establishing ROOTS in the German organic food market 2012 Foreword The organic market is growing worldwide with fast paces. The German market for or-ganic food and beverages was in 2010 the second largest organic market in the world. It is a fast growing market estimated to about 6.59 billion euros in 2011, growing by 9 per cent a year, encompassing 3.7 per cent of the entire Mette Gjerskov (Photo: Rune Johansen) food market in Germany in 2011. This is an opportunity for organic food companies, as it has never been seen before! It is my aspiration that this window of opportunity will be opened by providing high quality Danish organic products for a fast growing organic market. Many Danish companies are already active in the fi eld of foreign trade, participating at international fairs and export promotions. Danish companies have the advantage of a well-established business platform and many are already acting with competence and skill on the German market greatly supported by “Bio aus Dänemark”. 2 The organic sector in Denmark has a very high credibility with a large degree of self-regulation. Our strict state-run control system from farm to fork is not only securing high credibility of the organic products, but also contributing to the safety of food products, since the organic inspection is part of the general food inspection. As a result of this our Danish consumers have a very high confi dence and trust in organic products. Well-established public-private cooperation provides a prolifi c environment for new incentives motivated and supported by the Danish Government. Support of product in-novation and of organic exports is part of the Organic Action Plan 2020. Export initia-tives in line with our effort on enhancing a sustainable development in Denmark – the greening of our economy – are highly appreciated. The German market for organic food is a very challenging market, demanding high quality and storytelling organic food products as well as food products adapted to Ger-man tastes and customs. May the number of food companies taking up this challenge grow, and may they suc-ceed in their efforts to enter this huge and fast growing market! Mette Gjerskov Minister for Food, Agriculture and Fisheries 3 establishing ROOTS in the German organic food market Status Quo: German Organic Food Market 1) Organic sales and sales development in Germany 2) German organic production, export and main focus import 3) Consumers, organic marketing and market trends Focus: Organic Food Trade in Germany 4) Organic market structure 5) Food channels and their importance for organic sales a. Turnover development of organic food in the different channels b. The main players in the organic market over all channels c. Well known brands and labels in the organic market d. Organic food categories and their importance for the different channels e. A close look at the different channels for organic food (conventional followed by organic – retail and wholesale) 6) Trade margins and pricing in the organic and conventional trade 4 establishing ROOTS in the German organic food market establishing ROOTS in the German organic food market establishing ROOTS in the German organic food market 7) Hints for a successful import a. How to fi nd and get in touch with your customers b. Special product quality c. Labelling, certifi cation and quality assurance d. Rules and customs in German the food trade 8) Food Service Appendix Short historic review Schedule of fairs Blanks for product list, price list, logistic data Lists of a. Main conventional food discounters b. Conventional food wholesale and supermarket chains c. Organic wholesalers d. Organic supermarket chains 5 Status Quo: German Organic Food Market Organic sales and sales development in Germany With sales of about 7 billion Euros in 2012, the German market is (still) the largest organic market in Europe. The sales increase of 9% in 2011 covers the total organic sales 15 years ago. Looking at the market share and the average sales per person, it seems that there is further market potential. In 2011, the market share for organic food in Germany is the fourth largest in Europe with roughly 3.7% of total food sales (the increase mainly due to increased prices); the leading countries are Denmark with nearly 7.2% and Austria with 6% and Switzer- land with about 5.7%. With average annual sales per person (2010) of 74 Euros, the Germans spend 2-3 times more money on organic products than the average European, but much less than consumers in Denmark, Switzerland and Austria (see figure). For this comparison, country-based price differences are not considered. 6 Comparison of Organic Sales in Europe 2010 7.000 180 6.020 160 6.000 153 143 Sales in m Euro 140 5.000 Sales per person in Euro 120 118 ro u E ro n u 4.000 Average sales per person in i E 100 3.385 on m Europe: 28 Euro/year 86 s n 74 r i 3.000 80 e p es l r a e p S 52 2.000 60 2.000 es 1.550 l a 1.187 40 40 40 S 986 32 905 804 791 1.000 26 657 23 23 20 421 15 20 113 103 80 68 65 59 58 21 7 5 2 0 1 2 0 UK Italy France Austria Norway Ireland Finland Poland Germany SwedenDenmark Belgium Portugal Switzerland Spain (2009) Russia (2009) Greece (2006) The Netherlands Czech Republic (2009) Source: Wirthgen, based on data from AMI, Fibl, BÖLW 7 For the past years, until 2008, the organic market was growing quickly; between 2004 and 2008 the sales growth rate was in two-digits. Even so, in 2008 the organic market was still increasing by about 10 %. This boom stopped abruptly in 2009. The financial crisis has hit the organic market, even though the whole food market decreased even more. The organic market sales in 2009 more or less stagnated (slightly reduced) with about 5.8 billion Euros. But, while the prices fell, the total organic market volume still increased. However in 2009 and 2010, with an average growth rate of 2-3 %, this is a significantly lower level than in the previous years. On average, the volume of the organic market grew about 10 % annually the past 7 years (2005-2012). The organic market has picked up again since 2010 (sales growth +4 %), first mainly driven by the organic retail (2010) and than by food scandals and price increases in 2011 (+9 %) and 2012 (+4-5 %). The market sales of organic products exceeded 6 billion Euros in 2010 and will exceed 7 billion Euros in 2013. For more details concerning the market shares in the different trade channels, see chapter “Organic food trade …”. In the near future, market experts expect a moderately growing organic market. Since the organic market left the niche and now reaches many opportunity buyers, it is more sensitive towards financial changes than it was in its pioneering phase with only convinced, intensive organic buyers. Sales development in the German organic food market Yearly growth + 13% + 11% + 18% + 15% +10% - 1% + 4% + 9% + 4-5% Year 2004 2005 2006 2007 2008 2009 2010 2011 2012* Organic sales (in bn !) 3.5 3.9 4.6 5.3 5.85 5.8 6.0 6.6 6.9* Footnote: Data from 2010 onwards are based on a new data sourcing method, thus not directly comparable with the others. – *estimates Source: Wirthgen, based on data of AMI, Agromilagro, BMELV 8 Product categories: The main products in the field of organic food sales are clearly dairy products (incl. cheese), followed by vegetables (mainly carrots & tomatoes), bread and bakery products as well as fruits (mainly bananas). In 2011, these product categories reached market shares of about 10 % and more of the total food sales in these categories. Baby food, eggs, alcoholic drinks, sweets and fresh meat (incl. poultry) reached market shares of about 4-5 %. Market shares (sales) 2011 and growth rates of organic food categories 2011 vs 2010 40 35 Market share in % 30 % Growth in sales 25 20 15 10 5 0 Eggs Fruits Fixings Cheese Sweets Spreads Cereals Baby food Hot drinks Potatoes Vegetables Soft drinks Frozen food Alcoholic drinks Rest of dry food Edible oils, butter Meat substitutes Dairy products (white) Bread & bakery products Meat (fresh incl. poultry) Wirthgen based on AMI, BÖLW, 2012 9 Often, the relatively high sales or growth rates of certain organic products are due to the listing at conventional retailers, especially at discounters. While some products stabilized their market shares over the past years, others show strong growth rates. From 2010 to 2011, sales of organic fresh meat showed the strongest increase of about 40 % (listed at Aldi & Lidl since 2009), followed by sales of eggs of about 32 %, hot drinks and meat substitutes about 20 %. Moreover, edibles oils, butter, sweets, dairy products, alcoholic drinks and spreads present growth rates between 10 %-15 %. The first data for 2012 present organic meat & sausages, milk mix drinks, edible oils and yoghurt as strong sales carriers. Some product categories are still not clearly differentiated compared to the conventional Changes in Sales and Volume of selected Food Categories 2012 vs 2011 sector. Thus, there might be market potential. Quarters I-III This is valid for convenience, frozen and func- 50 tional food, as well as for meat and sausages. Apparently, only simple and intelligent organic 39,8 40 convenience food seems to be interesting for Volume changes in % Sales changes in % consumers. Organic consumers are not the 30 26,4 typical convenience shoppers.