Shufersal partially withdrew from the increase in commissions for suppliers.
Calcalist learned that after Esem informed Shufersal in a letter that it would stop supplying it with goods due to the increase in the commissions it pays to it for distributing its products to branches and arranging them on the shelves by about 25%, the chain withdrew and reached an agreement with the food manufacturer. The withdrawal from the demand from Asem will make it difficult for Shufersal to fully realize its demand from the other large suppliers.
Shufersal’s unilateral demand from the suppliers to increase the commissions, led Assem, the third largest food company in Israel, to inform the chain that it would stop supplying it with goods. Shufersal, which controls about 20% of the market, understood that this was a step that would put it in a negative light, and hurried to reach an understanding with the company that allowed the continuation of supplies.
In the background of Shufersal’s willingness to partially withdraw from its demand, there is the challenging situation in which Assem found itself, which has not been able to raise prices in recent years. The company announced price increases in 2018 and 2021, but backed off following public pressure and a threat of a consumer boycott, which also affected sales of its pasta.
Against this background, it can be estimated that the interruption of supply by Asem would have been accepted by the public with understanding, while Shufersal’s demand would have been perceived as unreasonable. On the other hand, Asem also had an interest in striving for understanding and not carrying out the threat. This, since its sales to Shufersal make up about 25% of its activity – something that does not allow it to easily give up the supply to the network.
In a letter she sent to the suppliers at the beginning of the month, Shufersel justified the commission’s increase in the increase in inputs she was dealing with. “Recently we have been experiencing a significant increase in the costs of inputs, including changing and transporting products, storage, labor, and more,” Nir Matusowitz, Deputy CEO and Director of the Trade Department, wrote to the suppliers. 26% since the beginning of the year. Haikor affects the logistics activity that serves, among other things, your products sold online.”
Shufersal also stated that the company is working to streamline and reduce logistics costs, but expects the suppliers to understand the justification for their participation in the burden. However, since this is a unilateral step, Shufersal stated that the supplier has the right not to supply the chain with goods under this condition; However, if he delivers goods – this will be consent to the change.
Shufersal’s move is intended to immediately improve its results, which they recorded in the first quarter, and according to estimates also in the first half, a significant deterioration. The demand to the suppliers was submitted immediately upon the return of Itzik Abarkhan, the former CEO, to the position of chairman of the company, who is obliged to justify his appointment by means of an immediate improvement in results.
Massem and Shufersal refused to comment.