Thomas White Global Investing
Israel
Israel Stamp
August 19, 2011
A Postcard from the Middle East and Africa
Israel: The cottage cheese revolution

Tel Aviv breakfast

Using Facebook, Israeli consumers launched a widespread protest to reduce the price of a popular breakfast staple – cottage cheese.

This year appears to be a watershed one for social networking. Across the Arab world, this new-age medium has been used to unite and mobilize thousands for common causes. After the tactic was used to oust a 24-year old government in Tunisia and to topple a 30-year old rule in Egypt, social networking has now been used for another crucial campaign – lowering the price of food commodities. And in the case of Israel, that prized food staple is none other than cottage cheese.

Along with milk and honey, cheese is enthroned in Israeli cuisine. Cottage cheese, in particular, is a frequent ingredient in Jewish holiday preparations. For the common Israeli, cottage cheese also forms an essential part of the traditional bread, olives, vegetables and cheese breakfast.

However, the cost of cottage cheese in Israel has been on the rise since some government price controls were lifted last year. This June, the price tag on cottage cheese was 75% higher than last year. The monopolistic nature of the industry, which is dominated by three major dairies – Tnuva, Tara and Strauss, is one of the reasons for the hike in prices of Israeli cottage cheese. Last April, a Bank of Israel annual report showed that nearly half of the Israeli economy was controlled by family-operated businesses, the Wall Street Journal reported.

Monopolies and cartels, along with local manufacturer controls and government-certified imports, have inflated the prices that Israeli consumers pay for nearly everything. Despite a strengthening local currency, the Israeli consumer has remained a victim of inflation. Food prices, in particular, rose 3.6% as of June this year, teetering the lowly cottage cheese staple on the brink of luxury status. And, cottage cheese might have become an extravagance if not for the social networking campaign launched by an incensed Israeli consumer.

At $2.30 per 9 ounce container, Itzhik Elrov, a cantor at a local synagogue, was appalled by the inflated price he was required to pay to purchase something as simple and basic as a tub of cottage cheese. This hit a nerve, prompting Elrov into action in June. Taking a leaf out of the books of the Arab Spring revolutions, he started a Facebook page calling for other consumers to boycott Israeli cottage cheese for a month starting from July 1.

The response was stunning. Over 100,000 other irate consumers joined his Facebook page, pledging to meet Elrov’s original goal. The mission was simple – Elrov wanted cottage cheese to rot in the stores until the Israeli dairies lowered prices. Despite the widespread response to Elrov’s call, together with a threat from the government to re-impose the lifted price controls, and proposals to import dairy products, the three major Israeli dairies initially stood firm on cottage cheese pricing.

And so, the cottage cheese began to rot on the supermarket shelves, to the dismay of shopkeepers. The dairies were forced to relent. According to the Wall Street Journal, Tnuva was the first to lower its wholesale price to retailers from $1.52 to $1.33, with two smaller dairies and the supermarket chains following suit. As a result, consumers are now expected to pay 55 cents lesser, or about $1.75, for one 9 ounce container of cottage cheese. The Facebook cottage cheese revolution succeeded.

But, that is not the end of the Israeli consumer’s woes. The cottage cheese revolution was the tip of the iceberg, reflective of a larger Middle Eastern and African problem. A major cause for the Arab Spring wave of protests and demonstrations this year was a sharp increase in food prices. According to the World Bank’s April Food Price Watch report, the Food Price Index has remained close to its 2008 peak levels. The report also states that a few countries in the Middle East and North Africa region have experienced double-digit food price inflation.

Indeed, Iran’s food price inflation has reached the highest level at 26%, followed by Egypt at 19% and Syria at 13%. Food groups across the spectrum – from dairy products to fruits, breads and cereals to fats and oils – have been impacted by the inflation. From Algeria to Yemen, the relentless increase in food prices were a major spark for the Arab Spring revolutions.

While protests in some Arab countries were successful, others are yet to achieve all their goals. In countries where the uprising was victorious, though, the food price inflation appears to have decelerated. In Egypt, for instance, where this year’s revolution succeeded in ridding a government, Reuters reported this month that food price inflation tumbled to 16.7% in July from 19% in June.

Whether Israel is able to achieve similar success in lowering food price inflation or not remains to be seen. But, flush from the victory of their first social networking revolution, Israelis are unlikely to suffer major issues in silence anymore. After all, the potential muscle of social networking is still being flexed. And, if Facebook could help topple governments and crackdown monopolies to lower the price of a simple tub of cottage cheese, who knows what the potential of people power might accomplish in the Middle East after all.

 

Image Credit: freeloosedirt on Flickr under a Creative Commons license

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