Cottage cheese boycott facts for kids
The cottage cheese boycott (Hebrew: מחאת הקוטג' or חרם הקוטג') was an Israeli consumer boycott which began in June 2011 using Facebook. The protest was against the continuing rise of food prices in Israel. The organizers called on the public to stop buying cottage cheese, which is perceived as a basic food item in Israel. Within a short time, 100,000 users joined the Facebook protest page. As the boycott gained momentum, it sparked a public debate on the high cost of living in Israel.
Despite special sales campaigns designed to tempt shoppers, supermarket chains reported a sharp drop in the purchase of cottage cheese by Israel's three leading dairies, and the price of cottage cheese in the country was lowered.
Contents
History
Cottage cheese is a popular commodity in Israel which is widely perceived as a basic food item by the Israeli public. The Tnuva cooperative controls more than 70% of the dairy market, while the companies Strauss and Tara control the rest of the market. In addition, importation of dairy products into Israel before the boycott was minimal due to the extremely high import duties imposed on them, with duties for some dairy imports standing over 100%. Due to Tnuva's dominance of the Israeli dairy market, it is considered a legal monopoly by the Israel Antitrust Authority, which has the power to regulate its prices to prevent it from price gouging. In August 2008, Israeli Finance Minister Avraham Hirschson declared that the government would stop regulating the price of cottage cheese, which stood at 4.82 NIS for a 250 ml (9-ounce) tub, in order to encourage competition in this market. Contrary to the expectations, within three years the price of cottage cheese rose by about 45% of the original price, up to approximately 8 NIS.
According to the Israeli financial newspaper Globes, the price hike that lead to the boycott was imposed due to a demand on Tnuva's executives by British Apax Partners, a London-based private equity fund that had bought a controlling interest in the Israeli Tnuva, to raise the company's value. After Tnuva had been acquired by Apax, its executives were ordered to present a 100-day plan to increase the company's value, which was nicknamed "Quick Wins", in accordance with Apax's policy of purchasing companies, increase their value, and selling them within six years. Apax then hired McKinsey & Company, an American consulting firm, to examine Tnuva's pricing capabilities. McKinsey, along with Dr. Shula Pesach (Tnuva's head economist) conducted a study, and concluded that Tnuva could increase prices by at least 15% without harming public demand, although Dr. Pesach warned that the price hike had the potential to "blow up in the company's face". Sources in Tnuva told Globes that "Even before the rise in raw milk inputs, it was clear that Tnuva was going to continuously raise prices."
The protest
Following a series of articles by Ilanit Chaim in Globes which covered the surge in food prices and cost of living in Israel, in June 2011, Bnei Brak resident Itzik Alrov opened a protest group on Facebook calling the Israeli public to stop buying cottage cheese as a first step. Although the boycott was planned for July 1, 2011, there had been much publicity in the media. With tens of thousands of Facebook users joining the protest group, the total soon passed 100,000. As a result, the boycott was moved up to mid-June 2011. The public was urged to purchase cottage cheese only if it cost less than 5 NIS, and to boycott other dairy products as well.
In September 2011, a NIS 125 million class action lawsuit was filed against Tnuva, alleging that the company "abused its position to raise cottage cheese prices by more than 40% between 2006 and 2011". The Israel Antitrust Authority also opened an investigation into Tnuva over alleged abuse of monopoly power.
After the CEO (Zehavit Cohen) of the Israeli branch of Apax Partners announced that it would not lower the price of cottage cheese, other Facebook protest groups were established calling to boycott all of Tnuva's products.
Research
Hendel, Lach and Spiegel (2017) studied the cottage boycott econometrically. They find that (i) demand for cottage cheese dropped by 30% because of the boycott; (ii) brand loyalty diminished, and customers become more price sensitive and willing to substitute across brands; and (iii) the increase in prices sensitivity was more pronounced in areas with more usage of social media; this findings suggests that social media played an important role in facilitating consumer mobilization; and (iv) post‐boycott prices were substantially below the profit maximizing levels (as implied by the post‐boycott demand elasticities), suggesting that firms restrained their pricing policies, most likely because they were concerned with the boycott spreading to other products and with the increased likelihood of government intervention due to high prices.
Literature
- Yossi Spiegel. Antitrust Enforcement of the Prohibition of Excessive Prices: The Israeli Experience. 3.3. The Cottage Cheese Class Action Case // Excessive Pricing and Competition Law Enforcement / eds. Yannis Katsoulacos, Frédéric Jenny. — Cham: Springer International Publishing, 2018. — P. 127–158. — ISBN: 9783319928319. — DOI:10.1007/978-3-319-92831-9 5.
- Shay Hershkovitz. “Not Buying Cottage Cheese”: Motivations for Consumer Protest — the Case of the 2011 Protest in Israel // Journal of Consumer Policy. — 2017. — December (vol. 40, iss. 4). — P. 473–484. — ISSN 0168-7034. — DOI:10.1007/s10603-017-9340-5.
- Hendel, I., Lach, S. and Spiegel, Y. (2017), Consumers' activism: the cottage cheese boycott. The RAND Journal of Economics, 48: 972-1003. -DOI:10.1111/1756-2171.12212.
See also
In Spanish: Boicot al Cottage para niños
