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    High expectations

    Germans expect the same things from private label as they do from the big brands: healthful, sustainable, high-quality offerings at a value price.

    By Elisabeth Straub

    German consumers expect high quality and low prices when it comes to food and beverage products. In 2013, the German food and beverage market grew by 3.6 per cent, with a very positive outlook for 2014, according to Ixpos, the German Business Portal.

    In Germany, there are several different types of food retail stores, with the most common being supermarkets and discounters.

    Trends in food retailing

    Although German consumers want high-quality food products, they are very price-sensitive. Germans are devoted to their discounters, and the country has, globally, the highest share of discounters in food retailing. This is one reason why margins at the retail level are so thin. A key demographic factor in the future will be Germany’s aging population, which is already ranked among the oldest in the world. Demand for convenience, health, wellness and luxury foods will continue to affect food. 1, 2

    Another trend is that German consumers take great pride in being environmentally responsible, or green. They are willing to pay more for sustainable, locally sourced, organic, Fairtrade and carbon-neutral products.1, 2

    For sustainability in particular, major retailers and producers are increasingly requiring certification. An organic label called the “Bio-Siegel” was created to enable consumers to better distinguish organic from non-organic products. The certification for this label fulfils the EU regulations for organic food.

    Germans passionate about organics

    Perhaps the shift towards an organic lifestyle fell on fertile ground in Germany because of the country’s long history of green movements and green politics. Nowadays, 90 per cent of Germans say they approve of organic food, and 70 percent state that they would not consider buying genetically modified food. There is also a strong perception that healthy food should be subsidized by state and supported by society. Thus, political support for organic agriculture sparks a consumption habit, and finally overcomes the initial market preference for low-priced food. 3, 4, 5, 6

    But there is another important driver behind the growth of organic food. Essentially, organic farming is more environmentally benign than conventional farming. The fact that pesticides and fertilizers are not used is only one well-known difference. Organic fields also have more biodiversity than their conventional counterparts: A recent analysis by The Conservation — an independent source of news and views, sourced from the academic and research community — found that organic fields and farms typically contain on average between 26 per cent to 42 per cent more species than fields managed using conventional methods. Today, organic products can be found in virtually every conventional supermarket.

    German consumers are considered to be inherently careful of their health, the environment and social issues. They generally give preference to healthier products, and organic goods have recently garnered unprecedented appeal as more and more Germans are making organic purchases. In fact, Germans are one of the top consumers of organic packaged food and beverages in the EU, according to an April 2014 report from Burnaby, British Columbia-based TechSci Research.

    Along with low price, high product quality is of primary concern to German consumers, especially amongst the senior consumer group, the fastest-rising consumer group in Germany. Furthermore, older consumers are the most solvent consumer group. One in two will switch to another product if they are not satisfied with, for instance, packaging and design.

    Germany boasts the largest market for organic products in Europe. The country spent 6.5 billion euros on organic products in 2011, notes the Organic Trade Association, Brattleboro, Vermont. Sales of organic products have benefited from retailers' ability, specifically discounters', to provide high-quality foods for low prices. Discounters played a major role in the increased awareness and distribution of organic products, but are slowly stepping back as the presence of special organic stores and the offerings of traditional supermarkets continue to expand.

    In contrast to other European states, organic goods are not deemed a luxury item in Germany, due to their affordability and Germans' value-for-money mentality. Although the main target group for organic products is comprised of LOHAS consumers (Lifestyles Of Health And Sustainability), the appeal is spreading rapidly to the general population, especially when it comes to staple foods such as milk and dairy products. Eighty to 85 per cent of the German population is interested in healthy nutrition. 7

    Ethnic-style organic ready meals (Indian or Turkish, for example) also are appearing on the market. Consequently, sales of organic products are significantly higher than those in other European countries, particularly France, the United Kingdom and Spain. Organic packaged food will represent an increasing proportion of the total packaged food market in Germany, with global market research firm Euromonitor International forecasting it to grow over 2.8 per cent in 2014.

    German consumers are fortunate that they can pick and choose where they shop for organic goods. This is due to the widespread availability and diversity of organic products, as well as the greater accessibility afforded by low prices.

    German consumers are dedicated to consuming organic food and are generally opposed to genetically modified organisms (GMOs). For example, Germany, along with France, Austria, Hungary, Greece, and Luxembourg, had banned the cultivation of “MON 810” (a genetically modified corn that is said to present a danger to the environment). In February, the EU voted to allow the introduction of the genetically modified TC1507 corn, according to an 11 February Deutsche Welle article. However, Germany’s Agriculture Minister, Hans-Peter Friedrich of the CDU's Bavarian sister party, the Christian Social Union, suggested he would make the introduction of genetically modified corn into Germany more difficult.

    Wide range of private label products

    In Germany, private label’s share of organic food and beverage products has steadily increased to 40 per cent in recent years, according to the Organic Trade Association. Focused on price, private label food products contributed to the initial success of German discounters. However, that has changed; nowadays, there are not only price-competitive standard private label products, but also more expensive high-quality premium products. Consumers are discovering the high value for money that private label brands are offering and how they can be an actual alternative to established brands.

    Private label market share is expected to increase further, driven by the increase profitability it is giving to retailers, states a 21 March, 2012 Horizon.net article. Private label leaders are supermarket chains such as Edeka, headquartered in Hamburg, and Cologne-based REWE, as well as discounters such as Baden-Württemberg-based Lidl, Aldi Nord (Essen) and ALDI Süd (Mülheim an der Ruhr).

    Regional food marketing is a boom sector

    Regional food marketing is popular among today’s German retailers. Offenburg-based EDEKA Südwest, for example, came out with a line called “Unsere Heimat”, which features products from Hessen and Germany overall.

    The LandMarkt initiative of REWE is actually a venture with more than 350 producers of all sorts of products (from eggs to goat cheese to asparagus) from all over Hessen. REWE supports domestic growers, too, by selling smaller-sized red apples under its sustainable sourcing label Pro Planet in 3,000 stores across the country. The group said the move was designed to support growers in Germany that produced a larger-than-usual volume of smaller apples this season as a result of cool weather earlier in the growing season.

    Fresh pasta, ready sliced salads, chilled ready meals and chilled pizza are becoming more and more important in Germany. A combination of freshness and convenience is the key, experts note. PLI

    Sources:

    1. www.ehi.org
    2. www.lebensmittelzeitung.net
    3. http://orgprints.org/view/subjects/countries-world.html
    4. http://www.lebensmittelzeitung.net
    5. https://www.study-in.de/en/life/culture-travel/tandem-reporter/--18769/
    6. http://www.boelw.de
    7. http://literatur.ti.bund.de/digbib_extern/dk041472.pdf

    SIDEBAR: REWE goes gastro

    Germany's second-largest food retailer intends to open a 200-square-metre standalone gastronomic concept in the city centre of Cologne this June next to a new REWE supermarket. The project is known as “Made by REWE”, a spokesman of the company confirmed.

    The pilot bistro-type outlet will serve pasta, pizza, salads, sandwiches, soft drinks, wine, etc., on the premises, as well as to take away. To boost its gastronomic know-how, REWE hired Mark Korzilius, the founder of cult restaurant chain Vapiano ,which specialises in pasta, pizza and salad.

    "Everything will be freshly cooked, and all ingredients are stocked in the supermarket," says one insider.

    REWE has increased customer frequency by integrating a gastronomic offer in the entrance areas of its larger supermarkets and superstores. To date, however, this offer has not gone much beyond coffee, cake, meatballs and salad. Shop customers will have direct access to the neighbouring restaurant via a passageway. In the long-term, it is the company’s intention to integrate these bistros in REWE supermarkets.

    By Elisabeth Straub
    • About Elisabeth Straub Elisabeth Straub is a freelance writer for Store Brands Magazine. She can be reached at [email protected]

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