The importance of the government’s intention to fight centralization in the food market, among other things by requiring private companies to disclose their financial reports, can be learned from the information revealed in the reports of food importer Diplomat, which became public just a year ago. It will be difficult to miss the riot reflected in the reward of Noam Weiman, the son of the company’s founder and controlling shareholders, who also serves as CEO.
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The cost of his annual salary was NIS 2.2 million, but Weiman has raised about NIS 28 million over the past year. This happened when a capital reward of NIS 8.1 million and an issue grant of NIS 11.5 million were added to the base salary. It does not end here, because Weiman’s wage agreement also includes annual grants for meeting targets and, as a result, a NIS 1.5 million grant for achieving a profit target before a tax from Diplomat Holdings and an additional grant of NIS 1.44 million from the subsidiary Diplomat Distributors, also for a profit target before Its tax, stood and trusted. Thus, in the thought of collecting various grants in the millions of shekels, the base salary swelled. However, Weiman’s compensation does not stop at the exceptional amount, because with the publication of the results for 2021, the company’s board of directors, headed by his partner Jeffrey Mendel, decided to distribute a dividend of NIS 24 million, from which Weiman, who owns 13.3% of the company, will rake in about 3.2 million NIS. Thus, Weiman will enjoy less than NIS 27.9 million over the past year.
This is the same year that its first quarter reports, published in May, revealed to Weiman that he was considering raising the prices of the products the company markets, in light of the sharp rise in world sea freight prices. The prices of diapers from the Pampers brand are 5%.
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Pampers Procter & Gamble Products One of the brands imported by Diplomat
(Photo: Wikipedia)
The investigation did its part, and in reports for the third quarter published in November, Weiman has already reiterated his intention to raise prices, explaining that At sea, the company’s suppliers did not raise prices. ”
It is difficult to explain the round that Weiman made within a few months, but as can be learned from the generous wage agreement he took care of himself when he issued the company, he knows how to spot opportunities. The company, which his father founded six decades ago, began his career in the production and sale of razors under the brands Ferma-Sharp, Diplomat, Bond and others and the export of its products. Five years later, Israel Diplomat was established to serve as the local distribution arm of the company’s products, which at the same time began distributing the products of suppliers who did not have an independent distribution system. The distribution business has proven to be more profitable. The company sold its razor manufacturing operations and signed an exclusive distribution agreement with consumer goods giant Procter & Gamble and later with other international corporations such as Nestlé and Mondelez, while expanding its operations to Georgia, Cyprus and South Africa.
In 2009, nine years after it began distributing Starkist’s tuna products, a diplomat bought half of Starkist Fodor, which owns an exclusive franchise for all American brand products, and completed the acquisition of full ownership in 2018. As the company’s owner, and out of an understanding of the benefits inherent in importing over local production, Weiman’s first step was to close the Starkist plant in Tirat Carmel and move to import the products that control 41.8% of the tuna market in Israel.
In March last year, a diplomat completed an IPO in which it raised about NIS 300 million for about 20% of its shares. Immediately after the issue, the company distributed a dividend of NIS 100 million, so that Weiman’s share in the dividend was NIS 13.3 million. As part of the employment agreement signed with him prior to the issue, it was determined that his salary would increase from NIS 120,000 gross per month to NIS 138,000 gross, plus NIS 40,000 for his non-compete obligation for two years from the end of the agreement. But the agreement also included clauses relating to annual grants, subject to meeting profit targets. It was determined that if the profit before tax is higher than NIS 50 million, Weiman will be entitled to a grant of 2.5% of the profit before tax up to a ceiling of NIS 1.8 million in that year and that the grant ceiling will be calculated cumulatively starting in 2022. The grant is NIS 3.6 million. In the agreement one can find Weiman’s incentive to argue for a vital need to raise prices, even though in practice, as the company reported only three months ago, its suppliers did not raise prices at all.
Diplomat sales, an importer and distributor of leading international food brands, including Gillette, Kellogg’s Heinz and Pampers, grew by 1.4% in 2021 to NIS 2.73 billion. The growth in sales was achieved mainly from its operations in Israel, whose sales grew by NIS 48.5 million. This is a 3% increase in sales, which amounted to NIS 1.64 billion. This is while sales of the consumer goods market in Israel contracted by 3.2% during the period.
The improvement in the company’s gross profit, which rose by 6.7% to NIS 574 million, an increase that boosted gross profitability to 21% of sales, compared with 19.9% in 2020, was also achieved from activity in the domestic market. A diplomat in Israel recorded an 8.4% increase in gross profit, which enabled it to improve its gross profit margin to 22% of sales, compared with 20.9% of sales in 2020. This is an addition of NIS 28 million to the group’s gross profit, so that Israel was responsible for 77% of the improvement in the gross profit of the entire company. According to Diplomat, the improvement was achieved mainly as a result of the sales mix, but it cannot be ignored that it explicitly stated that its suppliers did not raise prices for it, so any increase, such as a rise in pamphlet prices, worked to improve profitability. The increase in gross profit is also reflected in operating profit in Israel, which jumped by 13% to NIS 98 million and brought operating profitability to 6% of sales, compared with 5% in 2020. However, the grants received by Weiman reduced the increase in the operating profit of operations in Israel to only 2%, and this amounted to NIS 86.7 million, reflecting 5% operating profitability.
Weiman’s interest in increasing the amount of his annual grant, which depends on the company’s profit before tax, combined with his ability to identify opportunities, has led to quite a few more U-turns he has made in recent months. At the end of January, the company announced that starting in March, the prices of its products would increase by 4% -16%. This is only two months after the company reported that its suppliers did not raise prices for it. This happened after Osem, the third largest company in the food market, announced a price increase of 4% -7% from February. Such a move on the part of Osem has opened the door to a diplomat, operating in parallel areas, such as ketchup, cereals and more. But public pressure on the surge in food prices has led the finance minister to threaten a barn and a diplomat, who will not hesitate to harm them if he detects unjustified price increases, and the barn has backed down on its intention. It is hard not to guess that depending on the wind direction, a diplomat also declared a postponement of the price increase until after Passover.
Now, just before Pesach, Weiman is once again raising the issue of raising prices on the table. In its reports summarizing the year, Diplomat noted that in January, after the reporting period, some of its suppliers informed it that prices would rise and therefore, if it did not raise the price to the consumer, its results could be harmed. What are private companies doing, the results of which remain confidential? The Competition Authority is lazy with the investigation it opened 5 months ago, on suspicion of a restrictive arrangement and further violations of the Competition Act.
Diplomat’s reports are supposed to turn on all the warning lights from the discourse on raising prices to the table. The downside will be that prices will not go up.