Gates to German Retail Market

GATES TO GERMAN RETAIL MARKET

Lisbon /Portugal • March 3d, 2016 Prepared for aicep Portugal Global Trade & Investment Agency

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 1 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Gates to German retail market • Critical self-assessment • Success factors marketing • Success factors sales • Checklist financial requirements • Checklist logistical requirements • Checklist legal requirements

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 2 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 3 BASIC DATA GERMANY

History and Geography • Founded May 23 d 1949 • Surface area is 357.376 km 2 • Reunification with former German Democratic Republic on October 3d 1990 • 16 Federal States (incl. The 6 Easterrn States following reunification) • North-Rhine Westphalia is the larges state (17.64 m inhabitants) • Berlin, the capital , ist the largest city (3.47 m inhabitants ) • Nine countries border Germany

Source : www.destatis.de , 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 4 BASIC DATA GERMANY

Population and Households • 81.459 m inhabitants (227 per m 2)

• 40.2 m German households: • 40.8% are 1 person households • 34.4% are 2 person households • 24.8% are 3+ person households

• Average German household : 2.01 people

• Ageing population: • By 2020 22.5% estimated to be older than 65 years • By 2050 31.6% estimated to be older than 65 years

• 8.1 m migrants living in Germany (Mikrozensus 2014) • Thereof 3.7 m from EU-28 (esp. Poland 0,7m and Italy 0,6m) • Thereof 2.7 m from other Europe (esp.Turkey 1.5m)

Source : www.destatis.de , 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 5 BASIC DATA GERMANY

Economy • Fourth largest economy in the world • GDP of 3,027 bn Euro (per capita 32,299 Euro) • 43.2 m employed persons • Unemployment rate 4.5% (2.9 m persons) • Economic growth 1.7% in 2015 • Est. economic growth 1.7% in 2016 • Inflation rate 0.3% in 2015 • Currency: Euro

Source : www.destatis.de ,www.de.statista.com and www.bloombergbriefs.com, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 6 BASIC DATA GERMANY

Confidence: slightly below average but slightly pessimistic as well

Source : The Nielsen Company, Consumer Confidence Series, Q4/2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 7 BASIC DATA EUROPE

FMCG sales growth rates per country

Source : The Nielsen Company, 11/2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 8 BASIC DATA EUROPE

FMCG sales growth rates per country

Source : The Nielsen Company, 11/2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 9 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 10 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 11 EUROPEAN TOP 10 PLAYERS GROCERY

Top 10 grocery europe

gross sales in numbers sales-area in Mio. € of stores sqm 2014 2014 2014 1. Schwarz-Gruppe D 72.907 11.270 14.065.531 2. Carrefour F 54.478 9.687 10.767.783 3. Tesco GB 52.248 4.760 6.499.844 4. ALDI D 48.305 8.166 6.439.754 ALDI Süd 27.429 3.305 2.695.259 ALDI Nord 20.876 4.861 3.744.495 5. EDEKA D 45.942 13.299 10.684.858 6. Rewe Group D 40.199 10.183 8.738.711 7. Auchan F 34.508 3.430 7.524.717 8. Leclerc F 30.221 758 3.437.538 9. ITM (Intermarché) F 28.814 2.716 4.201.719 10. Metro Group D 26.826 1.015 7.654.829

Quelle: Planet Retail - 15. September 2015 Berücksichtigt sind Umsätze, die mit dem Verkauf von Food- und Near-Food-Waren im Einzel- und Großhandel erzielt wurden, exklusiv Foodservice. • 5 of Europe´s Top 10 grocery players are German • Germany itself is dominated by German domestic retail chains

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 12 GERMAN DISTRIBUTION CHANNELS

• Discounters count for 42% of total FMCG sales revenues and for 50% of total outlets

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 13 GERMAN TOP 10 PLAYERS FOOD TRADE

Top 10 Food Germany 2015 turnover food in total turnover share mio. € in mio. € change 2013 2014 Food in % 2014 in % 1. EDEKA-Gruppe 1 46.086 46.999 2,0% 90,6% 51.850 2. Schwarz-Gruppe 2 26.000 27.657 6,4% 81,2% 34.060 3. Rewe-Gruppe 1 26.813 27.559 2,8% 72,5% 37.999 4. ALDI-Gruppe 2 22.128 22.554 1,9% 82,0% 27.505 5. Metro-Gruppe 10.808 10.832 0,2% 36,5% 29.718 6. Lekkerland 8.365 8.702 4,0% 99,0% 8.790 7. dm 5.258 5.760 9,5% 90,0% 6.400 8. Rossmann 4.491 4.866 8,4% 90,0% 5.407 9. Globus 3.073 3.170 3,2% 67,0% 4.731 10. Bartel-Langness-Gruppe 2.904 3.020 4,0% 77,7% 3.889 Top 10 total 155.926 161.120 3,3% 76,6% 210.349

source: Trade Dimension - M arch 2015 italic: estimation of Trade Dimensions 1 including external sales of SEH 2 reevaluation of last year turnover • Top 5 count for about 82% of total turnover • 2 pure player discount within top 4 • Internet shopping in the food sector virtually non-existent

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 14 RANKING TOP 6 DISCOUNTER

Top 6 Discounter Germany 2015 gross-turnover in numbers of stores 1 sales-area in sqm Ø-sqm mio. € change change 2012 2013 Mrz 15 Okt 15 change 2013 2014 Okt 15 in % in % 1. ALDI-Gruppe 27.369 27.600 0,8% 4.223 4.192 -31 3.454.305 3.516.672 1,8% ALDI Süd, Mühlheim 15.446 15.500 0,3% 1.852 1.849 -3 1.984.876 1.998.227 0,7% 827 ALDI Nord, Essen 11.923 12.100 1,5% 2.371 2.343 -28 1.469.429 1.518.445 3,3% 842 2. Lidl 19.690 20.310 3,1% 3.196 3.182 -14 2.663.986 2.716.799 2,0% 851 3. Netto 12.933 13.221 2,2% 4.119 4.112 -7 3.135.496 3.159.173 0,8% 767 4. Penny 7.494 7.532 0,5% 2.169 2.164 -5 1.554.887 1.548.233 -0,4% 707 5. Norma 3.026 3.127 3,3% 1.289 1.287 -2 894.841 902.176 0,8% 702 6. Netto (Dansk Supermarked) 1.191 1.203 1,0% 351 350 -1 254.185 258.076 1,5% 734 source: Trade Dimension; 26. Mai 2015, sales-area in sqm status 5. February 2015 italic : estimation of Trade Dimensions

1 sourc e: Trade Dimension/ LZ - 2. October 2015

• Top 3 count for about 83% of total turnover • 3 „hard“and 3 „soft“ discount players

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 15 RANKING TOP 10 HYPERMARKETS

Top 10 hypermarkets based on Key Accounts Germany 2015

gross-turnover numbers in mio. € 1 of stores 2014 Sep 15 1. Kaufland* 13.600 645 2. real,-* 9.139 302 3. EDEKA-Gruppe (E-Center, Marktkauf, 5.689 309 4. Globus 3.310 46 5. Rewe-Group (Rewe Center, Akzenta)* 1.663 99 6. Bartels-Langness (Famila, Citti)* 1.531 87 7. Dohle-Gruppe (HIT)+ 1.241 84 8. Bünting (Combi, Famila) 885 113 9. Kaes (V-Markt) 496 38 10. Coop (Sky) 181 14 source: Trade Dimension - 20. Januar 2015 *estimation of Trade Dimensions hypermarkets up 1.500 qm

• Top 2 count for more than 60% of total turnover and about 55% number of stores

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 16 RANKING TOP 4 CASH + CARRY

Top 4 Cash + Carry Germany 2015

turnover market numbers sales-area in in io. € share of stores sqm 2014 2014 2014 2014

1. Metro-Gruppe Metro, C+C Schaper 5.173 51,5% 107 943.578 2. Transgourmet Selgros C&C, Transgourmet 1.770 17,6% 47 431.200 C&C 3. EDEKA-Gruppe E-C+C Großmarkt, Ratio 1.402 13,9% 111 416.430 4. Intergast 1 u.a. Wasgau C+C, Handelshof, 1.256 12,5% 72 367.380 C&C Abhollager

italic: estimation of Trade Dimensions 1 member of M arkant (eg. Handelshof, Brülle & Schmelzer, Wasgau, Kaes) source: Trade Dimension - M arch 2015

• Metro as undisputable market leader • Top 2 count for about 69% of market share value

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 17 LONGTERM DEVELOPMENT OF DISTRIBUTION CHANNELS

• Discount and small hypermarkets slightly growing • (Small) supermarkets declining

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 18 IMPORTANCE DISTRIBUTION CHANNELS

• Small hypermarkets increase number of stores and turnover • Drugstores with growth momentum

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-0319 19 EXPENDITURES PER PURCHASE AND NO. OF PURCHASES

• High purchase frequency at discount of more than once per week • Discounters are visited approx. three times as much as hypermarkets and supermarkets and four times as much as drugstores.

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 20 FULFILLMENT OF DEMAND PER DISTRIBUTION CHANNEL

• Demand of FMCG products mostly covered by discounters • German consumers as „value seekers“

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 21 CONSUMER BASE AND TOTAL EXPENDITURES

• Discounters by far leading in household penetration and expenditures

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 22 SEASONALITY OF RETAIL TURNOVER

• Three major peaks: Eastern, Pentecost and Christmas/New Year´s Eve

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 23 PRIVATE LABEL SHARES IN 2014 BY CATEGORY: VOLUME

• Dry grocery, dairy and frozen as leading PL food categories volume

Source: PLMA Yearbook, 2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 24 PRIVATE LABEL SHARES IN 2014 BY CATEGORY: VALUE

• Dairy, dry grocery and frozen as leading PL food categories value

Source: PLMA Yearbook, 2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 25 PRIVATE LABEL SHARES IN 2014 BY PRODUCT

• Market shares almost stable

Source: PLMA Yearbook, 2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 26 PRIVATE LABEL SHARES IN 2014 BY PRODUCT

• Canned tuna and fish specialties growing, potato products and seasoning decreasing

Source: PLMA Yearbook, 2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 27 PRIVATE LABEL SHARES IN 2014 BY PRODUCT

• Thin savory sauces, frozen fruit, ready meals and vegetables growing

Source: PLMA Yearbook, 2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 28 PRIVATE LABEL SHARES IN 2014 BY PRODUCT

• Toilet tissues moist growing, all other almost stable

Source: PLMA Yearbook, 2015

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 29 DEVELOPMENT ORGANIC FOOD

• Continuously growth of turnover and share of total food business

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 30 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 31 BASIC DATA GERMAN RETAIL TRADE

Factsheet Edeka • Germany´s No. 1 food retailer • Co-operative, head office in Hamburg/Germany • Seven regions • Characteristic: high number of independents • Price level about 5-10% higher vs. competition (non-mainstream categories) • Per region 3-7 distribution center , in total over 30 DCs across Germany • Direct store delivery possible (supermarekt/hypermarket) • Manufacturing facilities for meat, sausages, bread and bakery products, wine • Member of European trade alliance Alidis/Agenor • Number of stores in 2015: 13,573

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 32 BASIC DATA GERMAN RETAIL TRADE

Retail format and banner

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 33 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 34 BASIC DATA GERMAN RETAIL TRADE

Factsheet Schwarz Group • Germany´s No. 2 food retailer • Privately owned trust, head office in Neckarsulm/Germany • 2 store formats: discount stores (Lidl) and hypermarkets (Kaufland) • Characteristic: price-focussed, highly expansive • Price level about -5 to -10% less vs. competition (all categories) • Lidl around 38 DCs and Kaufland 5 DCs across Germany • No direct store delivery possible • Manufacturing facility for chocolate products • European presence in more than 20 countries • Number of stores in 2015: 3,838

Source: TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 35 BASIC DATA GERMAN RETAIL TRADE

Retail format and banner

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 36 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 37 BASIC DATA GERMAN RETAIL TRADE

Factsheet Rewe • Germany´s No. 3 food retailer • Co-operative, head office in Cologne/Germany • 6 regions + one independent region (Rewe Dortmund) • Characteristic: modern and celarly structured, less independents compared to Edeka • Price level about 5-10% higher vs. competition (non-mainstream categories) • Per region 1-3 distribution center , in total over 15 DCs across Germany • Direct store delivery possible (supermarkets/hypermarkets) • Manufacturing facilities for meat, bread and bakery products • Member of European trade alliance Coopernic • European presence in 11 countries, mainly Eastern Europe • Number of stores in 2015: 7,024

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 38 BASIC DATA GERMAN RETAIL TRADE

Retail format and banner

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 39 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 40 BASIC DATA GERMAN RETAIL TRADE

Factsheet Aldi • Germany´s No. 4 food retailer • Privately owned, head offices in Essen (Aldi Nord) and Mühlheim/Germany (Aldi Süd) • 2 independent regions, split through the middle of the country • Characteristic: focus on high quality at a reasonable price • Price level about -10% less vs. competition (all categories) • Aldi Nord 35 DCs and Aldi Süd 31 DCs across Germany • No direct store delivery possible • Manufacturing facilities for coffee roasting • Global presence in 17 countries, mainly in Europe • Number of stores in 2015: 4,232

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 41 BASIC DATA GERMAN RETAIL TRADE

Retail format and banner

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 42 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 43 BASIC DATA GERMAN RETAIL TRADE

Factsheet Metro • Germany´s No. 5 food retailer • Stock corporation, head office in Düsseldorf/Germany • 3 store formats food: hypermkts. (Real), C & C (Metro), dept. stores (Galeria Kaufhof) • Characteristic: highly diversified, innovation of retail practises and technology • Price level about +/- 0% vs. average (Real and Metro) resp. +10% vs. average (GK) • Real 6 DCs, Metro 18 DCs across Germany • Direct store delivery possible • No manufacturing facilities but broad ranges of private label products • Global presence in 32 countries, mainly in Europe, Asia and Africa • Number of stores in 2015: 528

Source : Trade Dimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 44 BASIC DATA GERMAN RETAIL TRADE

Retail format and banner

Source : TradeDimensions, 2016

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 45 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 46 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 47 CRITICAL SELF-ASSESSMENT

Initial questions you should ask yourself: • Why are you looking for export business? • Have you done your homework on your domestic market? • What is your sales approach: private label or brand? • What is your unique selling proposition (USP)? • What are you willing to invest? • Where has your brand /product been successful in the past ? • How tough will it be to launch your brand? • Can all parties involved make money with your brand?

Self-reflection as a crucial precondition

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 48 CRITICAL SELF-ASSESSMENT

Are you informed about your target market? • What do yo know about the size of your target market? • What do you know about existing product offers? • What do you know about your target consumers?

Information as another crucial precondition

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 49 PORTUGAL: (GERMAN) BRAND CONNOTATION

Source : Google, 2014

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 50 HOW TO OBTAIN MARKET DATA

Primary sources: evaluation of market size and existing product offers • To get an category overview through purchase of back data/snapshot • Costs depend on the category and depth or split of information requested • Costs vary from € 5-15,000 per category • Potential market research companies: • The Nielsen Company ( www.nielsen.com ) • GfK ( www.gfk.com ) • Trade Dimensions (www.tradedimensions.de ) • Planet Retail(www.planetretail.net ) • IRI ( www.iriworldwide.com )

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 51 HOW TO OBTAIN MARKET DATA

Secondary sources: evaluation of market size and existing product offers • To get an category overview through self-study • Desk research as lower-budget option • Potential sources trade press: • Lebensmittel Zeitung ( www.lebensmittelzeitung.net ) => general grocery • Lebensmittel Praxis ( www.lebensmittelpraxis.de ) => general grocery • Rundschau für den Lebensmittelhandel ( www.rundschau.de ) => general grocery • Allgemeine Fleischer Zeitung ( www.fleischwirtschaft.de ) => meat • Milch-Marketing ( www.moproweb.de ) => dairy • Fischmagazin ( www.fischmagazin.de ) => fish • Getränke Zeitung ( www.getraenke-zeitung.de ) => beverages • Inside ( www.inside-getraenke.de ) => beverages • Café Future ( www.cafe-future.net ) => horeca

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 52 HOW TO OBTAIN MARKET DATA

Secondary sources: evaluation of market size and existing product offers • To get an category overview through self-study • Desk research as lower-budget option • Potential sources Internet: • Retailer websites • Manufacturer websites • Government websites/tax authorities (www.zoll.de ) • Statistics offices (www.destatis.de and www.ec.europa.eu/eurostat ) • Logistics websites (www.dachser.com , www.kv-nagel.de and www.dhl.de ) • Service provider websites (www.gs1.com ) and (www.gruener-punkt.de ) • Market research companies (Nielsen, GfK, etc.)

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 53 HOW TO OBTAIN MARKET DATA

Consumer research: evaluation of consumer preferences, habits and needs • To get insights regarding consumer requirements and consumption patterns • To get insights regarding taste preferences and products standards (esp. East/West) • Qualitative research: focus groups, depth psychological interviews, etc. • Quantitative research: consumer panel, online research, etc. • Costs vary from € 7-15,000 per group discussion, interview series or back data • Potential market research companies : • The Nielsen Company ( www.nielsen.com ) • GfK ( www.gfk.com ) • IFAK ( www.ifak.de ) • TNS Infratest ( www.tns-infratest.com ) • Insight Europe ( www.insighteurope.de ) • Millward Brown ( www.millwardbrown.de ) • Rheingold ( www.rheingold-marktforschung.de )

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 54 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 55 SUCCESS FACTORS MARKETING

Fivesuccessfactors, partially taken asa casestudy

• Benefit => Uncommontaste andmouthfeeling

• Brand recognition => Consistent brand identity/positioning

• Quality => High quality, tradingup

• Originality => Authenticity and credibility

• Target pricing => Value for money: premium but affordable

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 56 SUCCESS FACTORS MARKETING

Benefit • British craftsmanship, unconventional and all natural • Novel tasting profile, extraordinary • Clear Unique Selling Proposition (USP) – hardly to be immitated

Original German followers

€ 1,99/150g € 1.89/120g € 1.99/110g € 0.99/150g € 13.27/1kg € 15.75/1kg € 18.09/1kg € 6.60/1kg

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 57 SUCCESS FACTORS MARKETING

Brand recognition • Clear product concept, easy to understand • Consistent brand identity/brand positioning > brand communication

German assortment of Kettle Chips brand

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 58 SUCCESS FACTORS MARKETING

Quality • High quality ingredients (free from GMO, flavour enhancers, artificial colours, etc.) • 100% Portuguese origin (or at least perceived as such) • Authorization through authorities such as EU organic • Certification of independent NGO (such as Eurofins institute or DLG) • Certification of consumer or trade magazines (such as Stiftung Warentest or LP)

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 59 SUCCESS FACTORS MARKETING

Certificates to differentiate from competition, not mandatory • Organic/Bio (www.bio-siegel.de ) • Fairtrade (www.fairtrade-deutschland.de ) • Rainforest Alliance (www.rainforest-alliance.org ) • Utz ( www.utzcertified.org ) • SGS Institut Fresenius ( www.institut-fresenius.de ) • Eurofins (www.eurofins.de ) • DLG Deutsche Landwirtschafts-Gesellschaft ( www.dlg.org ) • QS test system for meat, meat products, fruit and vegetables (www.q-s.de ) • Stiftung Warentest ( www.stiftung-warentest.de ) • Ökotest ( www.oekotest.de ) • Lebensmittel Praxis ( www.lebensmittelpraxis.de ) • Lebensmittel Zeitung ( www.lebensmittelzeitung.net ) • Reader´s Digest ( www.rdtrustedbrands.com )

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 60 SUCCESS FACTORS MARKETING

• Credibility: • Authenticity* = Uniqueness + Tradition + Trust + Worthiness • 100% Portuguese origin • Authorization through authorities such as EU protected origin

100%

*Source: IFAK, April 2005; qualitative market research for Wilms/Impuls

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 61 SUCCESS FACTORS MARKETING

Target pricing • Germany = Europe´s retail market with lowest price level for food products • Pricing structure corresponding to sales channel • Value and not only „cheap “

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 62 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 63 SUCCESS FACTORS SALES

Sales approach • Strategy depending on your company´s targets: • Producing generic products/private label? • Selling a unique brand?

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 64 SUCCESS FACTORS SALES

Sales approach • Strategy depending on your company ´s targets: • Producing generic products/private label?

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 65 SUCCESS FACTORS SALES

Sales approach • Strategy depending on your company´s targets • Selling a unique brand?

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 66 SUCCESS FACTORS SALES

Sales approach determines certain general conditions • Defining your needs and capabilities • Finding the „right“ retail format to focus on

Portuguese manufacturing company

German manufacturer oror German trade German distributor

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 67 SUCCESS FACTORS SALES

Essential preparatory work before contacting third parties • Presentation of company, product and its USP/strategy (in German language) • Production of fresh samples • Elaboration of product specification and technical data (in German language) • Elaboration of pricing structure (reversed usage of decimal point and comma) • Clear logistics solution for transport to all parts of Germany • Check on legal conformity (e.g. by SGS Institut Fresenius, Eurofins )

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 68 MANUFACTURER/DISTRIBUTOR ASSESSMENT GRID

Source: Export Solutions (www.exportsolutions.com)

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 69 SUCCESS FACTORS SALES

Tender process 1. (Personal) presentation of company and products, incl. first price proposal 2. Obtain buyer´s first feedback 3. Request to participate in tender process (no fixed windows; usually mid of year) 4. Demonstration of capabilities (listing situation, production output, etc.) 5. Adaptation/development of final product formula 6. Revision of price proposal (DDP/DAP) and product specification/data sheet; if competing against existing products : undercut prices by at least -5% 7. Audit of company and production facilities 8. Adaptation/development of private label packaging design

• All product parameters provided within the tender process • Usually tender by internet platform (exception Aldi Nord and Norma: Fax) • Excellent QA mandatory • All communication (written/spoken) in German language

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 70 SUCCESS FACTORS SALES

Contacts sales and distribution • Retailers • Edeka: www.edeka-gruppe.de • Rewe: www.rewe.de • Kaufland: www.kaufland.de • Lidl: www.lidl.de • Aldi Süd/Nord: www.aldi.de • Metro: www.metrogroup.de • Organic: www.alnatura.de www.denree-biohandelshaus.de

• Wholesalers/importers fruit & vegetable • Metro: www.metrogroup.de • Transgourmet: www.transgourmet.de • CF Gastro: www.cfgastro.de • Keuthmann: www.keuthmann.net

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 71 SUCCESS FACTORS SALES

Contacts sales and distribution • Distributor organizations food • European Sales & Marketing Association: www.esma.org • Circle of Specialty Food Distributors: www.ceisa.org

• Specialized distributors chilled food • Ruwisch & Zuck (cheese only): www.ruwischzuck.de • Uplegger (cheese & dairy): www.uplegger.de

• Specialized distributors beverages and spirits • MBG International Premium Brands: www.mbg-online.net • Drinks & More: www.drinks-and-more.com • Trend Beverages: www.trend-beverages.de

• Specialized distributors wine • Wein Wolf: www.weinwolf.de • Ardau Weinimport: www.ardau.de • Eggers & Franke: www.egfra.de • Mack & Schühle: www.mack-schuehle.de

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 72 SUCCESS FACTORS SALES

Contacts sales and distribution • Specialized manufacturers and distributors non food • DMV Diedrichs Markenvertrieb: www.markenvertrieb.de • Sebapharma: www.sebapharma.de • Klosterfrau Healthcare Group: www.klosterfrau.de • Mapa: www.mapa.de

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 73 AGENDA

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 74 CHECKLIST FINANCIAL REQUIREMENTS

Evaluating costs of entry • Size of category

• Sales approach/route to market: • Brand: >> Category leadership >> Top 3 category brand >> Niche player • Private label >> Low price, high volumes >> Low price, high volumes + service (e.g. lead times, return of goods, etc.)

• Category spend level (media, discounts, promotion, etc.)

• Fixed costs of entry (e.g. listing fees)

• Home country as benchmark

Source: based on Export Solutions (www.exportsolutions.com)

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 75 CHECKLIST FINANCIAL REQUIREMENTS

Costs to be covered within product calculation • VAT (e.g. Germany): food products = 7%; VAT beverages/non food = 19% • Direct business with German retail: invoice without VAT • Indirect business with indermediary: intermediary charges VAT to retailer

• Trade margin • Depending on product category, category growth and manufacturer´s promotion program; only top A -brands and signpost items allow lower margins • Several different trade expenses (off/on invoice rebates, either fixed or variable) • Advertising allowance („Werbekostenzuschuss“/WKZ) e.g. to feature products in leaflets

Net margin expectations Format Brand Private Label Retail 38-60% 28-40% Cash & Carry 38-60% 28-40% Discount 30-45% 25-45% Foodservice/wholesalers 20-45% 20-45% Gaz stations 50-65% -

Source: own graphic

GATES TO GERMAN RETAIL MARKET © by Markus Krick, 2016-03 76 CHECKLIST FINANCIAL REQUIREMENTS

• Sales organization (proprietary sales force vs. manufacturer/distributor)

• Marketing activities (displays, trade promotion, advertising, etc.)

• Excise duties (e.g. tobacco, coffee, beer, sparkling wine, spirits)

Costs to be covered within product calculation • In- and outbound logistics • Coverage of fragmented market structure necessary (DC vs. DSD) • Regional hubs of larger logistic service providers offer reliable consolidating service • Several service providers: Kraftverkehr Nagel ( www.nagel-group.com ), Dachser (www.dachser.com )

• Packaging and Waste Disposal fees • Legal basis: ordinance on the avoidance and recovery of packaging waste • Valid for sales packaging filled with goods to be purchased and used by private consumers • Fees payable are based on the type and weight of material used in the packaging • Branded manufacturers: mandatory to participate in the system • Private label manufacturers: retailer is responsible for admin./handling of packaging waste • Additional waste disposal fee for outer packaging (e.g. cases, trays) charged by retailer • Several service providers: DSD GmbH ( www.gruener-punkt.de ), Belland Vision (www.bellandvision.de ), Interseroh (www.interseroh.de )

Costs to be covered within product calculation • Deposit system for beverages (applicable for beverages in PET, glass and cans) • Deposit of € 0,25 charged on non-returnable (one-way) beverage packaging • Manadatory to label one-way packaging with DPG symbol and valid EAN code • Retailers have to take back all types of beverage packaging offered in their stores • Not applicable to wine, milk, juice and nectar • Not applicable to „ecologically sound“ packaging (e.g. cardboard/Tetra Pak)

• Currency fluctuations

Product category Net retail margin expected (private label -5-10%-pt.) Pricing example (e.g. ambient product) Wine 25-40% (port wine: 20-30%) Olive oil 25-45%

Vinegar 20-40%

RSP € 4,49 Spices 30-50% ./. VAT 7% € 0,29 Honey, jams, marmelades, spread 25-40% Fruit and vegetable preserves 15-35% = Net RSP € 4,20 Canned fish 20-35% ./. Retail margin (trade expenses) 40% € 1,68 Ready meals frozen 12-26% Confectionery (e.g. chocolate, cookies) 25-45% = NIV to trade € 2,52 Dried fruit 15-40% Fresh fruit and vegetable 5-50% (wholesale/spot business)

./. Advertising allowance /WKZ 5% € 0,21 Flowers 25 -50% ( wholesale /spot business ) = NSV to trade € 2,31 Non food (hygiene products) 10-30% Electronic household devices 35-55% ./. Sales organization (proprietary sales force vs. manufacturer/distributor) ./. Marketing activities (displays, trade promotion, advertising, etc.) ./. Excise duties (e.g. tobacco, coffee, beer, sparkling wine, spirits) ./. In- and outbound logistics ./. Packaging and Waste Disposal fees (e.g. „Grüner Punkt“/DSD, Interseroh) ./. Currency fluctuations = Price EXW

(Hidden) costs apart from product calculation, partially recurring • Production costs (staff, raw material, machinery, energy, etc.)

• R&D/product development (recipe, packaging design, etc.)

• QA (internal/external product analysis, specification sheets, audit costs, etc.)

• Listing fees (exception discount /private label : net net net costing required )

• Wastage costs (for products exceeding shelf life)

• Samples

• Market research/market data

• Insurance rate and attorney fees

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

Logistical requirements • EAN barcode/GTIN (Global Trade Item Number)

• EAN 128 (on pallets and outer cases)

• Shipment on multi-trip wooden Euro pallets (1200 x 800 mm) required

• Maximum pallet heights according to GS1 standard (www.gs1.com ) • CCG 1: max. height 105 cm (incl. 15 cm pallet height) • CCG 2: max. height 160-195 cm (incl. 15 cm pallet height)

• Capability to conduct EDI (transmission of data by electronic means)

Logistical requirements • Number of products per tray • In line with established products/segment • The smaller the unit the better (greater chance of successful and wider distribution)

• Best before date • In line with market segment • Longer shelf-life preferred • Chilled product ranges in Germany not as developed as in other countries • „Ultra fresh“ virtually non-existent • German retail expects the supplier to take on wastage costs

Logistical requirements • Prerequisite: floor displays and secondary placements

• Strong trend: shelf/infrastructure ready packaging

• Discounters: mixed cases often required

• Production capacities reflecting demand/seasonality

Source store photo: www.otto-kind.de

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

Legal requirements • Brand registered to be marketed within European Union/Germany

• Production process based on European/German law

• European/German product declaration (esp. EU food information regulation 1169/2011) • Ingredient list in German language • Allergy advice (bold letters, etc.) • Best before date (DD.MM.YYYY or MM.YYYY if a long shelf -life category ; German language ) • Net weight and symbol „ “ (production process based on EU directive 76/211) • Information on producer (address in EU) and importer/distributor (not mandatory) • Origin of product • Batch code for traceability • Bar code reflecting the GTIN (Global Trade Item Number) • Guidelines on preparation, usage and storage • Nutritional facts • Respect of EU regulation on nutrition and health claims made for foods

Legal requirements • Registration at recycling company (e.g. DSD)

• Registration at Deutsche Pfandsystem GmbH (DPG) if applicable (beverages)

• Trade: certification IFS (favored) and BRC • ISO and HACCP not sufficient • IFS certification (www.ifs -certification.com ) • BRC global standard certification (www.brc.org.uk )

• Trade: sustainability of production process (CO 2 footprint, etc.)

• Recommendation: checking of product quality/design by chemical analysis institute • SGS Institut Fresenius ( www.institut-fresenius.de ) • Eurofins (www.eurofins.de )

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

We are the most efficient distribution platform for premium FMCG brands mainly in Germany.

Our partners, either multinational companies or privately owned local/regional companies, are producing food and non-food products.

We act as a problem solver : • For existing brands on the market we serve as an outsourcing platform • For others we open the door to German consumers

• Founded in 1950 by Karl Heinz Wilms • Part of Zertus Group since 1984 • Focus on Germany • Additional direct sales to Austria, Switzerland and Luxemburg • Approx. 190 employees • Own sales organization • Own logistic center & warehouse

• Member of

• Office located in Walluf (Frankfurt area) • Logistic center & warehouse located in Alzey (greater Frankfurt area)

• Established 1826, until today a family business • Origin is the sugar refinery in Tangermünde • Diversified group of food specialists:

• Germany ´s leading marketer and distributor

• Leader dextrose market in Germany and other European markets

• Europe ´s largest tinned candy manufacturer and leading manufacturer of promotional confectionary merchandise

• Europe ´s largest flat and formed wafers specialist (B2B)

• One of UK‘s leading confectionary manufacturers (chocolate, dried fruits and nuts)

• Being your organization in Germany

Marketing Trade Marketing BRANDOWNER

Key-Account-Management CONSUMER TRADE Field Management Customer Service Supply Chain & Warehousing Quality Assurance Accountancy & IT

• Coverage of all relevant sales channels and product categories • Market leader position in many categories • Sustainable customer business development • Experienced marketing and sales team to tap market potential • Relationship with brand owners based on trust, synergy and quality

SALES CHANEL

PRODUCT CATEGORY Cash & & Carry & Carry CashCash Service Service FoodFood Drugstores Drugstores Pharmacy Pharmacy Wholesalers Wholesalers Retail DepartmentDepartment stores Convenience Convenience Confectionary X X X X X X

Snacks X X X X X

Breakfast Products X X X X

Edibleoil& vinegar X X X X

Condiment& sauces X X X X

Ethnicfood X X X X

Healthcare X X X X X X

Personal care X X X X X X

Non food X X X X X

Affiliate brands 11 years 14 years 13 years

Distribution and licensing 8 years 8 years 20 years 39 years 31 years 23 years brands

19 years 37 years 21 years 8 years

9 years 25 years 15 years 26 years 5 years

5 years 11 years 25 years 50 years 10 years 11 years 5 years

Multinational partners

Benefits manufacturer: Benefits retailer:

• Focus on core • Know-how to drive category growth countries/categories/channels/brands/ • Broad and complementary activities brand-portfolio • One of the biggest and strongest • Superior shelf-management and organizations in place service • Lean structures for quick decisions • Exceptional marketing activities • Cost efficiency and promotions • Financial stability • Profitable business relationship

• Basic data Germany

• Basic data German retail trade • Overall market data • Edeka Group • Schwarz Group • Rewe Group • Aldi • Metro

• Snapshot of Importhaus Wilms/Impuls

• Recommendation

Your gates to German retail market • Analyse your strengths and weaknesses • Envision your brand positioning (USP) • Conduct market research per target country (gap analysis: competition, price level, etc.) • Develop your own export strategy (countries, products, pricing, etc.) • Evaluate facts before contacting third parties/potential business partners

General rules to compete on the global market • Be honest to yourself • Calibrate expectations to spend level • Realize a „win-(win)-win“ situation (trade – [importer/distributor] – you/manufacturer) • Allow yourself time to establish business