Rami Levi's 1 Nis Chicken

Pricing Dilemma Assignment – Rami Levi's 1 NIS Chicken

I chose to write my pricing dilemma assignment about Rami Levy's strategic choice to market chicken at 1 NIS (~0.25 cents) per chicken.

Rami Levy is a well-known Israeli Businessman mainly known for his work in the food industry. He is the main shareholder and CEO of "Shivuk Hashikma" food retail chain, spreading throughout Israel. In the past years, levy also entered the Israeli communication field (Rami Levy Communications) and some smaller fields such as traveling.

Back in 2008, "Shivuk Hashikma" held 9 city stores in Jerusalem. During that time, Rami Levy decided on a very odd strategy – selling a whole chicken for 1 NIS (0.25 cents). during 2008 and the years following, Levy, following the same strategy, also held deals for 1 NIS honey before new years holiday, 1 NIS "Matza" before Passover, and milk that was cheaper than water. I studied the strategy as a whole, but I'll concentrate on the chicken deal, for it being the first and main deal within this strategy.

In order to show how major this deal was in 2008, I will say that at the time, the cheapest chains sold a whole chicken for no less than 7 NIS (1.5 dollar difference).

The main question I asked myself was what Levy's goals were applying this strategy. One thing is for sure – Levy lost money on chicken marketing (higher costs than revenues), but he did it in order to gain market share in the food retail market (and other markets) vastly and rapidly. Applying this strategy served a few sub-goals:

1. 1 NIS is one seventh of the cheapest whole-chicken price you could find in any retail chain in Israel. That ratio has a major significance in influencing consumers choice.
2. Psychologically, the number 1, in any currency, sounds to consumers like a very low price. I believe McDonalds 1-dollar menu (exhibit 1) has the same psychological effect on consumers.
3. At the time, Levy put the revenues aside and concentrated on becoming a brand in the eyes of the Israeli consumers. Levy wanted "Shivuk Hashikma" to become "the chain that sells food for nearly free".
4. Levy didn’t want to stop at that brand – he also wanted to be thought of as the Robbin Hood of food retail chains – the guy who sells us food for a reasonable price, unlike the big 'greedy' chains. Evidently, Levy kept stating that exact thing on interviews and different occasions.

And truly, the 1 NIS chicken deal did just that. There was a very big 'buzz' around the deal and other similar deals, which created a 'buzz' around Rami Levy and "Shivuk Hashikma" chain (with a very low advertisement budget). Consumers started buying there whole shopping cart at Levy's chain and very quickly rumor had it that Levy is a decent man with decent prices.

In my opinion, the short-term results were amazing. 2008 showed a growth of 38% in "Shivuk Hashikma"'s market share; 2009, the first year where the chain showed sales of over 1 billion NIS, showed revenue growth of 32-42% compared to 2008; Competitors near Rami Levy's stores cut prices by at-least 10%.

In the long-term, "Shivuk Hashikma" started a huge and tough price competition between the large food chains, which kept helping Levy's brand and image. Secondly, the chain jumped from 9 stores to 20 within two years, and to 52 supermarkets in 2018.