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Germany Food and Drink Report Q2 2009
Business Monitor International, April 2009, Pages: 74
Germany Food and Drink Report provides independent forecasts and competitive intelligence on Germany's food and drink industry.
The Berlin-based HDE foundation has that German retail sales increased by about 1% in the period between November 30 2008 and January 3 2009, bucking a general downwards trend in consumer spending across Western Europe. HDE reports that this growth was driven by demand for higher-priced gifts and reflects Germany’s good employment situation when compared with many other parts of the EU. Resilient consumer spending is likely to be reflected in food and drink consumption over the period. However, retail sales growth of just 1% still suggests that German consumers are looking for ways to make their money go further
These resilient sales figures reflect the fact that German consumers have lower levels of debt, and higher savings, than their contemporaries in other parts of the EU and the US. In addition the German housing market has not been artificially inflated, as it has in Spain, the UK and the US, and Germany has not yet experienced the mass-layoffs seen in many other developed markets. However, this positive sales data comes against a negative economic backdrop. The German economy fell into a recession in Q208 and we expect it to contract by more than 3% in 2009. Meanwhile, unemployment is expected to rise from 7.8% in 2008 to 9.3% in 2009 and this increased insecurity in the jobs market is likely to eventually filter through to spending with more consumers choosing to save rather than spend.
However, Germany’s export based economy is believed to be fundamentally strong and expected to emerge from the downturn more quickly than others in Western Europe. We are therefore forecasting a return to GDP growth in 2010 and strong growth in 2011. This is expected to be accompanied by an upturn in private consumption and as a reflection of this, two of Germany’s largest retailers have revealed that they will continue to invest in new stores.
Edeka, which is Germany’s largest grocery retailer by sales, has announced plans to open around 1,000 new stores by the end of 2010. Meanwhile, Rewe, Germany’s second-largest grocery retailer, has confirmed plans to open an additional 750 outlets by 2014. This dual focus on both full-service supermarkets and discount stores reflects the current market conditions, with the discount format likely to provide the best returns in the short term while consumer confidence is low, but with the supermarket format likely to bounce back once the economic climate improves.
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