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Germany Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 70
Germany Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Germany's food and drink industry.
Industry View: The German economy contracted by 5% in 2009, representing one of the sharpest declines in Western Europe. However, fortunes turned once again in 2010 and the spillover of Germany's impressive economic rebound into the second half has prompted the authors to revise up their 2010 real GDP growth forecast to 3.2% from 2.8%. Further ahead, however, BMI continue to expect a moderation in German economic activity, as the country's export reliance and weak private consumption levels will begin to bite. Indeed, they already expect a gradual cooling of the German economy in Q410 and continuing into 2011, which will keep real GDP growth below the 2.0% mark.
Headline Industry Data
- 2011 per capita food consumption = +2.9%; forecast to 2015 = +11.6%
- 2011 alcoholic drink sales = -0.6%; forecast to 2015 = +2.4%
- 2011 soft drink sales = +2.1% ; forecast to 2015 = +8.2%
- 2011 mass grocery retail sales = +4.8%; forecast to 2015 = +17%
Key Company Trends
German Bakeries Hit Hard Times– Italian food giant Barilla has recently announced that it is to offload its German bakery chain Kamps to ECM Equity Capital Management, a private equity group that invests in small and mid-size business in German speaking Europe. The chain generated sales of about EUR300mn in 2009 and is part of the Kamps bakery group, subsequently renamed Lieken, which Barilla bought for EUR1.8bn in 2002. Barilla will retain the company's industrial bread unit that now generates the majority of the bakery's sales. The divestment comes at a time when sales of bread through bakeries are declining as consumer shopping habits change and will allow Barilla to concentrate on its better performing units.
Emphasis on Supermarket Sector – The country’s leading retailer Edeka has recently confirmed plans to open 200 full-range supermarket outlets over the course of 2011, while second placed Rewe said it will open more than 120 of its eponymous supermarket stores during the year. This focus on the supermarket segment is likely to be partly at the expense of the 'no-frills' discount format and can be partly attributed to the strength of the German economic recovery, which has been among the strongest performers in Western Europe in 2010. Edeka Chief Executive Markus Mosa said that the country offers business opportunities to independent merchants for managing attractive grocery stores.
Key Risks to Outlook
Slowdown in China – As an export driven economy the major risk to the German outlook is the prospect of a more intense slowdown in China than BMI are currently forecasting. Chinese demand for Germany's exports have helped drive the country's recovery in 2010. However, overly accommodative fiscal and monetary stimuli in China have led to an overheating that could result in a sharp withdrawal in 2011. Even if China manages to avoid this scenario, BMI are projecting a slowdown in Chinese import levels towards the latter stages of 2010, as Beijing recognises the need to rebalance the economy towards domestic consumption.
Eurozone debt crisis – A second risk is the prospect of further instability in the eurozone as a result of the unsustainable debt levels built up by some member countries. With the eurozone economy facing a difficult period of fiscal austerity programmes, persisting fears of a renewed sovereign debt crisis in the bloc's periphery and a softening economic recovery in the US, BMI believe that the outlook for a weaker 2011 will increasingly feed through to the main leading indicators in Germany, pointing towards real GDP growth below the 2.0% mark.
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