The status of the German Food Industry

During an Anuga press conference on September 20th, Sabine Eichner, Managing director of the Federation of the German Food and Drink Industry made the following statements on the status of the German Food Industry: 

In the first nine months of 2011, turnover in the german food sector will reach ¤122 billion euros, according to projections made by the Federation of German Food and Drink Industries (BVE). 

The sizable nominal growth of 9% compared to the same period of last year is primarily due to strong momentum in the export business and price increases based on higher raw material costs. Adjusted for price increases, turnover increased by 2.4%. 

International success for German foods 

For years, exports have been the engine of growth for the food industry. German food exporters increased sales by 11.5% in the first three quarters of 2011 for a record turnover of ¤33.9 billion. They greatly expanded their market presence, especially outside the EU, for example in Russia. 

The positive expectations expressed by export managers in the "Export Barometer of the German Food Industry"of May 2011 thus appear to have been fulfilled. 

Over the past ten years, the international business operations of the food industry have doubled and now make up about 28% of total sales. The most important export products include those of the meat and dairy industries, which make up 20% and 16% of the total, respectively. Confectionery accounts for 12%, followed by beverages at 8%. 

About 80% of German food exports are sold in the EU. There is still room for growth outside the EU. For instance, positive developments are beginning to take place in Switzerland, which has made importing from the EU easier as of 1st July 2010. German manufacturers are also increasingly gaining market share in Russia, the U.S. and China. Exports to these countries increased by double digits in the first six months of 2011. 

The presence of exporting manufacturers at Anuga, the leading global trade fair for food and beverages, will help to further strengthen their business ties abroad. 

Food market suffers from rainy summer 

Food manufacturers consider the current business conditions in Germany to be worse than those in the spring of 2011. The rainy summer made it more difficult to sell typical seasonal goods. Whether it was meat and ingredients for grilling, beer, soft drinks and mineral water, or ice cream - consumers simply have much less need for these products when the weather is bad. In terms of quantity, sales therefore fell by 10 to 30% for these sectors. 

Raw materials remain a source of concern 

Companies continue to struggle with high prices for agricultural commodities and the resulting pressure on profits. In September 2011, prices for the most important raw materials were still a third higher than a year ago, according to the Hamburg Institute of International Economics (HWWI). The harvests in Germany in 2011 have in many cases been disappointing, especially for wheat and barley. Raw material costs therefore remain a major challenge for companies. 

Nevertheless, consumers have no need to worry. In August 2011, consumer prices for foods and non-alcoholic beverages were 3.0% higher than in August 2010. In contrast to the trend of the preceding months, prices even decreased slightly in August 2011 (-0.6%). 

The international food supply will be the focus of the "Business Leaders' Initiative", which consists of the Federation of German Food and Drink Industries (BVE), the German Farmers' Association (DBV), the German Agricultural Society (DLG), the Committee on Eastern European Economic Relations (OA) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (German Society for International Cooperation - GIZ). 

At Anuga on 9th October 2011, the group will hold its first event on the topic "Food Security: A Global Challenge for Business Leaders and Governments". In addition to other leading figures from government and industry, German Federal Minister Ilse Aigner is expected to attend. 

Business expectations 

The August 2011 Ifo Business Climate Index indicates that companies in the food industry are expecting stable business conditions and continued high cost pressure in the next six months. Almost 20% of the companies are expecting modest job cuts in the coming months. Expectations remain positive concerning the export business this year. 

The prerequisite for stable business growth in the food industry is a positive mood among consumers. Despite the crisis involving the euro and international debt, consumer attitudes in Germany have so far dimmed only slightly. Although consumers are aware of economic risks in general, they remain satisfied with their personal situations. This is due primarily to the good situation in the labour market. 

Market trend toward quality 

German consumers are putting more emphasis on quality when they go shopping for food. This trend, which has been apparent for a long time, is becoming firmly established. When it comes to which factors they consider when shopping, consumers rate quality just as highly as price, according to GfK Panel Services Deutschland. 

This presents the food industry and the food trade with opportunities for more value creation. On 7th October 2011, the BVE and the market research firm GfK will introduce the study "Consumers' Choice 2011", which deals with the "consumer focus on food quality: opportunities for the food industry and trade"and examines the attitudes of 30,000 surveyed households toward food quality. 

Consumer policy 

The food industry provides consumers with up to 160,000 different products - an assortment of hitherto unrivalled variety, quality and safety from which everyone can select food that is healthy and appeals to his or her taste. According to the Allensbach Institute, 85% of Germans rate the quality of their food as good to very good. 

Nonetheless, a few NGOs have promoted a general suspicion that the food sector intends to cheat the consumer in a variety of ways. Policymakers are reacting with populist measures that put an extra burden on businesses and restrict their rights. 

In the view of the business community, for example, the Internet portal "Lebensmittelklarheit", which has been financed with ¤750,000 of the taxpayers' money, is a public pillory in which the legal products of a whole business sector can be placed if they fail to meet the subjective taste of individual consumers. 

The business community is very concerned about these developments in consumer policy, because legally unobjectionable products are being publicly run down by an entity that has not been properly legitimised, with all the associated negative consequences for the company involved and its jobs. 

The food industry has a keen interest in improving "food knowledge"among the general population. It offers consumers a diverse range of information about its products, how they are manufactured, and where they come from, and it maintains a constant dialogue with its customers and the consumer organizations.