Aris Derksen: The German and Dutch food market for dummies

▪ Germany is the biggest market in the
EU with 82 million of the world’s
wealthiest consumers.
▪ In 2016 Germany imported $ 55
billion consumer oriented
agricultural products
▪ By value 25% of all imported food and
drinks comes from Holland, 10% Italy,
9% Spain and 8 France.
▪ After Switzerland and Turkey, the US is
the 3rd largest non EU supplier of
consumer oriented agricultural
products
▪ With a total GDP of $ 3.4 trillion,
Germany remains the largest
economy in Western Europe.
▪ Average growth of 2% per annum
during 2009-2015 outperforming all
other Western European economies
by at least 1% in constant terms
▪ GDP in Germany grew 1.7% in 2016
compared to 2015 reaching a GDP
PER CAPUITA of over $ 47,268 per
annum – according to World Bank.
The German Food Market Explained by www.winterbusinessgroup.net 2

▪ Discounters like Lidl and Aldi
remained the largest channel in retail
sales in 2015 but recorded a decline
in value sales for the first time in 5
years
▪ Supermarkets did better due to an
increased focus on private label
products.
▪ Private Labels are perceived as
being of a comparable level of
quality as branded products but are
usually cheaper.
▪ Hypermarkets remain popular in
rural areas and suburban areas for
one stop shopping a week.
▪ Market share for private label
products has steadily increased to
more than 40% in recent years
▪ Private label market share is
expected to increase further driven
by the increased profitability it is
giving to retailers.

▪ German consumers expect high
quality food products
▪ German consumers are very price
sensitive and are devoted to their
discounters.
▪ Germany has globally the highest
share of discounters in food retailing
▪ Germany has the world oldest
populations and food retailing will
therefore dramatically change in the
next few years.
▪ Demand for convenience, health and
wellness as well as luxury products
will remain an impacting consumer
trend.
▪ German consumers take pride in
being “green” they are willing to pay
substantially more for “sustainable”,
“locally sourced” free range”“natural”
“organic”“fair trade” and “carbon
neutral” food products.

▪ German consumers are also very
keen on ratings and verdicts of
consumer organizations involved in
investigating and comparing goods &
services in an unbiased way. (Stiftung
Warentest and Oeko Test).
▪ Stiftung has a substantial impact on
consumer buying behaviour: it’s
positive evaluations are often
marketing communication
campaigns.
▪ For sustainability in particular,
brands and retailers are required to
have a private certification. Unilever
has pledged to purchase 100%
sustainable in 2020.
▪ For UK products there is room to use
high health, safety and environmental
standards governing products as a
competitive advantage.
▪ It’s important they have a “story to
tell” and are prepared to consider
private sustainability certification.

▪ After the US, Germany is the largest
organic food market in the world
▪ Sales in 2015 were close to € 7,9
billion
▪ That is 33% of the total organic food
sales in the EU and about 4% of the
total food sales in Germany
▪ 50% of all organic food is sold in
traditional retail and 50% in
specialist organic retail stores like
bakeries, fruit &vegi stores, open
markets and direct sales from farms.
▪ There are 2.400 organic supermarket
outlets in Germany .
▪ Alnatura is the fastest grower with
12% in 2015.
▪ Denn’s Biomarkt is the only truly
nationwide organic supermarket
chain.

▪ Internet retailing in Germany is
worth $ 39 billion and is accounted
for a value share of 8% and an
increase of 13% in current value
terms in 2016.
▪ Internet sales of food & drinks
increased last year with 38% and
reached $ 1 billion turnover.
▪ Rewe and Edeka have rapidly
extended their delivery areas due to
sophisticated fresh food logistics and
a wider range of products.
▪ In 2017 retailers continue to work to
improve packaging and delivery
options.
▪ In relation to cross border
eCommerce, German on-line
shoppers can hardly purchase any
food and beverages directly from the
US or UK online merchants.
▪ Most online retailers such as Amazon
and Netgrocer.com as well as “bricks
& clicks” retailers such as Walmart do
not provide the opportunity to
German consumers to purchase
outside Germany.

▪ In 2010 Amazon started selling
grocery products via its Amazon.de
site and enable same day delivery
▪ In 2014 Amazon began equipping
facilities with appropriate delivery
infrastructure and transportation to
roll out AMAZON FRESH.de
▪ The local press and a few regional
retailers anticipated an
announcement in the fall of 2014.
▪ However that announcement never
came and Amazon Fresh appears to
remain a mere potentiality at this
point.
▪ AmazonFresh is a subsidiary of the
Amazon.com American e-commerce
company in Seattle,Washington. It is
a grocery delivery service currently
available in some U.S. states, London,
Tokyo, and Berlin.

Sector Strength & Market
Opportunities
▪ Germany is the biggest market in
Europe with one of the highest
income levels in the world
▪ Many German consumers are
uninformed about the details of
sustainability and there is yet room to
define a U.K. sustainability message
▪ Opportunities for healthy food
products not sufficiently available on
the local European market
SectorWeaknesses & Competitive
Threats
▪ German consumers demand high
quality and low prices
▪ No unified U.K. sustainability
message in the German market.
▪ Very competitive market with low
growth in retail sales besides organic
▪ Listing fees paid to retailers and
money spend on creating brand
awareness hamper the introduction
of new U.K. brands

Sector Strength & Market
Opportunities
▪ Equivalency agreement on Organics
offers ample opportunities
▪ Germany has many, well established
importers. Distribution system is well
developed
▪ Large non-German population and
German’s inclination to travel abroad
help fuel demand for foreign
products
Sector Weaknesses & Competitive
Threats
▪ Margins on food at retail level are
very thin
▪ Retailers rarely import products into
Germany on their own (tenders are
an exception)

▪ Success in introducing food products
depends mainly on knowledge of the
market and personal contact.
▪ Purchasing by German food retailers
is fragmented and competitive.
▪ Few German retailers import
products directly from other
countries, except for items that they
purchase in large quantities (wine is
a good example).
▪ Most food retailers would rather buy
from central buyers/distributors
importing food and beverages.
▪ In general, these wholesalers have
specialized in products or product
groups and some are even experts in
food products from a specific country
of origin.
▪ Thus, specialized importers have an
in-depth knowledge of importing
requirements,such as product
certification, labelling and
packaging.They also typically
handle shipping, customs clearance,
warehousing and distribution of
products within the country.

▪ Direct sales to Germany’s leading retail
companies are very difficult; however, it
can be a desirable product-entry
approach for a U.K. supplier.
▪ Due to their wide range of distribution,
central buyers are generally flooded
with offers from competing suppliers
and they are usually not interested in
taking on added responsibility of
importing products directly.
▪ This is especially the case for new to-
market products, which may not
comply with German food laws and
packaging and labelling requirements.
▪ Retail buyers may only be interested in
importing products directly if they are unique,
possess some specific attribute, or offer
significant advantages in terms of quality, price,
or financial promotional support.
▪ New products on the German market may
require up to 12 to 18 months of testing in order
to gain market acceptance.
▪ Listing fees, equivalent to several thousand
Pounds or more per product, are common and
do not ensure shelf space if a profitable
turnover is not achieved rather quickly.
▪ The exception may be a retailer's desire to
maintain a competitive edge by keeping a full
range of products.

▪ Each of Germany’s leading retail groups
has a different business structure,
purchasing, and distribution system.
▪ Many of the leading retailers have
multiple retail chains, often with various
types of retail formats such as large
hypermarkets, discount and small
neighbourhood stores, or perhaps
beverage and/or delicatessen outlets.
▪ Large retailers’ purchasing departments
may also be divided by retail format and,
sometimes, by region of the country.
▪ The German food retail sector is a typical
oligopoly.The top 5 grocers amount to
over 80 percent of the total market.
▪ Large grocery retailers in Germany are mainly
driven by competition between each other.
▪ They are very well-established, and compete
mainly on price, outlet networks and also
consumer trust, which amongst others requires
them to maintain their standards in terms of
quality.
▪ Many retailers also try to differentiate
themselves through services which add value to
their original value proposition.
▪ These can, for example, take the form of home
delivery, offering special qualified advice, or
complementary online services.

▪ Edeka Zentrale continued to lead
grocery retailers in Germany in 2016.
▪ Besides a successful television
marketing campaign, Edeka enjoyed
success with its own private label
products.
▪ Furthermore, with social
commitments beyond its daily
business, Edeka is creating stronger
brand recognition.
▪ Generally, Edeka operates a wide
range of different store formats,
ranging from small neighbourhood
stores (supermarkets) to large
hypermarkets, which are all operated
under the umbrella brand of Edeka.
▪ This creates synergies, and high
brand awareness, recognition and
trust amongst consumers.
▪ In addition, it also successfully
transformed its discounter Netto into
a modern discounter, which brought
a new diversity in discount retailing.

▪ The Cologne-based company Rewe
Markt had a successful year in 2015,
as it saw the biggest increase in value
sales amongst the big four grocery
retailers (Edeka, Rewe, Lidl and Aldi).
▪ The growth driver was its
supermarkets, which contributed the
most to its sales increase.
▪ Rewe successfully expanded its
network of supermarkets in urban
areas over the review period, and
likewise modernized many outlets.
▪ Furthermore, Rewe’s convenience
format “Rewe To Go” and Rewe
online are also starting to pick up.
The company has also started
cooperation with nationwide gas-
station chain Aral, and is planning to
further expand its forecourt retailers
business with Rewe to go stores

▪ Schwarz Gruppe consists of Kaufland
(hypermarkets, Cash & Carry,
wholesalers and supermarkets) and
Lidl discount
▪ The owner of the Group, Dieter Schwarz
has always been the black sheep of
German retail
▪ Although Lidl looks like a copy of Aldi,
the discounter is strongly represented
in Germany (rural areas up to 3.000
inhabitants) and in France and Spain.
▪ Kaufland has a strong presence in
Eastern Germany and Poland and
Check Republic.
▪ In 2003 Kaufland sold its shares in Ruef
to Edeka and left the C&C trade.

▪ Hard discount chain established by
Theo and Karl Albrecht in 1962
▪ Theo Albrechts Discount South in
Muelheim and Karl Albrechts
Discount with ALDI North in Essen.
▪ The 2 companies remain separated
today although there are
collaboration and non competition
agreements between them.
▪ ALDI’s assortment includes 750
articles, many own label with low
prices and high rotation.
▪ Some outlets achieve a turnover of €
100.000,- per week.

▪ In 2014/2015,the biggest news with
regard to mergers and acquisition on
the German grocery retail market was
the takeover of Kaiser’s Tengelmann
supermarket chain by Edeka.
▪ Kaiser’s has burdened the Tengelmann
Group for years, and despite numerous
efforts to make the company more
profitable, its sales and outlet numbers
have been declining continuously.
▪ Rewe, however, was also trying to
acquire Kaiser’s Tengelmann in order
not to let its main competitor Edeka
grow even bigger.
▪ In July 2016, Edeka has finally won the
approval of the Ministry for Economic
Affairs and Energy to acquire the rival
chain Kaiser’s Tengelmann, subject to
certain conditions. In October 2016, all
sides involved reached an agreement
on the takeover of the Kaiser's
Tengelmann grocery chain by Edeka.

Metro-Group
Real (Hypermarkets)
Metro (Cash & Carry)
107 outlets nationwide
Lekkerland
(Wholesaler)
15 outlets nationwide

The German Food Market Explained by www.winterbusinessgroup.net
Rank Retailer name Turnover 2015 in M of € Number stores 2015
1 Edeka 48,270 11,492
2 Rewe 30,712 4,801
3 Schwarz-Gruppe 28,048 3,838
4 Aldi 27,900 4,250
5 Metro Group 22,490 1,634
6 Amazon.de 10,645 -
7 Tengelmann 8,100 3,245
8 Lekkerland 7680 (e) 58,500
9 Otto.de 7,139 ('14/'15) -
10 DM-Drogeriemarkt 7,000 1,744
20

TOP 10
RETAILERS IN
HOLLAND
(FROM 10-1)IN
NUMBER OF
OUTLETS
▪ 10. Deen – 76 filialen
▪ 09. Dekamarkt – 82 filialen
▪ 08. Dirk van den Broek – 107 filialen
▪ 07. Spar – 217 filialen
▪ 06. COOP – 254 filialen
▪ 05. Plus – 262 filialen
▪ 04. Lidl – 404 filialen
▪ 03. Aldi – 497 filialen
▪ 02. Jumbo – 583 filialen
▪ 01. Albert Heijn – 944 filialen

▪ Ice cream and desserts continued to record
positive growth in Germany in 2016, rising
by 2% current value to reach €3.3 billion,
the highest level of value sales ever
achieved in the category.
▪ Even when analysing growth rates in
constant value terms, only 2003 was a better
year for the category, which of course was
the year of the so-called “summer of the
century”, when temperatures soared to
record levels for several weeks, which
helped to bolster demand for ice cream.
▪ In 2016, the excellent development of the
category was the result of various major
trends which continue to have a favourable
effect on value and volume sales of
packaged food in general and ice cream in
particular.
▪ More specifically, these trends include the
snacking trend and the convenience trend,
which have combined to create additional
demand on consumer side, which was
satisfied on the manufacturers’ side through
the introduction of new products and
promotional activities.
▪ Finally, the favourable economic
circumstances in Germany and high levels of
consumer confidence mean that consumers
now have fewer qualms about indulging
themselves.
▪ The only factor limiting even stronger
development in the category is the health
and wellness trend, with most products in the
category being seen as rather unhealthy.

▪ Unilever Deutschland GmbH with a
value share of 23% and
▪ Nestlé Schöller GmbH & Co KG with
a value share of 12%
▪ remained the two largest
manufacturers within ice cream and
frozen desserts in Germany in 2016.
▪ Each of these companies offers a
very wide range of well-known
products and brands which are
supported through regular new
product development and innovation
as well as advertising campaigns and
marketing activities.

▪ Ice cream and frozen desserts is set
to increase in each of volume and
value at a CAGR of 1% in constant
2016 terms over the forecast period
▪ Rising to 638,000 tonnes and €3.4
billion in value sales, €82 million
higher than what was recorded in the
category in 2016 in constant value
terms.
▪ The favourable circumstances for the
category are not expected to
deteriorate significantly, with the
longer, hotter summers that come
with climate change on the one hand
and the increasing consumption of
ice cream during the rest of the year
on the other expected to be major
contributors to the category’s
positive performance.
▪ Furthermore, all manufacturers
present the category are expected to
continue supporting their brands its
products through manifold activities.

▪ While Germany continues to be
Europe’s largest dessert market in
retail market value, retail volume
sales of these treats have stagnated
with a slight downward tendency of -
0.2% since 2012 to reach an
estimated 0.48 million tonnes in 2016.
▪ The dessert market, however, is
predicted to have experienced
modest 0.1% volume growth in 2016.
Chilled desserts, such as mousses
and puddings, are by far the largest
segment, accounting for nearly three-
quarters (74%) of total sales in
Germany in 2015, followed by frozen
desserts like frozen cakes or pastries
(24%) and far ahead of ambient
desserts, such as fruit compote (2%).

▪ Across Europe, the retail desserts
sector is facing challenging times. In
Germany, the market is under pressure
as many consumers are seeking to
follow healthier diets.
▪ “While benefiting from an association
with freshness, the market for chilled
desserts has seen tough times in recent
years, owed to growing competition
from yogurts and other types of snacks
and treats which are positioned more
versatility to deliver a powerful
combination of both indulgence and
health.
▪ “This creates opportunities for dessert
brands in Germany to leverage their
indulgent nature with a healthy twist.
Healthier indulgence offerings such as
gourmet yogurt are poised for growth.”
Source: Drink Analysis Mintel 2016

▪ This follows Mintel consumer research
which reveals that while the number of
Germans avoiding sugar and
carbohydrates seems high, Germans
are still the most likely in key European
markets to give into their cravings.
▪ As many as three quarters (74%) of
German consumers say that they allow
themselves the occasional treat,
compared to less than two thirds of
consumers in Spain (64%), Italy (62%),
France (60%) and Poland (60%).
▪ The research finds that many new
dessert launches in Germany are
embracing vegan claims. In Germany,
the share of chilled dessert launches,
excluding soya-based yogurt
alternatives, featuring vegan claims
shot up from 1% in 2013 to 8% in 2016.
▪ One in six (17%) German consumers
say that non-dairy yogurts, for instance
soy yogurts, are healthier for them than
dairy yogurts.
▪ However, it seems that brands have
their work cut out when it comes to the
tastiness of these non-dairy varieties,
as currently just one in four (24%) say
that non-dairy yogurts are as tasty as
dairy yogurts.

TRENDS
▪ Ice cream and frozen desserts continues on a
healthy growth path in 2016 as the mild Dutch
winter and autumn encourage consumers to
enjoy the products as a snack all year round.
▪ Although ice cream and frozen desserts
products remain seasonal, and consumption
rates increase during summer and spring, ice
cream players promote indulgence in ice
cream throughout the whole year.
▪ Major player Unilever Nederland particularly
promoted its take-home ice cream at the end of
the review period, while private label players
embarked on price promotions to attract
consumers to their products.
COMPETITIVE LANDSCAPE
▪ Ice cream and frozen desserts remains highly
concentrated.
▪ Unilever Nederland continues to dominate ice
cream and frozen desserts, accounting for a
65% value share in 2016.
▪ The company’s brands: Ola, Hertog and Ben &
Jerry’s are long established in The Netherlands
and remain favourites among Dutch consumers
due to their large-scale campaigns and
advertising activities.
▪ Furthermore, the company continues to invest
in product development, introducing new
flavours to maintain consumer interest in its
products.

PROSPECTS
▪ Ice cream and frozen desserts is expected to
record further value growth over the forecast
period as consumers continue to indulge
themselves in the products.
▪ There is potential for lots of further product
development in terms of healthier alternatives
and niche products such as dairy-free
alternatives.With manufacturers successfully
campaigning for year-round consumption of
ice cream, more Dutch consumers might be
convinced to try ice cream and frozen desserts
as a snack. However, since ice cream is
primarily a seasonal product, climate change
might have either a positive or negative effect
on the development of the category.
▪ With manufacturers successfully campaigning for year-
round consumption of ice cream, more Dutch consumers
might be convinced to try ice cream and frozen desserts
as a snack.
▪ However, since ice cream is primarily a seasonal product,
climate change might have either a positive or negative
effect on the development of the category.

Aris Derksen: The German and Dutch food market for dummies

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