Despite the removal of the control over the price of butter, local butter rose moderately, similar to the rate of increase in the price of the other controlled products. In contrast, the price of imported butter has soared and is now NIS 25 more expensive than the price of local butter
The Ministry of Agriculture is analyzing the butter market since it was removed from price controls: in the analysis of the butter market in Israel carried out by the Division for Research, Economics and Strategy at the Ministry of Agriculture, it appears that the price of imported butter to the consumer before VAT increased by NIS 21.5 per kg in 2022 compared to its price before the removal of the controls At the end of 2021. At the same time, the import price to the importer (CIF) increased much less by 14.4 NIS per kg. The marketing margin left by the marketers and importers increased by 7.1 NIS per kg.
As a reminder, the duty on butter imports was removed in February 2020, and the control over butter prices was removed from November 2021. In contrast to the prices of imported butter, the price of the local check remained stable, similar to its price before the control was removed, despite the global increase in kernel prices. The Ministry of Agriculture explains that the local butter producers have applied voluntary supervision to themselves, and are marketing the local butter at a price adjusted to the price of the other supervised dairy products in September 2022, which increased by 4.5%-5.3%.
According to the review, which is based on “Stornext” data representing sales of the marketing chains, the butter market in Israel has undergone several transformations in recent years that have caused significant changes in the market’s structure and composition. Until 2019, there was a protective tariff on the import of butter, which allowed imports in duty-free quotas allocated to supplement local production. Against the background of their shortage and an increase in local demand for butter, during 2019 the quotas for duty-free imports were increased, and in February 2020 the duty on butter imports was abolished altogether. In the meantime, under the influence of the Corona crisis and consumer trends, the demand for butter continued to rise and in November 2021, the supervision of butter was removed, with the aim of allowing increasing competition in this market. Following these processes, the total consumption of butter increased by 15%, while the market share of local butter from the general consumption in Israel decreased from 80%-90% by 2018, to 65% in 2022. The overall increase in butter consumption is explained by the increase in demand for milk fat In recent years as part of a consumer trend as well as effects of increasing the variety in view of the entry of imported brands.
At the same time, the analysis shows that even three years after the removal of the duty on butter imports and the great variety on the shelf, the Israeli consumer is still interested in local butter. The leading brand in Israel in butter sales is “Tnuva Butter”, which is undisputedly at the top of the table with a quantitative sale of 3,481 tons of butter per pack(!). For comparison, all 28 imported brands together sold only 1,932 tons in 2022. The average price of the local butter rose relatively moderately by only 5.7% in line with the increase in the price of the other controlled dairy products in September 2022 which rose by 4.5%-5.3%. In contrast to this, the prices of imported butter actually increased by a considerable rate of 61%, and at the same time, the volume of imports was relatively reduced in 2022. Between the year 2021 and 2022, there was a reversal of the trend and the share of local production that fell to a low of 52% in 2021 rose back to 65%, at the expense of the imported butter. In light of the recent price increase, the consumer looked for the cheaper local brand and “voted with his feet”.
The trend of price increases in imports can be attributed, at least in part, to the effects of the fighting between Russia and Ukraine which caused, among other things, increases in the prices of kernels and fodder. The costs of food for animals in the livestock sector constitute a significant share of the production costs of animal products, including butter.
At the same time, the Ministry of Agriculture emphasizes that the average price of local butter to the consumer at the end of 2022 was 41.3 NIS, while the average price to the consumer of imported butter was much more expensive and stood at 66.4 NIS and was in a gap of 25.1 NIS compared to the local butter.
In the shadow of the price increases, the Ministry of Agriculture explains that the prices of the “regular” imported butter have almost been compared to the prices of the “premium” butter, which were excluded from the supervision even before it was removed. This, despite the fact that premium butters were considered to be of higher quality, and have improved properties acquired during the production process, and also benefited from the consumer’s perception of the brand.
An examination of the volume of sales of the import brands to the consumer shows that the leading brand of imported butter is that of the “Valio” company, with a volume of sales of 700 tons, at an average price of 56.19 per kg. In second place is the butter of the “Lorpak” company with a sales volume of 276 tons, at an average price of NIS 59.15 per kg. The “White Chef” brand imported and marketed by “Tnuva” is in third place, with 189 tons, at a price of NIS 39.27 per kg.