Israel - Agriculture Israel - Agricultural Sector
Israeli consumers are sophisticated and enjoy cosmopolitan food tastes. Currently, 16.9% 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 agribusiness sector, contributing to a domestic market that is competitive and dynamic. Israel is not self-sufficient in agriculture and is dependent on imports. In 2018, imports of agricultural products reached U.S$6.92 billion. Approximately 7% of imports were sourced from the United States.
Israel’s limited land and water resources preclude agricultural self-sufficiency; this affects local production costs and consumer prices. The country posts sizeable trade deficits in food and agricultural products, importing large volumes of feed grains and sizable volumes of consumer oriented agricultural products.
Israel’s Agricultural Trade ($ millions)
|Imports from the U.S.||$668||$504||$486||$473||$520|
|U.S. market share||12%||9%||9%||8%||7%|
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 2017, Israeli food processors’ annual revenue stood at $16.75 billion while the beverage and tobacco industry’s annual revenue was $2.2 billion. The sector currently represents over 17% of Israel’s total manufacturing industry’s 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 2017, Israel imported $2.79 billion in raw food products for the food processing industry.
Israeli Fast Moving Consumer Goods (FMCG) sales reached over $12 billion in 2018, $9 billion of which were sales of food products. The food retail market is made up of supermarket chains, as well as urban convenience stores and gas stations, neighborhood grocery stores; and markets. Sales in supermarket chains account for over 60% of total retail food market sales. Large supermarket facilities are located in the outskirts of the large cities near major roads and tend to offer parking. Smaller neighborhood supermarkets are conveniently located but tend to be more expensive.
Israeli importers face two main considerations when selecting a particular product - quality and price. In terms of price, U.S. products are not always competitive due to relatively higher production and freight costs. Products from Europe and the Mediterranean Basin and the Black Sea Basin tend to be advantaged by proximity and, in some cases, lower production costs. Transportation costs are less crucial when dealing with higher-end products that tend to have very high value-to-volume ratios, such as spices, essences, flavorings, and concentrates. Similarly, products eligible for tariff preferences under the United States-Israel Agreement on Trade in Agricultural Products (ATAP) are at a natural advantage, making transportation costs less of a factor.
Due to the EU being the biggest market for Israeli agricultural and food exports, the Israeli food and food supplement legislation and standardization system is increasingly 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.
Exporters need to consider the issue of kashrut or kosher certification. Kosher certification is not a legal requirement for importing food into Israel, except for beef, poultry, and other meat and products. However, non-kosher products have a much 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, 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. Here United States’ products have an advantage, as the kashrut certification issued by many U.S. rabbis is recognized by Israel’s Chief Rabbinate. It is, however, quite simple for Israeli importers to send an Israeli rabbi to any supply source to certify the products, thereby reducing the U.S. advantage.
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. As stated above, these products must be certified as kosher by the Chief Rabbinate of Israel. 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 sub-sectors 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 which compete with local industry e.g. dairy, apples, and wine.
Post Contact and Additional Information:
USDA-FAS, Office of Agricultural Affairs, U.S. Embassy, Tel Aviv Embassy Branch
- USDA-FAS GAIN Reports
- Central Bureau of Statistics (CBS), Israel
- Food Control Service, Ministry of Health
- Ministry of Agriculture & Rural Development (MOAG), Israel
- Veterinary and Animal Health Services (IVAHS), MOAG, Israel
- Israel Plant Protection and Inspection Service (PPIS), MOAG, Israel
- Standards Institution of Israel (SII)