Carrefour Likely to Exit Israel Discount Basket Project After Sales Slump
Carrefour Israel CEO Inbal Harson is expected to decline a six-month extension of the government-backed discount program. The 30% price cuts on 100 items led to a disappointing 7.6% drop in same-store sales during Q2.
After five months of offering a heavily discounted product basket across one-third of its branches, Carrefour Israel's newly appointed CEO, Inbal Harson, is expected to decline the option to extend the government-backed initiative for an additional six months.
The extension would have required the chain to continue selling 100 essential products at a 30% discount in exchange for an additional state-funded marketing campaign worth 25 million NIS. The chain's current commitment to the Ministry of Economy runs until mid-next month, shortly after the high holidays.
Disappointing Financial Performance
The expected decision follows weak second-quarter financial results for Carrefour. Same-store sales fell by 7.6% compared to the same quarter last year, accompanied by a decline in gross profitability.
While some of the decline can be attributed to the timing of Passover, competitors fared significantly better. Yohananof and Rami Levy reported minor same-store sales declines of 1.6% and 2.4%, respectively. This gap indicates that the 30% discount on the selected 100 products severely eroded Carrefour's overall revenue rather than driving profitable volume.
This outcome contradicts Carrefour's initial projections. In a valuation attached to its financial reports, the company had anticipated a 214 million NIS revenue boost in 2026, stating:
"Management estimates that winning the program will expand sales volume, primarily due to public exposure and branding as a price leader."
A Blow to the Economy Minister's Flagship Initiative
The program's failure is also a significant setback for Economy Minister Nir Barkat. Having failed to prevent food manufacturers from raising prices through regulatory threats, Barkat launched the unprecedented 50 million NIS state-funded campaign to promote a private retailer.
To the ministry's surprise, Carrefour was the sole bidder. The initiative faced heavy criticism for structural flaws, including the inclusion of monopoly-branded junk food and beer, and the fact that discounts were restricted to only a third of Carrefour's stores. Furthermore, Carrefour raised prices in its non-participating branches to offset the losses.
Upcoming Challenges for Carrefour
Exiting the program presents Harson with immediate challenges. Once the state-subsidized discounts expire, consumers will face sharp price increases on these 100 items, which could trigger customer churn. Harson will need to quickly establish an alternative value proposition to compete with urban market rivals, particularly Shufersal.
Carrefour stated in response:
"We are completing our evaluations and will make a decision shortly."
