Overview
Israeli consumers are sophisticated and enjoy diverse food tastes. Currently, over 15 % of household expenditures are dedicated to food products. Producers, food processors, wholesalers, retailers, food service operators, and food importers are all part of a well-developed agro-food sector, contributing to a domestic market that is competitive and dynamic. Israel is not self-sufficient in agriculture and is dependent on imports. This situation will not change in the coming years due to the lack of arable land and of fresh water suitable for agriculture. In 2021 (last official Israeli figures), imports of agricultural products (HS codes 1-24) reached $8.79 billion. Approximately 6.4 % of these imports were sourced from the United States.
Israel’s limited land and water resources preclude agricultural self-sufficiency and affect local production costs and consumer prices. For instance, the need to import feed for poultry meat and egg production is sourced from abroad, leaving the price of domestically produced food subject to price fluctuations of imports. The country posts sizeable trade deficits in food and agricultural products, importing large volumes of feed grains and sizable volumes of consumer oriented agricultural products.
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
Total Exports | $2,137 | $2,076 | $2,199 | $2,280 | $2,182 | $2,181 | $2,445 |
Total Imports | $5,323 | $5,625 | $6,104 | $6,920 | $6,786 | $7,090 | $8,791 |
Imports from the U.S. | $504 | $486 | $473 | $520 | $522 | $500 | $559 |
U.S. market share | 9% | 9% | 8% | 7% | 7.7% | 7.1% | 6.4% |
*HS codes 1-24. Source; Israeli Central Bureau of Statistics (CBS).
With over 1,800 facilities, the Israeli food processing sector is an important player in the domestic economy. The Israeli food processing industry is innovative, constantly introducing new products to the market. Multi-national food manufacturers like Nestlé, Unilever, Danone, and Pepsi Co. partner with well-known Israeli food companies such as Osem and Strauss. Four groups dominate the local food processing industry: Tnuva, Osem-Nestlé, Unilever, and Strauss.
In 2021, Israeli food processors’ annual revenue stood at $16.45 billion. The sector represents 19.1% of Israel’s total manufacturing revenue. With limited land and resources, as well as a growing population, the ingredients demanded by the Israeli food processing sector represent an excellent opportunity for U.S. exporters of food ingredients. In 2021, Israel imported $3.54 billion in raw food products for the local food processing industry.
Israeli Fast Moving Consumer Goods (FMCG) sales reached $15.64 billion in 2021, $11.2 billion of which were sales of food products. The food retail market is made up of supermarket chains, convenience stores, gas stations, neighborhood grocery stores, and markets. Sales in supermarket chains account for over 65% of total retail food market sales. Large supermarket facilities are located in the outskirts of the large cities near major roads and tend to be cheaper than smaller neighborhood stores smaller neighborhood supermarkets are conveniently located but tend to be more expensive and with smaller variety of products.
U.S. products are not always competitive due to relatively higher production and freight costs. Products from Europe, the Mediterranean Basin and the Black Sea Basin have an advantage due to proximity and, in some cases, lower production costs. Transportation costs are less impactful for products with a high value-to-volume ratios, such as spices, essences, flavorings, and concentrates. Some U.S. products are eligible for tariff preferences under the United States-Israel Agreement on Trade in Agricultural Products.
The Israeli food and food supplement legislation and standardization system is largely harmonized to European standards. In many cases, European standards may differ from those in the United States, resulting in non-tariff trade barriers and a challenging import licensing process.
Sea freight costs increased by as much as 200% in the past year, according to importers. The increased shipping costs, combined with worldwide increase in commodity prices, have led to a price increase for food products in the local market.
Kashrut
Exporters should consider the issue of kosher certification. Kosher certification is not a legal requirement for importing food into Israel, except for beef, poultry, and other meat products. However, non-kosher products have a smaller market share, as most supermarkets and hotels refuse to carry them. In recent years there has been an increase in demand for non-kosher foods, or foods that lack kosher certification, especially from immigrants from the former Soviet Union.
Manufacturers who produce kosher products must be able to satisfy Israeli rabbinical supervisors’ demands that all ingredients and processes meet kosher standards. According to the Law for Prevention of Fraud in Kashrut, only the Chief Rabbinate of Israel can approve a product as kosher for consumption in Israel. The Chief Rabbinate may also authorize another supervisory body to act on his behalf; the kashrut certification issued by many U.S. rabbis is recognized by Israel’s Chief Rabbinate. Israeli importers can also send an Israeli rabbi to any supply source to certify the products.
Prohibited Imports
Israel, a member of the World Trade Organization (WTO), maintains relatively few prohibitions on agricultural imports. However, Israeli authorities prohibit the import of non-kosher meat and meat products (includes beef, poultry, and mutton) under the Law for Prevention of Fraud in Kashrut which requires these imported products to be certified as kosher by the Chief Rabbinate of Israel. These regulations do not apply to other non-kosher animal products, such as shellfish. The only other product prohibitions are targeted against internationally controlled substances or are designed to protect public morals, human, animal or plant health, or national security.
The U.S.-Israel FTA allows both countries the use of non-tariff restrictions or prohibitions on products from those agricultural subsectors that are sensitive to agricultural policy shifts. Israel has removed some administrative barriers to United States imports but retains high levies on products and commodities that compete with local industry, such as dairy, apples, and wine.
Resources
Post Contact and Additional Information:
USDA-FAS, Office of Agricultural Affairs, U.S. Embassy, Tel Aviv Embassy Branch
Tel: +972-3-519667
E-mail: agtelaviv@fas.usda.gov