Rami Levy seeking deal with international supermarket chain for discounted products

Rami Levy Hashikma Marketing, one of Israel’s largest supermarket chains, announced on Tuesday that it is seeking to tie up with an international supermarket chain, possibly French retail group Auchan.

The discount supermarket chain said that is mulling cooperation with international retail chains, among them Auchan, French food retailer Casino, and Dutch-owned international supermarket SPAR. Rami Levy filed the statement to the Tel Aviv Stock Exchange following reports in the Hebrew press this week that the supermarket chain is in talks to bring Auchan to Israel and to sell the French chain’s private label products.

The announcement comes as Israel’s largest supermarket chains are facing increased competition with the entry of French supermarket chain Carrefour and 7-Eleven in Israel.

In May, Carrefour opened the first 50 branches across the country at an investment of NIS 250 million to spur much desired competition in Israel’s overly concentrated food retail market and help bring down the cost of living. Israel’s Electra Consumer Products last year signed a franchise agreement with the French supermarket chain to set up a total of 150 branches by converting its local Yeinot Bitan supermarket branches to Carrefour stores.

Shufersal, the country’s largest supermarket chain, in December inked a deal to set up a chain of stores in Israel for SPAR and sell its private label products exclusively in its own stores.

Rami Levy did not provide any further details on the plans to bring international private label products to Israel but according to reports in the Hebrew press the supermarket chain is holding talks with Auchan, which could lead to either a franchise agreement or the establishment of a joint company in which Rami Levy would have a minority holding.

Rami Levy already operates 52 branches – including three franchises – across the country and runs a 30,000-square-meter (323,000-square-foot) logistics center in the city of Modiin. The group employs about 8,000 people and generates annual revenue of about NIS 6 billion ($1.68 billion).

The Auchan retail group has 2,100 points of sale in 13 countries, mainly in Europe, including France, Romania, Spain, Hungary, and Poland as well as in Africa. The chain employs more than 160,000 workers at hypermarkets, supermarkets, and convenience stores, and generated €32.9 billion in revenue in 2022. In May, Auchan announced its expansion in Africa by partnering with a local company in Algeria, which will be Auchan’s 14th country worldwide and its third in Africa, after Senegal and Côte d’Ivoire.

French food retailer Casino, established almost 125 years ago, operates more than 12,000 stores worldwide across France and Latin America. The supermarket group has 208,000 employees with consolidated net sales of €33.6 billion.

The latest efforts to lure global retail chains to Israel comes as Israeli consumers are grappling with a wave of food price hikes in recent weeks, putting more pressure on the government to take steps to lower the cost of living while policymakers continue to try to rein in rising inflation.

Food prices in Israel have risen 50% over the past two decades and are 25% to 80% above the OECD average, with dairy products, soft drinks, and grain-based products particularly expensive (as of 2017 data, according to the OECD). Some sectors in the local economy suffer from overconcentration, and in the food retail sector, the top three supermarket chains account for over half of the Israeli market, limiting competition and putting upward pressure on prices.

Meanwhile, import tariffs, regulatory bottlenecks, value-added tax costs and kosher restrictions have been making the Israeli market less attractive for international retail chains.

Prime Minister Benjamin Netanyahu touted Israel’s recent adoption of EU regulatory standards, meaning products won’t have to be re-approved in Israel, as one of the moves easing Carrefour’s launch in the country.