Public Trust in Businesses | Israeli Food Sector

Contributed by: Yan Marchenko

A new trend

The health trend in the Israeli food sector continues to rise. The main change has been the increasing importance regarding the health of ingredients and a declining focus on price reduction. Until 2015, the price was the most dominant (50%) however, today, the health and quality of the products have greatly surpassed price per public view. Large Israeli manufacturers have been following this upcoming trend and have preemptively implemented new health initiatives to regain public’s trust.

Maala has been tracking public opinion on the trust in the food sector as well as other Israeli industries since 2014 with the Maala-Globescan Radar. This is a global public opinion survey based on the Globescan Radar methodology which is administered annually in 30 countries. Conducted in Israel by Rotem AR, the survey reaches a sample set of 1,004 people who thoroughly represent the Israeli adult population. The survey aims to analyze societal attitudes, expectations, and trust of businesses, as well as material issues on the public agenda.

Maala-Globescan Radar public opinion survey, 2018.

 

In 2014 the survey began recording public trust in businesses and noted that the food industry yielded a meager 14% trust rate. This was the second lowest sector only outperforming the tobacco industry. Nevertheless, it was expected because the food sector was, per public view, a large contributor to the high cost of living which led to the biggest social unrest in Israeli history.

Unprecedented social unrest heavily impacts the food sector

In 2011, 500,000 Israeli’s lined up on Rothschild Boulevard to protest the high cost of living. Considering Israel is a country populated with only 7 million people, the attendance was unprecedented. The protests were galvanized by the middle class who were carrying the burden of a growing socioeconomic gap in the society. The public perceived the housing, food, retail, and gasoline industries as the biggest contributors to the high cost of living because they felt that suppliers took advantage of the inelasticity of these products. Based on the product’s necessity and lack of true competition, suppliers could increase prices with little loss of demand and consequently, causing the public to lose trust.

From the years 2005-2014 the food prices sky rocketed and within four years the profit margins of food producers had increased by 12%. Due to this, the mounting public unrest resulted in the protest of 2011 nicknamed the “cottage cheese protest”. This was the first evidence of a mass acknowledgement of the discontent with the overall food cost. Consumers were unhappy about a 45% increase of price on cottage cheese in a 3-year period.

Furthermore, in 2014 the Israeli food producer Strauss was scrutinized as well for the high domestic prices of one of their flagship dairy products ‘Milky’, in comparison to its cost in markets it exports to. And as a final blow, Osem’s leading product, Israeli snack staple ‘Bamba’ was being sold in Trader Joe’s. This was to the delight of the Israeli community living in the states; however, to the discontent of the people in Israel because Bamba was more expensive domestically.

According to Globes, an Israeli financial newspaper, food prices in Israel had decreased in 5.5% from 2015 to 2017. However, Israel is still 19% higher than the OECD average therefore, there is a long way to go. The majority of price reduction can be attributed to government efforts such as: increasing imports of beef; consequently, dropping beef prices from 7% to 17%, cutting Israel’s value added tax, cutting corporate taxes, and enforcing higher caps for imported foods.

A shift in focus

We strive to offer sustainable products and technologies to the market and to create positive outcomes, both for the consumer and the environment” Jonathan Berger, CEO at The Kitchen

The food industry had been relentlessly scrutinized and while significant price reductions were not discernible, these companies worked hard to regain the community’s trust through different channels. The main issues of importance have shifted in the last few years and the companies have capitalized on it. According to the Maala-Globescan radar, in 2015, the biggest issue in the food sector was price at 46.5%. In the following years though, it dramatically decreased to 19% in 2017 and 18% in 2018 and was greatly surpassed in 2018 by the health of the product components at 50%.

Food sector renaissance: growing awareness towards health, quality and environment

In response, companies have taken it upon themselves to increase the quality and safety of food products. A good example is The Kitchen Foodtech Hub, an incubator invested in by the Strauss Group to support startups with the goal of global food security. One of their key investments was in Yofix Probiotics LTD, a company manufacturing soy and dairy free fermented plant base pre-& pro-biotic foods. The company produces fairly priced, healthy foods through a sustainable production process and thanks to investment and guidance from Strauss, Yofix can be purchased at many local supermarkets and supermarket chains.  Jonathan Berger, CEO of The Kitchen said, “We strive to offer sustainable products and technologies to the market and to create positive outcomes, both for the consumer and the environment… It is very encouraging to see Yofix grow.”

Field tour at The Kitchen, day 2 – Maala international conference, 2017.

 

Other large food manufacturers have also become keen to the food health movement. Tnuva’s head of the dairy division Anat Gross Shon says, “The subject of sugar and salt and the risks in consuming them haven’t sunk in with consumers to the extent that they understand that they need to reduce sugar and salt.” She then goes on to say “It’s not enough for us to have decided to reduce sugar. I have to explain to the public why it’s important”. Therefore, she feels a responsibility not only to use healthier ingredients but to educate the public as well. Gross Shon claims that they reduced salt and sugar in their products, meanwhile doing over 100 taste tests. Furthermore, in 2013 Tnuva partnered with the Health Ministry in a program called Food Compass, which reduced sugar levels in over 130 food products.

Along with the concern for healthy ingredients, environmental awareness has grown. In the last few years the Israeli food industry (especially in high tech startups) has begun to pay closer attention to its waste and pollution externalities. This builds trust with the public because consumers see that the companies are attune to the environment. For instance, TIPA, a startup producing compostable bio-plastic packaging, makes a huge difference in sustainability. Another unique start up, Supermeat, produces “clean meat” or meat made from cultivating animal cells rather than killing animals. The growing awareness of the vegan movement paired with Tel Aviv as a vegan hub, also contributes to increasing trust from the public.

Positive outcome: rising trust 

The Israeli food industry was put under the spotlight after the protests of 2011. Yet, even though the large food manufacturers were not able to change the prices they were able to adapt as the public opinion shifted to focus more on the health of the ingredients. Globally, there has been a growing awareness towards the health of food. For instance, in 2016 Deloitte and Buzzilla noted that Israel saw a 17% increase in sugar free diet web searches. In anticipation of this growing trend, the food industry has taken large steps to ensure the health of their products and due to their efforts trust in the food sector increased to 24% in 2017 and 31% in 2018 (Maala-Globescan Radar).

Maala-Globescan Radar public opinion survey, 2018.

 

Trust is an invaluable characteristic that promotes efficiency, communication, and teamwork which are all vital components to conducting successful business. Paul Polman, CEO of Unilever, calls it a business’ “most valuable asset”. He goes on to say that Unilever’s current market capitalization is 130 billion, asset value is 30 billion, and that trust is the factor that evens out the scale. It is hard to observe trust because it cannot be measured in a monetary value, but in the bold claim by Unilever’s CEO, trust becomes an almost quantifiable number. It shows how much value can be added to a company when trust among employees, distributors, sub-contractors, and consumers is at a maximum. The Israeli business world unequivocally values trust and with the combined effort of the healthy minded leaders of large food manufacturing companies and the passionate health and sustainable food focused startups, the trust in the Israeli food industry will surely continue to grow.

For more insight on trust in the business sector, we invite you to engage in conversation at the 2018 Maala CSR conference, November 28-29, Tel Aviv.