the food & beverage industry in germany · were savory snacks and fine pastries. other growth...
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INDUSTRY OVERVIEWThe Food & Beverage Industry in Germany
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THE FOOD & BEVERAGE INDUSTRY IN GERMANY
GERMANY: EUROPE’S FOOD AND BEVERAGE MARKET LEADER
For many, German cuisine still conjures up images more hearty than haute. Yet, the reality is, that the German national diet is far more diverse than pre-vailing cliches would lead to believe. Europe’s larg-est food and beverage market offers much more for consumers and producers alike. Highly recep-tive to new cultural influences and culinary trends, the German food and beverage market offers busi-ness opportunities on all fronts. Germany’s food in-dustry is not only driven by a commitment to deliver the very best, but also by a desire to actively respond to changing consumer wants and needs. Increas-ing health awareness, an aging population, and the resulting demand for health and wellness products
have helped a number of previously niche market actors to become significant industry players. De-mand for functional foods alone has established Germany as a European leader, with the organic food segment experiencing an increase of some 250 percent in sales within a decade. Germany stands at the fore-front of food and beverage market development as it rises to meet the international challenge of increased demand for safe and healthy foodstuffs.
THE INDUSTRY IN NUMBERS
EUROPE’S LARGEST MARKETAround 82 million consumers help make Germany the largest food and beverage retail market in Europe. Total food retailing revenue reached EUR 180.4 billion in 2013. Other important distribution channels include food ser-vice sales (EUR 69.4 billion) and exports (EUR 53.6 bil-lion).
MAJOR INDUSTRY SECTORSGermany’s food and beverage industry is the fourth larg-est industry sector in Germany – generating production value of EUR 175.2 billion in 2013; this being a four per-cent increase on 2012 sales. The industry is best char-acterized by its small and medium-sized enterprise sec-tor of around 6,000 companies employing a workforce of around 560,000.
The largest industry segments by production value are meat and sausage products (23 percent), dairy products (16 percent), baked goods (9 percent), and confectionery (8 percent). Single to two-digit growth was recorded in the sugar, coffee and tea, alcoholic beverages, and meat and meat products segments.
Leading companies include well-known brand names such as Nestlé, Dr. Oetker, Vion Food Group, Tchibo, Co-ca-Cola, and Mondelez International. R&D and innova-tion spending in the German food and beverage industry is projected to reach more than EUR 2.4 billion in 2014.
INTERNATIONAL TRADEIn 2013, exports of processed foods and agricultural commodities generated EUR 64.2 billion in sales. More than 30 percent of all processed foods made in Germany are exported (79 percent to other EU member states). The country is a net importer of food and beverage prod-ucts and thereby the most important European market for foreign producers. Processed foods and agricultural commodities to the value of around EUR 71.5 billion were imported in 2013.
RECENT INVESTMENT PROJECTSCurrent significant investments in the industry include Nestlé’s plans to erect a Dolce Gusto production plant in Schwerin (Mecklenburg-Vorpommern). The EUR 220 million factory investment will include 12 production lines, producing two billion coffee capsules a year as of summer 2014. Four hundred fifty new jobs will be cre-ated in the northeast region of Germany.
Danish dairy group Arla will invest EUR 16.9 million in a creamery at its location in Pronsfeld (Rheinland-Pfalz) in the west of Germany. The project is part of a larger German investment program amounting to EUR 40 million.
Bonduelle, a French company producing processed veg-etables, is investing EUR 6 million in the extension of its site in Straelen, North Rhine-Westphalia, almost dou-bling the production area. The factory, operated around the clock, is considered the most modern lettuce pro-cessing plant in Europe.
MARKET OUTLOOKIndustry analysts expect a positive market develop-ment for 2014 and beyond, with growing demand for convenience, health, and wellness food products. The domestic food and beverage sector has profited from the strong German economy and low unemployment. Regionally sourced or produced foods and growing ex-ports will support the industry in the years to come.
In 2013, food service market sales increased by two percent on the previous year’s results, continuing the trend of recent years. It is expected that the market will also record growth in 2014 and beyond. The market is driven by a growing popularity of fast casual restau-rants such as Mediterranean style and “better burger” concepts.
Industry Overview 2014/15 www.gtai.com
3
German Food and Beverage Industry Production Value 2010-2013
Source: BVE 2014.
Domestic sales International sales Export rate
250
200
150
100
50
0
35
30
25
20
15
10
5
0
Prod
uctio
n valu
e (in
EUR
billio
n)
Export rate (in percent)
42.8
109.0
151.851.2
118.1
169.3
53.6
121.6
175.228.7 29.5 30.5 31.0
48.4
115.0
163.4
2010 2011 2012 2013
MARKET SEGMENTATION
BAKED GOODS
MARKETFuelled by an annual per capita consumption of bread and fine pastries of around 85 kg, Germany is the Euro-pean leader in the production of bread and rolls. In 2013, the industry generated sales of EUR 13.2 billion. Bread production reached 6.6 million tons in 2012. The German biscuit market had a market value of EUR 2.1 billion in 2012 (2.1 percent increase), with chocolate cookies the largest subsegment (21 percent), followed by butter-based biscuits (18 percent), and cream-filled cookies (14 percent). An average annual market growth of 1.6 percent is predicted until 2017.
COMPETITIVE LANDSCAPEAlthough the overall number of companies operating in the German baked goods industry has been decreas-ing for years due to an ongoing consolidation trend, the industry remains home to a wealth of market actors, being made up of SMEs and leading multinational play-ers alike.
OPPORTUNITIESThe baked goods segment has firmly established itself in the German retail consumer market. In 2012, arti-sanal bread and rolls sales accounted for 61 percent of the German bread market, followed by industrial products (33 percent), and in-store bakeries (6 percent) respectively. Artisanal production is increasingly be-ing replaced by industrial production. In-store bakeries are also expected to continue to grow. Further growth potential rests on niche and trend products such as Mediterranean, gluten-free products, and convenience baked goods. Forecasts show that the domestic market for bread and rolls will grow by six percent by 2017.
DAIRY PRODUCTS
MARKETGermany is Europe’s largest dairy producer. With milk production volume of 31 million tons in 2013, the country ranks sixth globally. A total production value of around EUR 21 billion, and some 30,000 workers at more than 150 German dairy processors help make the German dairy industry the country’s second largest food and bev-erage sector.
The milk, cheese, and fresh dairy products produced by the German dairy industry make a major contribution to the well-being of German consumers, underpinning the sector’s important role in the promotion of a healthy lifestyle. Milk derivatives such as casein, whey, and milk powder are used in a number of food sectors as ingredi-ents in a large variety of products.
COMPETITIVE LANDSCAPEThe German dairy industry is largely made up of small to medium-sized players and can still be regarded as frag-mented: the top three players holding only 26 percent of the total market value. As such, international companies can enter the marketplace more easily, although indus-try analysts predict an increasing consolidation trend to-wards fewer but larger companies in the future.
OPPORTUNITIESThe dairy industry is one of Germany’s most innovative food and beverage industry sectors. Companies are con-stantly improving existing products through the applica-tion of new technologies and innovations. The dairy in-dustry has been quick to respond to increased consumer demand for functional foods. The trend for health and wellness food products provides excellent growth op-portunities; not just for dairy products using functional ingredients, but also for producers with a focus on natu-ral ingredients such as calcium or reduced-fat formulas for yogurts or desserts.
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MARKET OPPORTUNITIES
The Food and Beverage Industry by Segment 2013
Source: BVE 2014.
Meat 23.3%
Dairy 16.2%
Baked goods 8.8%Confectionery 7.7%
Alcoholic beverages 7.3%
Processed fruits & vegetables 5.7%
Convenience foods & others 5.1%
Non-alcoholic beverages (incl. mineral water) 4.4%
Edible oil & fats 4.0%
Mill products, starch 3.6%Seasonings & sauces 2.4%
Coffee & tea 2.3%Sugar 2.1%
Others 5.9%Fish 1.2%
Total production value EUR 175.2 billion
Industry Overview 2014/15 www.gtai.com
CONFECTIONERY AND SNACKS
MARKETHigh innovation levels and low barriers to new product market entry have helped create a EUR 12.5 billion con-fectionery and snack production market in 2013. The leading segments in terms of market value are cocoa and chocolate products (EUR 6.6 billion), fine pastries (EUR 2.4 billion), and sugar confectionery (EUR 2.0 billion). Average annual confectionery per capita con-sumption exceeded 32 kg (equivalent to EUR 113).
COMPETITIVE LANDSCAPEAlthough the top three market actors in the German confectionery industry occupy around 40 percent of the total market value, the industry is fairly fragmented. The broad palette of brands available (differentiated in quality and price terms) is such that consumer power is not the determining factor in this market. Germany’s attractive and competitive location factors are under-pinned by an above average export rate of around 45 percent, which makes Germany the world’s confection-ery export champion – considerably ahead of the Neth-erlands and Belgium (with just half of German export volume respectively).
OPPORTUNITIESInternational confectionery producers slightly in-creased their export share to Germany to reach EUR 3.6 billion. The segments experiencing the fastest growth were savory snacks and fine pastries. Other growth segments are powered by the health and wellness trend, which has led to increased demand for fat-free, low-sugar, and sugar-free confectionery.
BEVERAGES
MARKETGermany is Europe’s largest market for soft drinks and alcoholic beverages. In 2013, the average per capita consumption of soft drinks and mineral water reached 126 liters and 145 liters respectively. In the same year, non-alcoholic beverages accounted for EUR 11.1 billion in retail sales, whereby mineral waters (EUR 2.2 bil-lion), cola and mixed cola drinks (EUR 1.7 billion) were among the most important categories. Segments with above average growth included calorie-free cola drinks and fruit juice drinks.
Germany is Europe’s leading alcoholic beverages mar-ket – around 16 percent of all alcoholic beverages con-sumed in Europe are sold in Germany. With almost half of the market share, beer and flavored alcoholic bev-erages represent the largest subsegment, followed by spirits (29 percent), and wines (23 percent) respectively.
COMPETITIVE LANDSCAPEAlthough a number of major international players are present in the German soft drinks market, the industry is highly differentiated. Like the German soft drinks in-dustry, the alcoholic drinks market is diversified, with the top three companies generating only one third of total sales. This makes the German alcoholic beverage market an attractive business proposition – particularly for niche or value-added products.
OPPORTUNITIESFollowing the health and convenience megatrend, the in-dustry offers opportunities in segments and niche seg-ments such as functional drinks, smoothies, enhanced water, and organic beverages in particular. Compa-nies new to the market also have the chance to record smaller scale successes by stressing health benefits or unique production methods. Current growth categories in the alcoholic beverages sector include beer mixed drinks, fruit brandies, and alcohol-free beers. Changes in consumer preferences have also led to a higher con-sumption of organic wines, beers, and spirits.
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Confectionery and Snack Production by Value 2013
Source: BDSI 2014.
Chocolate products
Fine baked goods
Sugar products
Snack products
Ice cream
Cocoa & chocolate semi-finished products
Cocoa-containing food preparations
Others
Confectionery and snack (overall)
Value (in EUR billion)
5.5
2.3
1.8
0.8
0.7
0.6
0.6
0.3
12.6
MEAT AND SAUSAGE PRODUCTS
MARKETThe meat and sausage products industry is the largest segment in Germany’s food industry. In 2013, it gener-ated sales of more than EUR 40 billion. The major seg-ments include pork (68 percent), chicken (18 percent), and beef (14 percent). With a total meat consumption of 88 kg per capita in 2013, including around 35 kg of sau-sage products, Germany is one of the most attractive markets in Europe.
COMPETITIVE LANDSCAPEThe German meat processing industry is character-ized by an ongoing consolidation trend. The top three industry players, for example, account for around 55 percent of all pig slaughtering. As overall competition in Germany can be regarded as strong, companies are prompt to develop new products and explore export markets (total exports reached EUR 11 billion in 2013). Some retailers follow a backward integration strategy and operate own slaughterhouses, putting additional pressure on processors.
OpportunitiesProduct segments gaining in popularity include sau-sages in glass or can, pre-packed meat, pre-packed barbecue and regular sausages. Although organically produced meat and sausage products remained niche markets in 2013, producers are shifting to organic pro-duction to meet growing consumer demand. Clear la-bel products as well as poultry sausage variations are gaining in popularity.
Besides organic production, the manufacture of meat products in accordance with halal requirements will become more important in Germany thanks to more than 4 million practicing Muslims.
FRUITS AND VEGETABLES
MARKETGermany’s fruit and vegetable market is of particular interest for foreign companies: just one fifth of con-sumed fruits and a third of consumed vegetables are locally sourced. More than half of Germany’s fruit im-ports come from Spain and Italy; France and the Neth-erlands follow in third and fourth places respectively. Consumer spending on fruit and vegetables (excluding juices) reached EUR 16.2 billion in 2012.
Fresh fruits (EUR 6.0 billion) and vegetables (EUR 5.7 billion) make up more than 60 percent of the overall sales value. Potato products account for EUR 2.2 bil-lion and mixed pickles for around EUR 0.6 billion. In 2012, fruit preparations (55 percent) and jellies and jams (28 percent) dominated the production of pro-cessed fruits. Canned vegetables (34 percent) and mixed pickles (33 percent) are the most important subsegments on the market for processed vegetables. Savory potato snacks (39 percent), frozen potato prod-ucts (26 percent), and cooked potato products (13 per-cent) are the top three single subsegments within the processed potato segment.
COMPETITIVE LANDSCAPEThe German fruit and vegetable industry is still frag-mented, although some companies are slowly entering a consolidation phase. With more than half of the mar-ket volume and a value share of 43 percent, discounters were the most important distribution channel for fresh fruit and vegetables in Germany in 2013.
OPPORTUNITIESGermany’s fresh fruit and vegetable consumption is considerably behind that of other European countries. Current consumer trends include convenience prod-ucts including pre-packed fruit and vegetable salads. Rising market prices and the abolishment of EU com-mon marketing standards increases the attractiveness of the market and eases sales in Germany.
6
Source: BLE, BMEL 2014.
Fruit and Vegetable Consumption in Germany by Volume 2012-2013
0 5 10 15 20 25
Apples
Bananas
Table Grapes
Peaches
Strawberries
Tomatoes
Carrots
Onions
Cucumbers
Red and White Cabbage
24.7 (-4.6%)
10.3 (-1.9%)
5.1 (-8.9%)
3.5 (-2.8%)
3.4 (-2.9%)
24.8 (-0.8%)
8.7 (+7.2%)
8 (-7.0%)
6.4 (-1.5%)
4.9 (-9.3%)
Consumption per capita (in kg, change over 2011-2012)
Industry Overview 2014/15 www.gtai.com
MARKET TRENDS
Recent consumer trends in the German food and bev-erage market have, above all, been influenced by a number of far-reaching changes in society: an aging population is fueling demand for health and wellness as well as functional food products to prevent or overcome conditions including diabetes, high blood pressure, and cholesterol. Healthy nutrition plays an important role in the lives of around 70 percent of the population.
The organic food movement has long since achieved mainstream status in Germany. More and more con-sumers are seeking to improve their sense of well-be-ing, health, and even their performance levels through the consumption of functional foods. An increasingly fast-paced society and the rising number of single households is driving demand for highly convenient foodstuffs including ready-to-eat meals, desserts, and baked goods.
Other trends include sales of fair trade products, such as coffee and fruit juices, which grew by 23 percent in 2013 – exceeding EUR 650 million in sales. Ethnic foods, beauty foods, and “free of” foods (e.g. lactose and glu-ten-free products) are further trends currently finding favor with Germany’s increasingly discerning consum-er base.
ORGANIC FOODSWith more than EUR 7.6 billion in organic food sales in 2013, Germany is a frontrunner in the production and consumption of organic food products, and by far the largest market in Europe followed by France (EUR 4 billion) and the UK (EUR 2 billion). Per capita sales in Germany of EUR 86 are more than twice as high as the EU-28 average of EUR 41.
Following several years of steady growth, organic food sales grew by more than seven percent in 2013. Although some of the growth can be explained by in-creased prices, some segments experienced signifi-cantly real volume growth. Among those organic food categories with significant growth levels are potatoes (17 percent increase), milk (11 percent increase), meat and meat products (11 percent increase), and fruits and vegetables (10 and 7 percent increases, respec-tively).
Other future growth segments include convenience foods, dairy products, confectionery, and non-alco-holic beverages variations to name but a few of the exciting areas of market opportunity. The rising de-mand for organic foodstuffs in the commercial cater-ing sector – although still nascent – is further driving the market.
7
Source: Bund Ökologische Lebensmittelwirtschaft 2014.
7.0 Germany
France
UK
Italy
Switzerland
Austria
Spain
Denmark
Sweden
Netherlands
Belgium
Norway
Domestic market sales (in EUR billion)
European Organic Foods Sales and Consumption by Country 2012
Germany
France
UK
Italy
Switzerland
Austria
Spain
Denmark
Sweden
Netherlands
Belgium
Norway
Per capita consumption (in EUR)
4.0
2.0
1.9
1.5
1.0
1.0
0.9
0.9
0.8
0.4
0.2
86
61
32
31
189
127
21
159
95
47
38
42
In Germany, organic foods are increasingly being sold by supermarkets and discounters. Most supermarkets and discounter chains have successfully introduced their own organic label brands. The strong trend to-wards organic food products also makes itself evident in the constantly increasing number of organic food shops. The strong trend towards organic food products also makes itself evident in the constantly increas-ing number of organic food shops. Some 2,400 shops operate in Germany selling solely organic-produced products. The introduction of the EU-wide organic food logo further eased the import and distribution of organic foods in Germany and other EU member states.
FUNCTIONAL FOODSMore and more people in Germany see food as a way to overcome general health concerns (such as obesity, diabetes, and celiac disease) as well as improve their sense of well-being, and even their performance levels. The global functional foods market has grown signifi-cantly and reached a value of some EUR 128 billion in 2013. Sales in Germany alone have increased tenfold in the last decade to around EUR 5 billion and rising. Dis-counters and internet sales are gaining market share as these distribution channels increase their functional and wellness food offerings.
In functional foods, highly nutrious components like probiotics, fiber, and vitamins are added to make the eating experience more beneficial in terms of positive health effects and taste. Major segments in Germany include probiotic yogurts, yogurt drinks, and beverages such as vitamin-enhanced waters.
Although the Europe-wide implementation of regula-tions on nutrition and health claims is likely to slow market growth, it is expected that functional foods will become one of the most dynamic and important seg-ments of the food and beverage industry, with most industry innovations forecast to take place in this fast-growing sector. Increased demand for functional food will make the sector a solid platform for new invest-ment and continued success for companies already ac-tive in the sector.
CONVENIENCE FOODSThe rising number of single households, as well as an increasingly mobile society, are changing food and bev-erage consumption patterns in favor of the convenience food industry.
Germany already has the largest frozen food market in Europe, with total sales of EUR 12.4 billion in 2013 (EUR 7.2 billion from retail and EUR 5.2 billion from the ca-tering sector). The largest retail segments are frozen baked goods (21 percent) and vegetables (14 percent). Current growth segments include frozen meat and pizza as well as dairy products and confectionery (3 percent increase each). The catering industry has also recorded a growing demand especially for frozen pizza (9 percent increase), frozen baked goods (7 percent increase), and side dishes and cereal products (6 percent increase). Experts predict future growth in both segments.
The German chilled and deli food market grew by around one percent in 2012 to reach EUR 28.1 billion. Deli foods such as fresh noodles, dips and pickled veg-etables account for two thirds of the market value fol-lowed by chilled meat products (22 percent) and chilled fish & seafood with six percent of the market value. Growth markets within the chilled food industry are fruit juices, soups and sauces, fresh pasta, desserts, ready-made meals, and savory snacks. Organic conve-nience products also promise growth.
8
Source: Metro 2014.
0 5 10 15 20 25
Trends in Private Demand for Selected Food and BeveragesSegments 2010-2013 (change in percent)
Chilled food
Hot beverages
Non-alcoholic beverages
Ice cream
Total food and beverages
Dairy products
Frozen food
Meat, meat products
Delicatessen
Fruits and vegetables
Alcoholic beverages
Baked goods
Confectionery
20.7
15.8
9.7
9.6
8.2
7.4
7.1
6.7
5.9
4.4
2.8
2.7
1.7
INNOVATIVE EXCELLENCE
The German food industry and public and private in-stitutes alike continuously conduct R&D activities to develop new products, enhance nutrition, and improve general food safety. R&D and innovation spending in the German food and beverage industry is projected to reach more than EUR 2.4 billion in 2014. More than one out of two companies introduced new products or processes in the last three years, creating an average of seven percent of total revenue with new products. In 2012, more than 2,600 people worked in food and bev-erage R&D. Companies put their main focus on experi-mental development (54 percent of total R&D spending) and applied science (41 percent of total R&D spending).
Almost half of private R&D spending in the German food and beverage industry is foreign company derived – underpinning the importance of local R&D to adapt products to the local market. Local research teams are able to research and develop new products according to culinary customs, tastes, and preferences.
The non-profit Research Association of the German Food Industry (FEI) supports research projects in all fields of food science, food technology, and nutritional science. The main focus of the FEI’s activities are the coordination and promotion of industrial collective re-search projects initiated by the Federal Ministry for Economic Affairs and Energy (BMWi).
Germany’s federal and regional institutes support R&D activities with around EUR 500 million every year. Ger-many’s strong food industry R&D landscape is sup-ported by world-renowned public institutes such as the Julius Kühn-Institut (Federal Research Centre for Cultivated Plants), the Max Rubner-Institut (Federal Research Institute of Nutrition and Food), and six insti-tutions of the Leibniz Association. Main research areas include nutrition science, food technology, plant and animal production, and aquaculture.
The majority of all completed and ongoing publicly sup-ported research projects in production concern new technological and biotechnological processes. Bavaria, North Rhine-Westphalia, and Hessen are the federal states with the highest R&D spending and number of re-searchers.
With an annual budget of EUR 38 million, the German federal government supports technical and non-tech-nical innovation in nutrition, agriculture and consumer protection. The program aims to promote the develop-ment of internationally competitive products, process-es and services based on new scientific knowledge. Thematic priorities include: animal health, breeding of crops, breeding of farm animals, technology and environmentally sound land management, food safety and quality, prevention of allergies, and improving the framework conditions for innovation.
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R&D FRAMEWORK
Sector Institutes Ongoing projects
Finished projects
All projects
Food processing 204 92 404 496
Food chemistry 110 50 219 269
Food microbiology 71 44 118 162
Overview of R&D Projects in Nutritional Science
Nutrition physiology 99 13 207 220
Nutritional behavior 63 28 69 97
Toxicology 54 28 218 246
Home economics 16 1 16 17
Overview of R&D Projects in Food Technology
Source: FoodDrinkEurope 2014.
Europe’s 10 Most Innovative Food Sectors 2013
0 1 2 3 4 5 6 7 8 9
Dairy products
Ready-made meals
Soft drinks
Savory frozen products
Biscuits
Meat, delicatessen, poultry
Appetizer, grocery products
Chocolate products
Cheeses
Condiments and sauces
7.8
7.4
6.9
6.6
5.8
5.0
4.7
3.7
3.4
3.2
Source: BLF 2014.
Percentage of total European food innovation
MARKET LOCATION ADVANTAGE
The German food and beverage market including food service sales was worth around EUR 245 billion in 2013, making Germany the European leader in the food and beverage sector. Important contributory factors include increasing purchasing power, a strong local agriculture sector, and state-of-the-art infrastructure. Germany’s position as a global consumer trends frontrunner is underscored by competitive labor and tax conditions. These factors combine to make Germany the ideal point of entry into both German and European markets.
RETAIL LANDSCAPEThe German food and beverages retail landscape is consolidated and mature, but remains relatively diver-sified compared with many other European countries. This provides manufacturers with numerous ways of marketing products. In total, the top five German retail-ers (Edeka, Rewe Group, Schwarz Group, Aldi Group, and Metro Group) have a market share of 73 percent of the entire German retail market. Edeka, Rewe Group, and Schwarz Group operate chains in more than one dis-tribution channel (e.g. supermarkets and discounters). In 2013, the overall market share of discounters offer-ing a limited selection of mainly private label goods at low prices remained stable at around 41 percent.
Hypermarkets and large-scale superstores (≥2,500 sqm) have a total sales volume of 28 percent of the market. Conventional supermarkets (1,000-2,499 sqm) have a market share of 16 percent. Convenience stores and small supermarkets are losing ground.
PRIVATE CONSUMPTIONHigh employment levels, rising wages and low interest rates have contributed to create a domestic consumer market that is prospering and vibrant. Disposable in-come per capita reached around EUR 21,000 in 2013. Of this sum, EUR 19,000 was allocated for total private consumption - more than ever before and significantly higher than the EU average of EUR 14,900 (2012).
The German Retail Federation and the German Federal Statistical Office forecast a domestic demand increase of 1.5 percent for 2014 on the back of domestic consumer behavior. The largest and most free-spending consum-er group is the 50+ “best agers” segment. According to the HDE, only 10 percent of available disposable income is currently being saved - equivalent to a 1.5 percent fall from the nadir reached at the start of 2009 during the global economic crisis. The actual amount of dispos-able income has increased over the same period, with more people in employment - 215,000 more in 2013 than was the case for 2012. Real consumption - excluding cars, gasoline, fuel, and pharmaceuticals - has grown 2.6 percent.
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INVESTMENT CLIMATE
Top 10 Food Retailers in Germany in 2013
Retailers Retail brands Food sales (in EUR billion)
Share of food sales (in percent)
Change of sales over 2012 (in percent)
Edeka Group Edeka, Marktkauf, Netto, Plus, Treff 3000 46.1 90.6 +3.4
Rewe Group Penny, REWE, Kaufpark, Fegro, Selgros 26.8 72.2 +2.2
Schwarz Group Lidl, Kaufland, Handelshof 26.0 81.2 +4.9
Aldi Group Aldi Nord, Aldi Süd 22.1 82.0 +3.6
Metro Group Real, Metro C+C, Galeria KAUFHOF 10.8 36.4 -2.1
Lekkerland Lekkerland, others 8.4 99.0 +2.2
DM-Drogeriemarkt DM 5.3 90.0 +14.2
Rossmann Rossmann 4.5 90.0 +12.1
Globus Globus 3.0 66.9 +3.0
Bartels-Langness Group Famila, MARKANT, NAH&FRISCH, BELA C+C, CITTI, others
2.9 77.6 +3.6
Total Top 10 155.9Source: Trade Dimensions 2014.
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LOCAL SOURCINGGermany’s abundant farmland offers countless oppor-tunities for local sourcing and underpins Germany’s at-tractiveness as a production location. In 2013, around 285,000 companies cultivated around 16.7 million hect-ares of land. Around 70 percent of the total available farmland is used for farming. The number of compa-nies operating in the organic food sector grew by two percent in 2013, amounting to more than eight percent of the total. As a result, six percent of all agricultural farmland is used for organic farming.
LOGISTICS EXCELLENCEProviding a regular supply of food to a population of al-most 82 million people makes significant demands of the food logistics sector: customer deliveries must be fast, secure, and on time. A high-performance road in-frastructure is an essential requirement for customer-oriented delivery of food.
Germany’s infrastructure excellence is confirmed by a number of recent studies: The World Bank’s 2014 Lo-gistics Performance Index (LPI) ranks Germany first out of 160 countries. The study further points out that Germany was also the best performer over the period 2007-2014. The LPI is based on a worldwide survey of operators on the ground (global freight forwarders and express carriers) supplemented with quantitative data on the performance of key components of the logistics chain in the country of work.
TRADEWith total import and export values of around EUR 72 billion and EUR 64 billion respectively, Germany was a net importer of processed foods and agricultural com-modities in 2013. The rising share of exports underpins Germany’s competitive location factors and its excel-lent geographical position to serve not only national but also international markets.
Germany’s main trading partners are other EU coun-tries. Both meat and sausage products and milk and dairy products are the leading food and beverage seg-ments in terms of exports, representing total export values of around EUR 9 billion each in 2013. Thanks to the enduring popularity of German-made products abroad, the industry is expected to continue its steep growth curve in the coming years. Despite the fact that they currently account for less than twenty percent of total export value, eastern and central Europe in par-ticular hold promising mid-term prospects.
LABOR COST DEVELOPMENTHigh productivity rates and steady labor costs make Germany an attractive investment location. Labor cost increases have been the lowest in Europe in recent years, with a modest annual growth rate of 1.8 percent for the total economy between 2004 and 2013.
German productivity rates are 10 percent higher than the average of the Euro area and more than one quarter higher than the OECD average. Highly flexible working practices such as fixed-term contracts, shift systems, and 24/7 operating permits contribute to enhance Ger-many’s international competitiveness as a suitable in-vestment location for internationally active businesses.
TAX CONDITIONSGermany has developed one of the most competitive tax systems in the world. Significant company taxation reforms have resulted in a decrease of the corporate tax burden by around 25 percent. The overall average corporate tax burden has sunk to just below 30 percent, with a number of federal states providing even more competitive tax rates. Standard corporate income tax has also been reduced by 10 percent to just 15 percent on all corporate taxable earnings.
0 1 2 3 4 5 6
Note: Business Economy includes NACE Rev. 2, B-NSource: Eurostat 2014.
Growth of Labor Costs in the Business Economy 2004-2013(annual average growth in percent)
1.8%2.6%
2.8%3.0%3.0%3.1%
4.6%5.0%
5.8%5.3%
GermanyNetherlands
EU-28FranceSpain
UKCzech Rep.
Slovak Rep.Poland
Hungary
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FINANCING & INCENTIVES IN GERMANY
In Germany, investment projects can receive financial assistance through a number of different instruments. Besides private sources, these instruments may come from different public incentives programs with the possibility of program combination available to all companies - regardless of country of provenance. They fit the needs of diverse economic activities at dif-ferent stages of the investment process.
INVESTMENT PROJECT FINANCING BY PRIVATE EUQITYTechnologically innovative start-ups in particular have to rely solely on financing through equity such as venture capital (VC). In Germany, appropriate VC partners can be found through the Bundesverband Deutscher Kapitalbeteiligungsgesellschaften e.V (BVK – “German Private Equity and Venture Capital Associa-tion”). Special conferences and events like the Deut-sches Eigenkapitalforum (“German Equity Forum”) provide another opportunity for young enterprises to come into direct contact with potential VC partners. Public institutions such as development banks (pu-blicly owned and organized banks which exist at the national and state level) and public VC companies may also offer partnership programs at this development stage.
INVESTMENT PROJECT FINANCING BY BANK LOANSDebt financing is a central financing resource and the classic supplement to equity financing in Germany. It is available to companies with a continuous cash flow. Loans can be provided to finance long-term invest-ments, working capital and operational costs (R&D, personnel) and for bridging temporary financial gaps. Besides offers from commercial banks, investors can access publicly subsidized loan programs in Germany. These programs usually offer loans at attractive interest rates in combination with repay-ment-free start-up years, in particular for small and medium-sized companies. These loans are provided by the state-owned KfW development bank and also by regional development banks.
CASH INCENTIVES FOR INVESTMENTS AND R&D When it comes to setting up production or service facili-ties, investors can count on a number of different pub-lic funding programs. These programs complement the financing of an investment project. Most important are cash incentives provided in the form of non-repayable grants applicable to co-finance investment-related ex-penditures such as new buildings, equipment or ma-chinery.
R&D project funding is made available through a num-ber of different incentives programs targeted at reduc-ing the operating costs of R&D projects. Programs op-erate at the regional, national, and European level and are wholly independent from investment incentives. At the national level, all R&D project funding has been concentrated in the so-called High-Tech-Strategy to push the development of cutting-edge technologies. Substantial annual funding budgets are available for diverse R&D projects.
LABOR-RELATED INCENTIVES After the location-based investment has been initiated or realized, companies can receive further subsidies for building up a workforce or the implementation of R&D projects. Labor-related incentives play a signifi-cant role in reducing the operational costs incurred by new businesses. The range of programs offered can be classified into three main groups: programs focusing on recruitment support, training support, and wage subsidies respectively.
Please visit our website for more incentives information: www.gtai.com/incentives
Incentives in Germany
Funding purposes
Investments Working Capital
Research &Development
Specific Purposes
Personnel
Financing supported by any of the following public funding instruments (combinations of instruments usually possible)
Public funding instruments
Grants Loans Guarantees Equity Capital
Mezzanine Capital
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FENCHEM BIOTEK
China-based Fenchem Biotek is active in the develop-ment, manufacturing, and marketing of active ingredi-ents. Serving the dietary supplements, functional food, cosmetic and feed industries worldwide, an excellent ex-port infrastructure is key to the success of the company. Consequently, the investor decided to establish a West-ern European headquarters and warehouse in Germany in late 2011.
To Fenchem, critical location factors were the proximity to clients in Germany and France, an optimal logistics in-frastructure, and a vibrant Chinese community. Germany Trade & Invest supported the investor with information on specific regions, completed by substantial advice and information on tax and legal issues, rent and labor costs, the concrete process of setting up a company in Germany, cultural considerations, and many other pressing issues.
By January 2013, Fenchem had rented a location in Co-logne in the state of North-Rhine Westphalia and, spot-ting a huge potential in the German market, stepped into full operation several months later. The investor was fully satisfied with the substantial contribution that Germany Trade & Invest and its regional partner orga-nization NRW.Invest were able to provide to the invest-ment project. Ten new jobs have been created to date.
OLIVE LIFESCIENCES
Founded in India in 2007, Olive Lifesciences manufac-tures herbal and botanical extracts, phytochemicals, and probiotics for the food, beverage, and cosmetic indus-tries. In late 2012, Olive Lifesciences decided to open a sales office and warehouse in Germany to better serve the European market. Frankfurt in Hessen was chosen as the preferred location mainly for its ideal logistics in-frastructure within Germany and Europe, frequent flight connections to India, and the proximity to clients.
Germany Trade & Invest worked in close partnership with the investor - both in India and Germany. After ini-tial contact was established in Mumbai, location require-ments and administrative considerations relative to es-tablishing a presence in Germany were discussed with Olive Lifescience executives in Germany. Site visits in and around Frankfurt were then organized by Germany Trade & Invest in cooperation with regional partner or-ganization Hessen Trade & Invest.
A business location was soon identified as a result of the excellent partnership of all parties involved, and German subsidiary activities under the name BioActives Europe quickly established. The new company was able to com-mence its office and warehouse operations in January 2013, thereby bringing the investment project to its suc-cessful conclusion.
SUCCESS STORIES
Nanjing Fenchem Biotek Investment Project Time Line
Oct 2011 GTAI contacted Fenchem Biotek at Supply Side West in Las Vegas.
Nov 2011 Discussion of project background and location requirements at Food Ingredients Europe in Paris.
1st half of 2012 Continuous exchange of information.
Sep 2012 Meeting with GTAI representatives in China.
Nov 2012 Meeting at Health Ingredients Europe in Frankfurt and site visits in Cologne, Dusseldorf, and Hamburg.
Dec 2012 Final location decision for Cologne.
Jan 2013 Company formation and signing of rental agreement, supported by NRW.INVEST
Olive Lifesciences Investment Project Time Line
Oct 2012 Initial contact with GTAI India via the Indo-German Chamber of Commerce.
Nov 2012 Definition of location requirements and initial meeting at Health Ingredients Europe in Germany.
Nov 2012 Contact to Hessen Trade & Invest and initial site visits.
Dec 2012 Identification of a suitable business location in Frankfurt.Signing of rental agreement.
Dec 2012 Registration of a limited company in Germany.
Jan 2013 Opening of office and warehouse.
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GERMANY TRADE & INVEST HELPS YOU
Germany Trade & Invest’s teams of industry experts will assist you in setting up your operations in Germany. We support your project management activities from the earliest stages of your expansion strategy.
We provide you with all of the industry information you need – covering everything from key markets and related supply and application sectors to the R&D land-scape. Foreign companies profit from our rich expe-rience in identifying the business locations which best meet their specific investment criteria. We help turn your requirements into concrete investment site propos-als; providing consulting services to ensure you make the right location decision.
We coordinate site visits, meetings with potential part-ners, universities, and other institutes active in the in-dustry. Our team of consultants is at hand to provide you with the relevant background information on Germa-ny’s tax and legal system, industry regulations, and the domestic labor market.
Germany Trade & Invest’s experts help you create the appropriate financial package for your invest-ment and put you in contact with suitable financial partners. Incentives specialists provide you with detailed information about available incentives, sup-port you with the application process, and arrange con-tacts with local economic development corporations.
All of our investor-related services are treated with the utmost confidentiality and provided free of charge.
PROJECT MANAGEMENT ASSISTANCE
Coordination and support of negot-iations with local authorities
Joint project management with regional develop-ment agency
Project partner identification and contact
Market entry strategy support
Business oppor-tunity analysis and market research
LOCATION CONSULTING /SITE EVALUATION
Final site decision support
Site visit organization
Site preselectionCost factor analysis
Identification of project-specific location factors
Accompanying in-centives application and establishment formalities
Administrative affairs support
Organization of meetings with legal advisors and financial partners
Project-related financing and incen-tives consultancy
Identification of relevant tax and legal issues
SUPPORT SERVICES
DECISION & INVESTMENTSTRATEGY EVALUATION
OUR INVESTMENT PROJECT CONSULTANCY SERVICES
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CONTACT
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PUBLISHER Germany Trade and InvestGesellschaft für Außenwirtschaft und Standortmarketing mbHFriedrichstraße 6010117 BerlinGermany
T. +49 (0)30 200 099-555F. +49 (0)30 200 [email protected]
EXECUTIVE BOARD Dr. Benno Bunse, Chairman/CEO Dr. Jürgen Friedrich, CEO
AUTHORDaniel Lindel, Senior Manager, Food, Nutrition & Life Services,Germany Trade & Invest, [email protected]
EDITORWilliam MacDougall, Germany Trade & Invest
LAYOUTGermany Trade & Invest
PRINTAsmuth Druck & Crossmedia GmbH & Co. KG, Köln
NOTES©Germany Trade & Invest, September 2014All market data provided is based on the most current market information available at the time of publication. Germany Trade & Invest accepts no liability for the actuality,accuracy, or completeness of the information provided.
ORDER NUMBER13699
ABOUT US
Germany Trade & Invest is the foreign trade and inward in- vestment agency of the Federal Republic of Germany. The organization advises and supports foreign companies seeking to expand into the German market, and assists companies established in Germany looking to enter foreign markets.
All inquiries relating to Germany as a business location are trea- ted confidentially. All investment services and related publi-cations are free of charge.
Supported by the Federal Ministry for Economic Affairs and Energy on the basis of a decision by the German Bundestag.
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Germany Trade & InvestFriedrichstraße 6010117 BerlinGermany
T. +49 (0)30 200 099-555F. +49 (0)30 200 [email protected]/food