Germany Food and Drink Report Q3 2008

Demand for Germany’s technologically-advanced exports in rapidly industrialising emerging markets has pushed Germany’s rate of GDP growth above 2.5% over the past two years. This is much higher than the recent average and there are now signs that this relatively strong economic performance is starting to feed into consumer confidence and push up spending on food and drink products, which in real terms had been in long term decline. However, these phenomena may be short lived as rapid inflation and the significant slowdown in the US economy are both likely to damage confidence and could curtail spending.

Unlike in previous years Germany’s Mass Grocery Retailers (MGRs) generally reported strong results for 2006 and 2007. In April the country’s largest retailer, Edeka, reported that its revenues climbed by 4.4% in 2007 and Edeka’s chairman claimed that 2007 was the most successful year in the firm’s history. The country’s second largest retailer Rewe is also expected to report strong growth for 2007 in keeping with its results for 2006 when it reported growth of 4.3%. This growth in 2006 can be compared to the period between 2002 and 2005 when the firm’s domestic growth averaged a measly 0.3%.

Per capita food consumption in Germany has therefore returned to growth after a long period of stagnation and this trend has prompted retailers to stock more products that cater to consumers willing to pay premium prices. For example Rewe has launched a new premium private-label brand with the name ‘Rewe Exklusiv’ and has announced that all of its full-range supermarkets will stock more regional products which will appeal to upmarket shoppers interested in eating local specialities.

So far in 2008 this rate of spending has held up; however, two factors look like they could undermine the sector’s recent strength. Firstly the global rise in food prices threatens to undermine consumer confidence. The very high levels of price competition in Germany mean that both retailers and producers are already working with wafer thin margins and therefore neither has the ability to shield consumers from the recent commodity price rises. This has meant that the rate of food inflation in Germany has been the second highest in Europe behind only Spain. If prices continue to rise at this rapid rate demand for premium quality food and drink products is likely to fall away as consumers again start to focus purely on price.

A second, perhaps more serious, issue is the recent decline in the US economy. Germany’s economy is particularly dependent on exports and the US is Germany’s second largest export market. In addition a recession in the US is likely to reduce demand for Germany’s exports across the world, especially in countries that are also heavily reliant on trade with the US. There are already signs that Germany’s rate of economic growth in 2008 will be much lower than in 2006 and 2007 and this will surely have an affect on consumer spending. If the US manages to avoid a recession and returns to a reasonable level of growth by 2009 then Germany’s food and drink producers may escape relatively unscathed. However, if the US does enter a sustained period of economic contraction then the recent strength of Germany’s food and drink sector is likely to be severely undermined. SHOW LESS READ MORE >

Executive Summary 7
Business Environment 8
Western Europe Food & Drink Business Environment Ratings 8
Table: Western Europe Food & Drink Business Environment Ratings Q3 2008 11
Table: Global Food & Drink Business Environment Ratings – Germany’s Peer Group 13

SWOT Analysis 14
Food And Drink 14
Germany Food And Drink Industry SWOT 14
Mass Grocery Retail 15
Germany Mass Grocery Retail Industry SWOT . 15
Macroeconomic Outlook 16
Table: Germany Macroeconomic Forecasts 18
Food .19

Industry Forecast Scenario 19
Food Consumption 19
Table: Germany Food Consumption Indicators – Historical Data & Forecasts 20
Confectionery 20
Table: Confectionery Value/Volume Sales – Historical Data & Forecasts 21

Industry Developments 22
Market Overview 24
Food Production 24
Prepared Food 24
Dairy 24
Meat and Fish 25
Drink 26

Industry Forecast Scenario 26
Soft Drinks And Bottled Water 26
Table: Soft Drink Value Sales – Historical Data & Foreca 26
Alcoholic Drinks 26
Table: Alcoholic Drink Value/Volume Sales – Historical Data & Forecasts 28
Hot Drinks 28
Table: Hot Drink Value Sales – Historical Data & Forecasts 29
Industry Developments 30
Market Overview 31
Soft Drinks 31
Alcoholic Drinks 31
Agriculture At A Glance 32
Table: Germany’s Agricultural Sub-Sector, Production. 32
Table: Germany Organic Agricultural Data 32
Table: Germany Dairy Industry Data 32
Agricultural Commodity Price 33
Mass Grocery Retail 34
Industry Forecast Scenario 34
Table: Germany MGR Sector – Sales Value By Format (US$bn) – Historical Data & Forecasts 35
Grocery Retail Sales By Format – Historical Data And Forecasts 35
Industry Developments 35
Market Overview 37
Table: Structure Of Germany's Mass Grocery Retail Market By Estimated Number Of Outlets 39
Table: Sales Format By Value In Germany's Mass Grocery Retail Market (US$bn) 39
Table: Annual Average Sales Per Outlet By Format (US$mn) – 2007 40

Competitive Landscape 41
Key Players 41
Food And Drink 41
Table: Key Players In Germany's Food & Drink Sector (2006) 41
Mass Grocery Retail 42
Table: Key Players In Germany's Mass Grocery Retail Se 42
Company Analysis 44
Food 44
Oetker Group 44
Nordmilch Group 45
Drink 46
Emig GmbH & Co KG (GerberEmig Group) 46
Radeberger Group 47
InBev Germany 48
Mass Grocery Retail . 49
Lidl Group 49
Rewe Group 50

Deep US Recession Scenario 51
Global Scenario 51
Table: World GDP Growth 51
Table: US GDP Growth, Investment Growth And Private Consumption Growth 52
Table: Eurozone GDP Growth 53
Table: Asia, Excluding Japan, GDP Growth 54
Table: China GDP Growth 55
Table: Mexico GDP Growth 55
Table: Africa GDP Growth 56
Western Europe Recession Scenario 57
Table: Impact Of Deep US Recession On Total Food Consumption In Selected Western European Markets – Cumulative Difference Between
Core And Recession Scenarios (%) . 58

Appendix 60
Food & Drink Business Environment Ratings 60
Ratings Methodology 60
Ratings Overview 60
Ratings System 60
Indicators 60
Limits Of Potential Returns 61
Risks To Realisation Of Potential Returns 62
Weighting 63
Weighting 63
BMI Food & Drink Industry Glossary 64
Food & Drink 64
Mass Grocery Retail 64
BMI Food & Drink Forecasting & Sourcing 66
How We Generate Our Industry Forecasts 66
Sourcing 67

- Oetker Group
- Nordmilch Group
- Drink
- Emig GmbH & Co KG (GerberEmig Group)
- Radeberger Group
- InBev Germany
- Mass Grocery Retail
- Lidl Group
- Rewe Group