Dairy Board. "It's not just the kosher consumer, it's the culture," he says of the ancient restrictions concerning the timing and con- text in which milk products are consumed by Jews. Even so, the Israeli dairy in- dustry is growing at around 4 per- cent annually. In 1995, the dairy sector con- stituted 1.5 percent of Israel's gross national product, with an average per capita consumption of 190 liters per year. There are around 900 dairy products on the market and last year their com- bined sales totalled around $1.3 billion. To avoid waste of milk, the en- tire industry is carefully planned. Each farm operating a cowshed is allotted a production quota, set by the Dairy Board. The process- ing dairy pays the farmer the full set price for the milk produced within the quota. Any excess is also bought by the dairy, but at a lower price, and mostly for export markets. Around 40 or so dairies partic- ipate in the process. Tnuva, the oldest and the largest, processes more than 50 million liters of milk per month. Four medium-sized competitors — Tam, Strauss, Yot- , vata and the Ramat Hagolan dairy— each process between 1.2 and 10 million liters per month, and 35 or so smaller dairies han- dle up to half a million liters monthly. Despite the apparent abun- dance of dairies in Israel, Tnuva is the sun around which all the rest orbit. Not only does Tnuva hold a 70 percent share of the market, but 95 percent of all the country's milk passes through one of its dairies, where it is processed and then partly sold back, in one form or another, to Tnuva's com- petitors. Tnuva also owns the only fa- cility for making milk powder, a vital resource since it is a good so- lution for surplus milk in gener- al, and particularly in the winter, when demand for dairy products is lower. Thus, in a nutshell, the dairy market belongs to Tnuva, as a re- sult of security considerations which go back to pre-statehood times, according to Dr. Avi Weiss, an economist at Bar-Ilan Uni- versity and director of the Azrieli Institute for Research on the Is- raeli Economy. Indeed like public-transport monopolist Egged, Tnuva took it upon itself to supply the entire country, including the most re- mote places and even in times of emergency. Based on the very arguable — actually, unfounded — premise that if it were up to the market the periphery would not be sup- plied with basic food products, Tnuva was given monopoly pow- er. As this rationale gradually lost its military relevance and eco- nomic popularity, laws should have been changed accordingly. They were not. "Any monopoly is harmful to the consumer because it raises prices," says Dr. Weiss, "especially with necessity-type goods, where prices can be raised without de- mand falling. With goods like milk, if prices rise people won't lower their consumption. Then the monopoly becomes more of a concern." One of the ways to reduce gnu- va's grip on the industry is to re- form its financial mechanisms, so that some of ith separate produc- tion and marketing companies' combined revenues — which last year totalled some $2.3 billion— would be spread among its 650- member kibbutzim and moshav- im. Besides ultimately generating improved service for consumers, this would certainly work in fa- vor of those member kibbutzim which are on the verge of bank- ruptcy. However, due to its unique structure no one actually "owns" Tnuva. Consequently, revolu- tionary strategy decisions are sel- that we are making changes. We dom taken, even in face of an es- will use the media far more timated 40 percent plunge in strongly. We are going to almost annual profits last year to rough- double our advertising budget." ly $30 million. The Tel Aviv advertising agency Arik Reichman, general man- Gittam BBDO has been chosen ager of Tnuva since January, is to coordinate Tnuva's PR effort, not looking to reduce Tnuva's although the timing of a compre- stake in the dairy market. How- hensive campaign has not been ever, he knows something has to finalized. change, as became clear during Mr. Reichman, who was pre- last September's public row over viously secretary general of the the media's discovery of foam United Kibbutz Movement, says avoiding, but potentially toxic sil- he is contemplating change, icon in its long-life milk. though in discussing it he does Tnuva's self-damaging public- not go beyond "decentralization." ity resulted from its Rehovot dairy Tnuva's activities go far beyond refusing to admit its wrong doing. the dairy sector: In the chicken, Though the Israeli courts have fruit and egg markets, it holds ruled that Tnuva's practice was more than a 50 percent stake in not dangerous, the damage had each. already been done. 'Perception is "Although Tnuva was — and reality," says Mr. Reichman grim- still is — the leader in the food ly, who assumed office after market, there is a need to re-en- Yitzhak Landsman's abrupt res- gineer the corporation," explains ignation in the aftermath of the Mr. Reichman. "Every unit silicon scandal. "Every house in should focus on its own activity." Israel uses Tnuva. There is no At the moment, Tnuva's activ- question that it cost us in public ities are under the control of the opinion," he concedes. general manager. The dairy sec- One of the ways Mr. Reichman tor constitutes 45 percent of the is combating this aftershock is by organization's volume. increasing contact with the con- Mr. Reichman!s first action was sumer. A toll-free number has to appoint a new manager to co- been set up for queries, and Mr. ordinate the dairy side of the op- Reichman says this is only the eration. 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