The German Food Retail Market

An Expert's View about Retail Trade and Electronic Commerce in Germany

Posted on: 31 Aug 2012

Germany, by far the biggest market in the European Union, shows good prospects for U.S. food products.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 8/15/2012 GAIN Report Number: GM12021 Germany Retail Foods The German Food Retail Market Approved By: Paul Spencer Prepared By: Leif Erik Rehder Report Highlights: Germany, by far the biggest market in the European Union, shows good prospects for U.S. food products such as tree nuts, wine, processed fruits and vegetables and fruit juices. The food retail sector is fairly consolidated with discounters dominating the market. Food marketing trends in Germany show an increase in demand for convenience, sustainable, health, luxury, private label, and innovative food products. Post: Berlin Executive Summary: Section I. Market Summary Germany has 82 million of the world’s wealthiest consumers and it is by far the biggest market for food and beverages in the European Union. According to Euromonitor International, grocery retailing reached sales of €178.5 billion in 2011 ($218 billion). Part of demand is met with domestic products; however, overall Germany is a net importer of all major categories of food products. Value of imports from Consumer Oriented and Fishery Products, past 5 years billion USD 2007 2008 2009 2010 2011 Consumer Oriented Products 51.1 57.2 51.5 52.5 58.1 Imports from the U.S. 0.5 0.6 0.6 0.6 0.8 Fishery products 4.2 4.5 4.4 4.5 5.1 Imports from the U.S. 0.3 0.3 0.2 0.2 0.3 Source: The German food market is heavily dependent on imports to meet it consumer demands. Last year, Germany imported $ 58.1 billion of consumer-oriented products. By value, about one fourth came from the Netherlands and France and Italy each had about 10 percent of the import market. After Switzerland and Turkey, the U.S. is the third largest non EU-supplier of consumer-oriented products. In 2011, U.S. exports totaled $824 million, led by tree nuts, wine, food preparations, and beef. Current situation The global financial crisis has not affected Germany as severely as other countries but economic uncertainty has led to a decrease in consumer spending on food and non-alcoholic beverages. In 2008, the German economy slowed and by 2009 Germany was in a recession. In 2010 and 2011 the economy rebounded and Germany performed better than most Western European countries. In 2011, unemployment fell to the lowest level in over a decade. Consumer spending recovered in line with the economy. However, continued fiscal consolidation and Germany’s dependence on exports could slow the pace of growth in consumer expenditures on food. Consumer Expenditures Germany in Euro Per Capita – Value at Current Prices Consumer Expenditures 2008 2009 2010 2011 2012* Consumer Expenditures 15,989 16,040 16,508 17,215 17,685 Consumer Expenditures on food and non-alcoholic 1,815 1,788 1,817 1,911 1,927 beverages Consumer Expenditures on alcoholic beverages and 515 517 519 527 535 tobacco Source: Euromonitor, 2012* estimate Consolidation, market saturation, strong competition and low prices are key characteristics of the German retail food market. The sector is dominated by five large retail companies. The major chains face slim margins due to fierce competition in the sector. However, in recent years, there has also been a trend in consumer preference toward smaller grocery formats, including convenience stores, small grocery retailers and independents. German Food Retail Sector Source: Euromonitor International Number of retail outlets in Germany Type of Outlet 2007 2010 2013f Supermarkets/Hypermarkets 15.757 15.779 15.521 Independent Food Stores 22.916 21.558 20.117 Convenience Stores 14.997 15.427 15.923 Discounters 14.525 15.086 16.058 Traditional Markets 3.315 3.315 n.a. Source: Euromonitor International In terms of sales, discounters are well established and dominate food retailing in Germany. After years of growth, the discounters face limits to growth that can be achieved through the opening of new stores. However, in 2010 and 2011 supermarkets performed better than other retail channels. They distinguish themselves from other grocery channels by offering high-quality products located close to city centers. Sales in Hypermarkets stagnated due to competition by discounters. In response, Hypermarkets expanded their own private label products. Due to the sheer number of stores, the importance of independents is relatively high. With their combination of packaged, branded products and local, fresh products, independent food stores perform well, although their numbers are slowly declining. Convenience stores take advantage of a trend towards ready-to-eat products and are slowly increasing sales following the crisis. An ongoing development within this channel is a decrease in independent stores but an increase in chain stores. Traditional open markets are increasingly taking advantage of the popularity of locally produced fresh foods. Weekly markets can be found in nearly all German cities, though they play only a minor role in terms of sales. Sales in Grocery Retailing by Category, billions of Euro Type of Outlet 2007 2008 2009 2010 2011 Discounters 59.1 61.3 61.3 61.7 62.1 Supermarkets 40.4 45.6 47.1 48.9 49.2 Hypermarkets 33.1 34.1 34.6 34.6 33.9 Traditional Grocery Retailers 24.9 23.9 23.7 23.7 24.0 Convenience Stores* 8.8 9.4 9.3 9.3 9.4 Source: Euromonitor International, FAS, * Convenience Stores include kiosks, gas stations, small grocery shops, etc. with extended opening hours, a selling area of less than 400sq meters, and offering take-away food. Wide Range of Private Label Products In Germany, the market share for private label products has steadily increased to 40 percent in recent years. Focused on price, private label food products contributed to the initial success of German discounters. However, that has changed since nowadays there is not only price competitive standard private label products, but also more expensive high quality premium products Consumers are discovering the high value for money that private label brands are offering and how they can be an actual alternative to established brands. Private label market share is expected to increase further, driven by the increase profitability it is giving to retailers. Private label leaders are supermarket chains like Edeka and Rewe. Discounters have played less of a role in the development of private label sales. Trends in food retailing Basic expectations for German consumers are for high quality food products. However they are very price- sensitive. Germans are devoted to their discounters and the country has, globally, the highest share of discounters in food retailing. This is one reason why margins at the retail level are so thin. A key demographic factor in the future will be Germany’s aging population, which is already ranked among the oldest in the world. Demand for convenience, health, wellness, and luxury foods, will continue to affect food retailing. Another trend is that German consumers take great pride in being environmental or, ‘green.’ A segment of the market has demonstrated they are willing to pay more for “sustainable,” “locally sourced,” “free range,” “natural,” “organic,” “fair trade” and “carbon neutral” products. For sustainability in particular, major retailers and producers are increasingly requiring private certification. Unilever, for example, has pledged purchase 100% ‘sustainable’ products by 2020 and is already making strong progress toward that goal. For U.S. products, there is room to use high health, safety and environmental standards governing production as a competitive advantage but is it important that suppliers ‘have a story to tell’ and are prepared to consider private sustainability certification. Advantages and Challenges of the German Food Retail Market Sector Strength & Market Opportunities Sector Weaknesses & Competitive Threats Germany is the biggest market in Europe with one of German consumers demand quality and low the highest income levels in the world prices Many German consumers are uninformed about the No unified U.S. sustainability message in the details of sustainability and there is yet room to define German market. a U.S. sustainability message Germany is among the largest food importing nations in EU import regulation and tariffs. EU gives the world preferential access to products from EU countries Opportunities for healthy food products not sufficiently Very competitive market with low growth in available on the local European market retail sales Equivalency agreement on Organics offers ample Listing fees paid to retailers and money spend on opportunities creating brand awareness hamper the introduction of new U.S. brands Germany has many, well established importers. Margins on food at retail level are very thin Distribution system is well developed U.S. style is popular, especially among the younger Retailers rarely import products into Germany on generation their own The size of the EU import quota for beef is rising to The quota only applies to beef from animals not 48,200 tons and Germany is the largest EU market. treated with growth-promoting hormones’ Good reputation for U.S. food like dried fruits, seafood, wine. Large non-German population and German’s inclination to travel abroad help fuel demand for foreign products Source: FAS Berlin Section II. Road Map for Market Entry The German market offers good opportunities for U.S. exporters of consumer-oriented agricultural products. However there are a number of challenges U.S. exporters must meet before exporting to the German market. Success in introducing food products depends mainly on knowledge of the market and personal contact. There is also little room for compliance errors with stringent EU and German rules. The U.S. supplier should analyze German/EU food laws, packaging and labeling requirements, business practices and trade-related laws and tariffs, potential importers and the distribution system. The Office of Agricultural Affairs (OAA) offers guidelines on business practices and import regulations. The FAS’s Foreign Buyers List, for example, gives important information on German buyers of food, fish, and seafood products. Purchasing by German food retailers is fragmented and competitive. Few German retailers import products directly from other countries, except for items that they purchase in large quantities. Most food retailers would rather buy from central buyers/distributors importing food and beverages. In general, these wholesalers have specialized in products or product groups and some are even experts in food products from a specific country of origin. Thus, specialized importers have an in-depth knowledge of importing requirements, such as product certification, labeling and packaging. They also typically handle shipping, customs clearance, warehousing and distribution of products within the country. Source: FAS Berlin Participating in German food trade shows is a proven way to find the right distributor and facilitates the direct contact with German food brokers, importers, and wholesalers. Trade shows like ANUGA, Green Week or the BioFach show in Germany enjoy an exceptional reputation within the global food industry and these shows outreach is, in many cases, global. For a current listing of German food trade shows, please see: www.usda- . Selling direct Direct sales to Germany’s leading retail companies is very difficult; however, it can be a desirable product-entry approach for a U.S. supplier. Due to their wide range of distribution, central buyers are generally flooded with offers from competing suppliers and they are usually not interested in taking on added responsibility of importing products directly. This is especially the case for new-to-market products, which may not comply with German/EU import requirements, food laws and packaging and labeling requirements. Retail buyers may only be interested in importing products directly if they are unique, possess some specific attribute, or offer significant advantages in terms of quality, price, or financial promotional support. Each of Germany’s leading retail groups has a different business structure, purchasing, and distribution system. Many of the leading retailers have multiple retail chains, often with various types of retail formats such as large hypermarkets, discount and small neighborhood stores, or perhaps beverage and/or delicatessen outlets. Large retailers’ purchasing departments may also be divided by retail format and, sometimes, by region of the country. New products on the German market may require up to 12 to 18 months of testing to gain market acceptance. Listing fees, equivalent to several thousand dollars or more per product are common and do not ensure shelf space if a profitable turnover is not achieved rather quickly. The exception may be a retailer's desire to maintain a competitive edge by keeping a full range of products. Profiles of Leading Retail Companies Retailer Name and Outlet Type Ownership FoodSales No. of Outlets Locations (€Mil/2011) Edeka-Group Local Edeka (Supermarkets) 31,552 7,908 nationwide Netto (Discounter) 11,157 4,000 nationwide Rewe-Group Local Rewe (Supermarkets) 15,485 2,994 nationwide Penny (Discounter) 6,824 2,400 nationwide Metro-Group Local Real (Hypermarkets) 6,764 331 nationwide Metro (Cash & Carry) 4,358 123 nationwide Schwarz-Group Local Lidl (Discounter) 12,956 3,200 nationwide Kaufland (Hypermarkets) 10,280 563 nationwide Aldi-Group Local Aldi Süd (Discounter) 11,234 <1,800 Southern Germany Aldi Nord (Discounter) 9,020 <2,500 Northern Germany Lekkerland (Wholesaler) Local 7,601 19 nationwide Tengelmann-Group Kaisers (Supermarket) Local 2,050 710 nationwide Source: Euromonitor, Lebensmittelzeitung Section III. Competition Germany is increasingly dependent on supplies of bulk and intermediate products (like seafood, fruit juices, swine, fresh produce, nuts, etc) from other EU member states and third countries. Germany also depends especially on Southern Hemisphere countries for year-round supplies of fresh fruit and vegetables. Another reason why importers and food distributors turn to foreign markets is the search for unique products. U.S. beef, fruits, nuts, sweet potatoes, and a full range of specialty food products have gained popularity over the years. Competition for U.S. exports Product category Main suppliers in Strengths of Key supply Advantages and Disadvantages of Total Import in million percentage, 2011 countries Local Suppliers US$, 2011 PG 30 Breakfast Cereals 1. France 16.3 Distance, availability and Developed processed food industry 2. Netherlands 14.9 regional products 256 3. United Kingdom 12.5 16. U.S. 0.2 PG 31 Snack Foods 1. Netherlands Distance, availability and Developed confectionary industry 23.3 regional products 3,258 2. Belgium 22.3 3. Poland 8.3 4. U.S. 0.2 HS 02: Meat 1. Netherlands Distance and availability Focus on dairy production instead 8,094 22.5 of beef production. Genetics need 2. Belgium improvement 13.7 3. Denmark 11.1 18. U.S. 0.8 HS 03: Fish and 1. Poland 1,2: Distance and Tradition in seafood trading and Crustaceans 14.3 availaibility processing, fish is popular 4,294 2. Denmark 3: Price/quality ratio 12.5 3. China 12.2 6. U.S. 5.5 HS 04: Dairy Produce; 1. Netherlands Proximity Great tradition of milk and milk Birds Eggs and Natural 31.3 based products Honey 2. France 8,625 14.5 3. Austria 7.7 33. U.S. 0.1 HS 07: Edible vegetables 1. Netherlands 1: Proximity Products not sufficiently available 6,444 38.1 2,3: Tradition, different on local market 2. Spain climate/ supply/ taste/ 20.3 varieties 3. Italy 9.0 19. U.S. 0.3 HS 08: Edible Fruits and 1. Spain 1,3: Tradition, different Products not sufficiently available Nuts 19.4 climate/ supply/ taste/ on local market 9,055 2. Netherlands varieties 18.7 2: Proximity 3. Italy 12.7 6. U.S. 4.8 HS 09: Coffee, Tea, Mate 1. Brazil Trading tradition No domestic availability, Re-export and Spices 29.2 6,401 2. Vietnam 8.4 3. Peru 7.2 35. U.S. 0.2 HS 16: Edible 1. Netherlands 1,3: Proximity Not sufficiently domestically Preparations of Meat 15.4 3: Price/quality ratio available Fish, Crustaceans 2. Brazil 2.966 10.7 3. Poland 10.4 30. U.S. 0.2 HS 19: Preparation off 1. Italy Proximity and re-export Not sufficiently domestically Cereals, Flour, Starch or 30.6 available Milk 2. France 1,493 12.9 3. Netherlands 11.9 29. U.S. 0.1 HS 20: Preparations of 1. Netherlands Proximity Not sufficiently domestically Vegetables, fruits, Nuts 22.1 available 5,689 2. Italy 12.8 3. Belgium 9.0 19. U.S. 0.6 HS 21: Miscellaneous 1. Netherlands Proximity and re-export Not sufficiently domestically Edible Preparations 18.3 available 3,034 2. France 13.0 3. Italy 9.1 11. U.S. 1.6 HS 22: Beverages, Spirits, 1. Italy Excellent regional Not sufficiently domestically Wine and Vinegar 20.7 products available 8,679 2. France 20.5 3. Netherlands 11.3 8. U.S. 4.7 Source: Section IV. Best Product Prospects Product Category Total German U.S. Import Market attractiveness for USA German Imports Growth in Imports from the 5 years 2011 in U.S. in (2007- millions of millions of 2011)* U.S. $ U.S. $ Fish and Seafood 5,146 257 -1% The German market offers lucrative Products opportunities for fish and seafood products. Fish consumption is growing as consumers associate fishery products with a healthy diet. Best prospects for U.S. and seafood exports are salmon, (lobster), shrimps, crabs, caviar substitutes, catfish and scallops Tree Nuts 1,539 298 14% The United States is the biggest supplier of tree nuts to Germany. Most tree nuts are used as ingredients by the food processing sector. Almonds are the most important commodity within this category. Further products with good sales potential include hazelnuts, pistachios, pecans and walnuts. Wine and Beer 3,902 98 42% Germany has a high share of domestic wine production. However, good prospects exists for “new world wines” including those from the U.S. Pet Foods (Dog and 861 1.6 -22% Sales of cat food have the biggest market Cat) share. U.S. exports are declining but potential exists for premium pet food. Processed Fruits and 3,295 33 11% German imports are slowly increasing. Those Vegetables products are mostly used as ingredients by the food processing sector for the production of pastries and cereals. Dried fruits and prepared nuts are also popular as a snack. Snack Foods (Excl. 3,257 6.5 12% German demand for healthy, organic, Nuts) innovative, and exotic snacks continues to grow. Red Meats 5,541 68 2439% Good opportunities for U.S. high quality beef Fresh/Chilled/Frozen produced without growth promotants. The EU quota size and administration system have recently see changes.; * Due to the global financial crisis most import volumes peaked in 2008. U.S. imports have recovered slowly. Some products like pet foods and fish still haven’t reached pre-crisis levels. Category A: Products Present in the Market That Have Good Sales Potential Tree nuts Wine Processed fruits and vegetables Fruit juices Snack foods Health food, organic food, sustainable food products Dried fruits Category B: Products Not Present In Significant Quantities but Which Have Good Sales Potential High quality beef (produced without promotants) Cranberries and cranberry products Seafood and seafood products Game and exotic meat Innovative sauces, condiments and confectionary products Products featuring ‘sustainable’ or other social issue-based marketing theme Category C: Products Not Present Because They Face Significant Barriers Poultry (non-tariff barrier) Processed food with GMO ingredients, bleached flour Section V. Post Contact and Further Information Internet home pages of potential interest to U.S. food and beverage exporters are listed below: USDA/FAS/Berlin U.S. Mission to the European Union FAS/Washington European Importer Directory If you have questions or comments regarding this report, or need assistance exporting to Germany, please contact the U.S. Agricultural Affairs Office in Berlin at the following address: Foreign Agricultural Service U.S. Department of Agriculture Embassy of United States of America Clayallee 170 14195 Berlin, Germany Tel: (49) (30) 8305 – 1150 Fax: (49) (30) 8431 – 1935 Email: Home Page: Please view our Home Page for more information on exporting U.S. food and beverage products to Germany, including market and product “briefs” available on specific topics of interest to U.S. exporters. Importer listings are available from the Agricultural Affairs Office for use by U.S. exporters of U.S. food and beverage products. Recent reports of interests to U.S. exporters interested in the German Market include: Report Title Report Number Month Report was written Exporter Guide GM 1019 August 2011 FAIRS Report GM 12006 January 2012 Biotech Report GM 12012 May 2012 Attachment I Key German Contacts for the Food Retail Trade Note: While it is impractical to provide a complete list, this partial list is for your information only with the understanding that no discrimination is intended and no guarantee of reliability implied. Aldi Einkauf GmbH & Co. oHG - Sued Burgstrasse 37 45476 Muelheim/Ruhr, Germany Fax: (0049) 1803 252722 Homepage: Aldi Einkauf GmbH & Co. oHG - Nord Eckenbergstrasse 16 45307 Essen, Germany Fax: (49-201) 859 33 19 Homepage: EDEKA Zentrale AG & Co. KG New-York-Ring 6 22297 Hamburg, Germany Tel: (49-40) 63 770 Fax: (49-40) 63 77 22 31 Homepage: EHI Retail Institute e.V. Spichernstrasse 55 50672 Koeln, Germany Tel: (49-221) 57 99 30 Fax: (49-221) 57 99 345 Homepage: Organization representing the retail sectors; German counterpart of FMI. Globus SB Warenhaus Geschaeftsfuehrungs-GmbH Leipziger Strasse 8 66606 St. Wendel, Germany Tel: (49-6851) 90 90 Fax: (49-6851) 90 96 00 Homepage: KaDeWe Kaufhaus des Westens Tauentzienstrasse 21-24 10789 Berlin, Germany Tel: (49-30) 212 10 Fax: (49-30) 211 01 90 Homepage: KaDeWe is the flagship of the Karstadt department store chain. It is comparable to Harrods in London and claims to have the biggest food & delicatessen department in Europe. Lekkerland GmbH & Co. KG Europaallee 57 50226 Frechen, Germany Tel: (49-2234) 182 10 Fax: (49-2234) 182 14 45 Homepage: Lidl Stiftung & Co. KG Einkauf International Stiftsbergstrasse 1 74167 Neckarsulm, Germany Tel: (49-7132) 94-2000 Homepage: Markant Handels und Service GmbH ZHG Ware Hanns-Martin-Schleyer-Strasse 2 77656 Offenburg, Germany Tel: (49-781) 61 60 Fax: (49-781) 616166 Homepage: MGB METRO Group Buying GmbH Schlueterstrasse 1 40235 Duesseldorf, Germany Tel: (49-211) 68860 Fax: (49-211) 6886-2000 Homepage: REWE-Zentral AG Foreign Trade Dept. - HWA - Domstrasse 20 50668 Koeln, Germany Tel: (49-221) 1490 Fax: (49-221) 149 93 71 Homepage: Tengelmann Warenhandelsgesellschaft Unternehmenszentrale Wissollstrasse 5-43 45478 Muelheim/Ruhr, Germany Tel: (49-208) 580 60 Fax: (49-208) 5806-6401 Homepage:
Posted: 31 August 2012

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