Last month, I did a price comparison between McDonald’s in the United States and McDonald here in Israel. As we saw, Israeli prices are often twice, or more, than comparable items in the US McDonald’s.
This month, I decided to compare a sampling of prices in the supermarket. I compared the prices several household staples at Mega supermarket with those at Stop and Shop. Mega is the smaller of the two largest Israeli supermarket chains. I examined items at the Mega located near me in the center of Tel Aviv. The Stop and Shop store I checked was in New Rochelle, NY, an upscale suburb.
Before you say — Obviously, the store in Tel Aviv is more expensive than other supermarkets in Israel, you should know that one of the many odd things in Israel, is that supermarket chains across the country do not maintain the same prices throughout the chain. Moreover, almost illogically, supermarket prices are less expensive in Tel Aviv than in the smaller outlining towns with lower rents. Why? In Tel Aviv, there is competition.
Other challenges in conducting a comparison survey of this type is both the fact that product package sizes are often different in different countries, and of course, in Israel, VAT is included in the price of food. The price comparisons given below are after accounting for different product sizes and removal of VAT fees. The shekel prices cited are based on an exchange rate of 3.5 NIS per USD.
SUPERMARKET PRICE COMPARISONS — September 2019
Stop & Shop (New Rochelle, NY) vs. Mega (Tel Aviv, Israel):
Jar of Hellman’s Mayonnaise NIS 7.1 (S&S) NIS 14.5 (Mega)
Coke (2-liter) NIS 5.5 (S&S) NIS 7.90 (Mega)
Ginger Ale (2-liter) NIS 3.0 (S&S) NIS 9.0 (Mega)
Coca Pebbles (425 gram box ) NIS 10.09 (S&S) NIS 17.9 (Mega)
Honey Bunch of Oats (same size box) NIS 12.28 (S&S) NIS 22.90 (Mega)
Heinz Ketchup (same size bottle) NIS 10.90 (S&S) NIS 14.90 (Mega)
Milk (1 liter) NIS 5.56 (S&S) NIS 6.70* (Mega)
* Milk prices remain higher in Land of Milk and Honey, despite the fact that The Land of Israel is home to the most productive cows in the world.
The one area where prices seem to be about the same is for chicken. The price of non-Kosher chicken in the US appears to be just a bit below Israeli poultry prices, while Kosher chickens are slightly more expensive in America than in Israel.
It should be noted that median Israeli salaries are considerably below the median salary in New Rochelle.
I will not go into the question of how Israelis afford these prices, nor why eight years ago Israelis flooded the streets to protest the cost of living, and have remained in total silence since then — despite the fact that supermarket prices have never gone down, and the size of packaging has slowly shrunk (which has surreptitiously raised prices on many items).
Why are the prices of goods so much higher in Israel? A small part of the answer is the supermarket chains. While Stop & Shop had a gross profit margin of 21% last year, Mega reported a gross profit margin of 26%. The main reason for the significant price gap is the large profit made by Israeli wholesalers and importers on all items. The only way to significantly lower prices in Israel is to find a way to eliminate the middlemen.
One last point, it would be reasonable to question whether Israeli-made products are less expensive. The answer is that Israeli products are as expensive — or more expensive — than their imported counterparts, in almost every category.