairy sector. In 2011, Tnuva, then owned by the Apax fund, raised cottage cheese prices sharply after deregulation, prompting the mass protest and a decade-long price freeze around 6 shekels per cup. This episode exposed the unchecked pricing power Tnuva held, supported by a McKinsey report that encouraged double-digit price increases without reducing demand.
Subsequent government interventions, such as former Finance Minister Moshe Kahlon's populist price controls on dairy products, failed to address structural issues. For example, Kahlon's refusal to allow price increases led to production cuts by dairies like Tnuva and Tara, which stopped producing staple items like butter and milk bags. The market remains dominated by Tnuva, which controls approximately 75% of cottage cheese sales (666 million shekels in 2023), 87% of butter sales, and over 60% of regulated milk and cream sales. Competitors like Tara and Strauss hold smaller shares and have shifted focus to more profitable premium products.
This concentration enables dairies to impose unilateral changes that raise consumer costs, such as discontinuing smaller, cheaper packaging and increasing prices beyond regulated levels. Recent price hikes saw Tnuva raise butter prices by about 5%, while others increased dairy prices by 1-3%. The current shortage, caused by a factory malfunction, would be less severe in a competitive market.
Experts and critics blame not only the companies but also successive Israeli governments for neglecting to foster competition or support new dairy producers through investment incentives. Past efforts, including a government committee after the 2011 protest, identified concentration as a problem but resulted only in limited legislation that failed to curb retailer and supplier power or reduce prices. Political reluctance to tackle complex reforms, especially ahead of elections, has allowed market concentration to deepen, with the top 10 suppliers' market share rising to nearly 49% in 2025. Without significant policy changes, future shortages and price increases appear inevitable.
