Last week Israel’s biggest food manufacturers raised prices. Over the past two years, food prices have risen faster than housing prices and the (CPI) consumer price index. Between March 2023 and March 2025, food prices in Israel (excluding fresh fruits and vegetables) rose 8%, more than the CPI (6.2%) and more than housing prices (7.6%). When fruit and vegetables are also taken into account, food prices have jumped by 9.5%.
Manufacturers, for their part, point to an increase in inputs, but data show that prices from some of the inputs are actually decreasing. Add to this other ingredients like limited competition, ineffective price controls and a concentrated market, and Israel has a recipe for price increases.
The latest wave of price hikes is still in full swing. Last week, within a few hours, Unilever, Strauss, Central Bottling Co. (Coca Cola Israel) and Gad announced price increases for dozens of products and this week food conglomerate Tnuva and importer Diplomat have hiked prices. The price increases affect a variety of products from breakfast cereals and soups to dairy products and soft drinks, and range from a few percent to about 15%, in the case of a Diplomat, which among many brands imports Heinz.
Food is becoming more expensive as input prices fall
As with almost every price hike, manufacturers complain they must pay more for inputs, and must pass on at least some of these price increases to consumers. Panda Chocolate CEO Daniel Barkat says, “Our main raw material cocoa has skyrocketed.” Indeed, global cocoa contract prices have more than tripled in the last two years. In addition, he says that other inputs have also become more expensive, “including air freight, energy and, of course, wages for workers.”
During these two years, air freight prices have risen 25%, electricity rates have risen almost 5%, and nominal wages have also been rising consistently, including the minimum wage that was updated last month. However, sea freight, which is relevant to other manufacturers and importers, is slowly returning to pre-war levels. Shipping prices jumped in 2024, reaching almost $8,000 for shipping a container from China to the Mediterranean last summer, after the closure of Bab al-Mandab by the Houthis. As of early May 2025, the price has fallen to around $3,000.
There have also been price reductions in commodities, after the dramatic surge that began in 2020 due to the global commodity glut. Some basic food commodities like sugar and corn are still tens of percent more expensive than in 2019, but their prices have been cut significantly in the last two years, as has the price of soybeans.
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Food cos hike prices one after another
Wheat prices have also fallen in recent years, and yet bread prices in Israel have actually risen. A policy document from the Manufacturers Association shows that while global wheat prices have fallen 18% since 2021, the wholesale price indices for white flour and whole-meal flour have risen by 23% and 38%, respectively.
Using strength in the market to block competition
The price increases on supermarket shelves are not uniform. According to Aviv Hatzbani, director of the Food Industries Association, it is products whose prices are under government supervision that have risen at a much faster rate: “The supervised products and those that depend on controlled inputs from the government have risen in price at a higher rate than other food products, because the formula requires the government to examine the cost basket of producers and update the price accordingly.”
He adds, “The price increases taking place in Israel today are very similar to those seen in OECD countries.” The solution, in his view, is to move beyond direct subsidies to farmers, instead of a “target price” that sets, for example, a minimum price that people are obligated to pay for milk and eggs. But while the rate of food price increases is similar to that in the OECD, prices in Israel are higher to begin with compared to other OECD countries, with Israel almost always ranking first or second in the OECD’s cost of living index, along with the much wealthier Switzerland.
According to public lobby NGO Lobby 99, “The phenomenon of continued rises in the product price index, despite the decline in commodity prices, stems from the ‘stickiness’ and rigidity of prices in the food market, which characterize non-competitive markets.” The NGO explains that there is a significant lack of competitiveness in the Israeli economy among food manufacturers, with producers using their market strength to block competitors and maintain high prices.
A number of reforms have proposed to ease the cost of living, especially in food but failed to penetrate all the regulatory hurdles and allow importers to freely bring in products from abroad. The “What’s good for Europe is good for Israel” reform promoted by the current government also aims to do exactly that, but in the meantime, its exceptions committee is still meeting, and it’s too early to know whether it will succeed in bringing about significant change.
Either way, food prices in Israel are currently rising at a faster rate than in the US, for example, where food prices have risen 5.3% in the last two years, compared with 8% in Israel for food excluding fruit and vegetables and 9.5% with fruit and vegetables, which are part of the American index, are also considered.
Purchasing power of Israelis is being eroded
So while many inputs have indeed increased, food prices are also rising dramatically compared to other prices. The CPI is moderated by other sectors such as clothing and furniture, which are almost entirely imported, and their competitiveness is evident and is reflected in a fall in prices in the last two years.
The result of this trend is that real wages, i.e. the value of wages in purchasing power, have hardly changed in the past two years. According to the Central Bureau of Statistics, the average real wage in Israel fell by 1.4% in February 2025 compared with February 2024. In other words, although the average wage is rising, prices have risen at an even faster pace in the past year, so that the average wage in Israel is able to buy slightly less than last year. The Bank of Israel noted in a presentation it published that “real wages are higher than their pre-war level, but continue to remain below the long-term trend.” In any case, when nominal wages rise, this is another input that food producers need to take into account, and it is often the one that fuels price increases in a phenomenon called the “wage-price spiral.” In the meantime, Israelis’ purchasing power is eroding while prices continue to climb. Unless there is a revolution in competition or inputs, the price spiral will continue.
Published by Globes, Israel business news – en.globes.co.il – on May 6, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
