Rising Food Prices Shrink Israeli Consumer Shopping Basket in Q2
In the second quarter of 2025, Israeli consumer spending on fast-moving consumer goods (FMCG) declined by 1.5% year-over-year to approximately 16 billion shekels, with a real decrease of 3.6% after adjusting for price increases, according to StoreNext data obtained by Calcalist. The food sector experienced the steepest real sales drop of 3.8%, totaling 11.6 billion shekels, marking an unusual decline in this typically stable market segment. Food prices rose by 2.4% compared to the same quarter last year, continuing a trend of rising costs that began in 2024 when food sales fell 0.7% in real terms despite a 4.6% price increase.
The ongoing sales decline prompted Israeli retailers to adopt unconventional tactics to attract customers, such as Osher Ad selling Kia Sportage cars at discounted prices starting in late May, followed by Rami Levy offering Chinese BAIC and Arcfox vehicles at reduced rates. These efforts followed earlier promotions involving discounted electronics and alcohol to encourage larger grocery purchases. Despite these measures, the shopping basket continued to shrink.
The Q2 sales drop also reflects timing shifts in holiday shopping and the absence of a repeat of last year’s "With the Lion" war effect, which had caused a 5.5% sales surge in Q2 2024 due to panic buying. Conversely, Q1 2025 saw an 11.5% sales jump fueled by Passover timing and the "Roar of the Lion" conflict, which closed workplaces and schools, boosting household consumption.
Overall FMCG sales in the first half of 2025 rose 4.7% to 32.6 billion shekels, with a real growth of 2.7% after excluding price inflation of 2.1%. Price hikes were most pronounced in food and beverages, with increases of 2.4% and 2.2%, respectively. However, consumer caution and reduced purchase volumes, especially in food (-0.7%), signal limited short-term growth prospects, particularly as many Israelis plan summer and holiday travel abroad.
The persistent price increases, driven by both suppliers and retailers, have pressured consumers to cut back. Notably, dairy product prices rose sharply in May, with Strauss and Tnuva raising prices by up to 4.8%. Industry insiders expect a slowdown in price hikes due to consumer resistance. Globally, major FMCG companies like Nestlé and General Mills are announcing workforce reductions and efficiency measures in response to anticipated sales declines, a trend Israeli companies may need to follow to sustain profitability.
