Israel Basket Project Ends as Carrefour Exits Price-Fixing Initiative
The "Israel Basket" initiative by Ministry of Economy comes to an end on October 14. Carrefour drops price commitments as the state opts out of funding a six-month extension.
On October 14, exactly six months after its much-touted launch, the "Israel Basket" initiative spearheaded by Minister of Economy Nir Barkat will come to an end. Carrefour will be released from its commitment to maintain the fixed prices for the 112 products currently included in the project, the state will forgo the option to invest an additional 25 million shekels in a campaign for another six months, and the lingering question is what exactly remains of this experiment.
On paper, almost every side can find data that serves its narrative: the Ministry of Economy claims direct savings of about 40 million shekels for the public and boasts additional savings of tens of millions of shekels across competing supermarket chains. However, the full report underlying these figures has not yet been published, making it impossible at this stage to independently verify the complete calculation.
Carrefour, for its part, can point to hundreds of thousands of consumers who were exposed to the brand and to a significant influx of new customers. Conversely, independent checks and studies published during this period failed to uncover the broad price war that was supposed to transform a single chain's basket into a market-shaping disruption.
The cost borne by Carrefour also became clear gradually. Electra Consumer Products Chairman Zvi Schwimmer stated following the second-quarter earnings report that while the initiative brought in new customers, it negatively impacted revenues. It was later revealed by Globes that operational costs and the hit to profitability were among the key considerations in the decision not to extend the program for another term. All of this comes at a particularly sensitive time for Carrefour, following years of losses and restructuring, and ahead of a planned IPO on the Tel Aviv Stock Exchange valued at close to 1 billion shekels.
The Competition That Never Materialized
At the outset, Carrefour committed to selling a basket of roughly 100 products for a total price of about 1,098 shekels, compared to an estimated market average of around 1,700 shekels. A study conducted by Prof. Itai Ater, Adi Omer, and Dr. Or Avishay-Rizi from Tel Aviv University found that in Carrefour branches participating in the program and online, the prices of the basket products dropped by approximately 35%.
However, the study also revealed that Carrefour simultaneously raised prices in other categories. Carrefour rejected the claim that these were intentional price hikes, arguing that in some cases they simply marked the expiration of promotional discounts.
Ten days after the launch, a joint check by Globes and CHP showed that only the Mahsanei HaShuk chain implemented a relative price reduction on the basket, while other major players hardly altered their pricing. The later study by Tel Aviv University reached a similar conclusion: no significant drop in basket prices was found across the broader supermarket sector, though discount chains recorded an average decline of about 3%. Mahsanei HaShuk stood out with a roughly 10% drop, whereas Shufersal Deal, Universe, and Osher Ad showed no statistically significant decrease.
According to preliminary data from the Ministry of Economy, prices of "parallel baskets" at leading chains fell by 8.4% during the pilot period, compared to a drop of about 3% across all consumer goods at those same chains. "It is possible that the move caused some customers from other chains to try out Carrefour or shift a portion of their shopping there," Prof. Ater told Globes. "Even if this does not immediately translate into overall market share, the initiative may have contributed to positioning Carrefour as a chain competing more aggressively for the Israeli consumer."
Moshe Dolev, CEO and founder of CHP, points to a flaw that he believes was structurally built into the tender from day one. "I think the central point of failure was that a rigid list of leading brand barcodes was chosen," he explains. "This left no room for flexibility and creativity on the retailers' side. It forced them to adopt a Loss Leader approach. Heavy discount players, such as Rami Levy, do not like operating this way, and therefore real competition failed to materialize."
The Bill Received by Carrefour
If there is one asset Carrefour gained from the initiative that is difficult to price, it is exposure. The state funded a massive advertising campaign across television, the internet, and radio. For a retail chain still trying to establish its footing in Israel just months before a planned public offering, this carried clear branding value. Nonetheless, there is still no concrete data to determine how much of that exposure actually converted into loyal customers or sustained purchases.
Ater believes the media coverage played a role that went far beyond mere advertising exposure. "On the one hand, Carrefour enjoyed positive media exposure, which was valuable, especially ahead of the IPO," he notes. "On the other hand, the Ministry of Economy found itself facing public and media criticism over the very use of public funds to finance a campaign, with some arguing the move would not necessarily lead to a significant and lasting reduction in the grocery bill."
However, company sources explain that the compensation received under the tender ultimately failed to offset the operational costs incurred. Alongside price-fixing obligations, the tender terms mandated that roughly 85% of the items on the basket list be continuously available in participating branches. This required, among other things, transferring inventory between branches (51 stores out of roughly 150 nationwide), generating additional logistical expenses.
Industry insiders cautiously estimate that the total cost of price-fixing for Carrefour could reach several tens of millions of shekels. What is known for certain is that second-quarter financial reports showed a 2.6% decline in revenues for Electra Consumer Products' food retail division, dropping to approximately 818 million shekels, while same-store sales fell by 7.2%. However, it is impossible to attribute the entire decline solely to the government initiative.
So Who Won?
From the perspective of the Ministry of Economy, the picture is complex. The initial goal presented at the start of the road was far more ambitious—to trigger competitive pressure that would drag the entire market downward. In February, when it became clear that Carrefour was the sole bidder for the tender, sources close to Barkat estimated that the low price submitted would "create an earthquake in the market." Independent data collected in the months that followed pointed to a far more modest response from competitors.
Ministry of Economy officials explain that the decision regarding the project's continuation was also heavily influenced by scheduling constraints. They note that the rollout was delayed due to the war and supplier unavailabilities, a delay that severely compromised the ability to implement the original plan and extend it by an additional six months ahead of expected government changes.
According to officials, the political timing also rendered the decision-making process more complex. In its latest announcement, the ministry stated that the minister decided against committing to additional expenditures and operational periods, opting instead to transfer the collected data to the incoming government. Ministry officials estimate that a new economy minister may prefer to launch their own tailored program, though they do not rule out the possibility that elements of the "Israel Basket" will serve as the foundation for a future initiative.
Immediately following the conclusion of the project, Carrefour plans to launch "Carrefour Special Deal," an independent promotional campaign across all 144 branches and its online platform.
