How to successfully export to Germany Green Seed Food Consulting Roy G. Edleston, Managing Director November 13th, 2012 Contents I. Green Seed Group – who we are II. Key features and food trends in Germany III. How to enter the German market IV. German retail V. Overview of the Top 5 German retailers VI. Foodservice VII. Case studies VIII. 10 golden rules for success in Germany Contents I. Green Seed Group – who we are II. Key features and food trends in Germany III. How to enter the German market IV. German retail V. Overview of the Top 5 German retailers VI. Foodservice VII. Case studies VIII. 10 golden rules for success in Germany Green Seed Group • Unique, international consulting network, specialising in the food & drink sector • 10 offices in Europe and North America • Over 25 years of experience Green Seed Germany • We advise food and drink companies or marketing boards on how to develop a sustainable and profitable position in Germany, Austria or Switzerland • By using our in-depth knowledge of the local food and drink market and our established contacts with the trade How the Green Seed model works • Over the last decade, German food & drink retailers have become more and more interested in dealing directly with their suppliers. Green Seed Germany has developed its business model around this trend. • German retailers and food service operators have appreciated our involvement and added value in the context of our common projects for over 25 years. • We act as business facilitators, ensuring that every step of the process is managed with maximum efficiency. From a first market visit, to the launch as well as the ongoing relationship that follows. • We offer a highly cost-effective solution of “flexible local sales and marketing management support” aimed at adding value, acting as your extended marketing and sales arm. • You remain in control of strategic management and invoicing. The Green Seed approach We offer tailor-made services depending on your strategy, your current needs and your budget. • Trade & Consumer Insight • Market Selection • Opportunity Assessment • Product Proposition Evaluation • Trends & Developments • Sales & Profitability Projections • Nielsen data • M & A / Strategic Alliances • Brand Planning • Sales Strategy & Planning • Trade & Consumer • Distributor Selection Promotion • Channel & Category Planning • Event Management • Key Account Management • Public Relations I. Green Seed Group – who we are II. Key features and food trends in Germany III. How to enter the German market IV. German retail V. Overview of the Top 5 German retailers VI. Foodservice VII. Case studies VIII. 10 golden rules for success in Germany Germany is about SIZE! Population: 82 m Food industry: 5,960 companies Food retail: 41,708 outlets Geography 16 federal states Borders on 9 countries • Surface area: 357,121 sqm • Hamburg to Munich: 775 km • Regional differences in consumption habits Source: Federal Statistical Office Germany Geography North Rhine-Westphalia: Highest population => 18 m = 22 % 11 major conurbations • With approx. 82 m consumers, even niche markets can be promising • Major cities: Berlin (3.5 m), Munich (2.6 m), Hamburg (1.8 m), Cologne (1 m) Source: Federal Statistical Office Germany Socio-demographics Germany vs. Belgium Population 82.3 m 10.4 m Households 40.3 m 4.6 m 1-person households 36.9 % 32.6 % Share of people aged 65+ 20.1 % 18.3 % Foreigners 7.3 % 10.2 % Sources: Federal Statistical Office Germany, www.belgium.be Germany – International assumptions & characteristics Punctual Bratwurst & Sauerkraut Beer & Lederhosen Goethe Neat & Tidy Accurate Hard-working Loyal Food trends Convenience Traditional & ethnic Seasonality / variety Low fat / less sugar Snacking / food on the move Functional food Food Trends 100 g 50 g Mini sizes Smaller packs Free from Sustainability Clean label / NGM Green packaging Nestlé Food Study 2011 Main findings • Daily life is becoming less structured; meals are fitted in whenever time allows • “Snacking” and “out-of-home” meals are the trends of the future • Family is still the biggest influence on children’s diets • Despite crisis: decreasing price sensitivity, increasing importance of quality of food & drink • Consumers value local/regional products more than organic products • Many consumers are overwhelmed by the concepts of sustainability and social responsibility Source: Nestlé Food Study 2011 I. Green Seed Group – who we are II. Key features and food trends in Germany III. How to enter the German market IV. German retail V. Overview of the Top 5 German retailers VI. Case studies VII. 10 golden rules for success in Germany What you have to take into account for the German market • Consumer research • VAT 7% / 19% • Packaging and waste disposal fees • Labelling and legal aspects • Packaging standards retail / discount or • Logistic routes and customer requirements ? • Delivery to retailer depots • Pallet standards • Price calculation considerations What you have to take into account for the German market cont. • Mandatory accreditations and safety procedures - HACCP - E.g. IFS • Optional accreditations - Organic - Fair trade - Industry-initiated (e.g. QS, DLG) - Test magazines (e.g. Stiftung Warentest) • Language requirements • Standard communication modes • Shelf-life • Product testing • Risk management I. Green Seed Group – who we are II. Key features and food trends in Germany III. How to enter the German market IV. German retail V. Overview of the Top 5 German retailers VI. Foodservice VII. Case studies VIII. 10 golden rules for success in Germany German retail structure • German grocery retail (incl. discounters) and drugstores increased by 1.4 % to € 158 bn in 2011 (source: Nielsen July 2012) • Top 5 German retail players account for over 65 % • Germany is over-shopped and has been for many years • The number of total grocery stores (incl. drugstores and discounters) is declining • Germany's top retailers operate a variety of formats Number of Outlets Turnover (€ m) (Jan 2012) 2011 Superstores total 6.788 64.695 large (as of 2,500 sqm) 1.972 41.220 small (1,000-2,499 sqm) 4.816 23.475 Discounters 16.320 60.525 Supermarkets total 11.330 20.890 large (400-999 sqm) 4.897 15.915 small (100-399 sqm) 6.433 4.975 Drugstores 7.270 11.890 TOTAL 41.708 158.000 Source: Nielsen July 2012 Market shares of Top 5 food & drink retailers 2011 EDEKA; 25,3 Others; 27,4 Metro; 6,8 REWE; 14,8 ALDI; 12,0 Schwarz; 13,7 Source: BVE 2012 Top 10 food Germany 2011 Rank Group Food Turnover* Change (%) Food Share (%) 1 Edeka 42.7 +6.8 90.5 2 Rewe 25.1 -7.0 70.7 3 Schwarz Group 23.2 +0.9 81.1 4 Aldi Group 20.3 +0.8 82.0 5 Metro 11.4 -2.2 38.0 6 Lekkerland 7.6 +1.3 95.0 7 dm 4.0 +10.1 90.0 8 Schlecker 3.7 -7.0 92.0 9 Rossmann 2.9 +11.8 75.5 *Gross in € bn Source: Trade Dimensions March 2012 / Lebensmittel Zeitung.net April 2012 Discounters in Germany Gross turnover Number of outlets Rank Company 2011 in € m July 2012 1 Aldi-Group 24.700* 4.317 Aldi Süd, Mülheim (S. Germany) 13.700* 1.805 Aldi Nord, Essen (N. Germany) 11.000* 2.512 2 Lidl** 15.800* 3.287 3 Netto 11.814 4.098 4 Penny 7.582 2.363 5 Norma 2.650 1.278 * Estimate; **incl. special offer stores Mega-Cent; ***incl. Netto Beverage Stores Source: Trade Dimensions, July 2012 Change of destination shop Pre approx. 2007 Destination Shop Supermarkets / Hypermarkets Top-up Shop Aldi & Co. Post approx. 2007 Destination Shop Aldi & Co. / Drugstores Top-up Shop Supermarkets / Hypermarkets Perception of mainstream retailers Listing fees • Listing fees are extremely difficult to quantify due to the number of variables - e.g. product category, - category growth, - manufacturer’s promotion programme, - consumer advertising etc. • No fixed listing amounts. • Depending on volume and number of stores, can be anywhere between € 10-75,000. • Discounters require net, net, net costing with no need for the manufacturer to keep in reserve any other support money. • Promotion investment can often offset / reduce a listing fee. Promotions • Sales leaflets (German: Handzettel) - Most common tool - Published weekly - Often combined with price reductions - Financed by the amount of advertising cost WKZ (Werbekosten- zuschuss or advertising allowance) which is discussed in the annual review meetings - Fees are subject to individual negotiations with the buyer - Often combined with product listings • Off-shelf placements (German: Displays) - In (selected) stores - Often only during the promotion week - Stock on ¼ Chep pallets • Further promotional tools are in-store tastings (German: Verkostungen). EDEKA’s independents etc. are especially keen on this type of promotion as individual store sales benefit from this action. Contents I. Green Seed Group – who we are II. Key features and food trends in Germany III. How to enter the German market IV. German retail V. Overview of the Top 5 German retailers VI. Foodservice VII. Case studies VIII. 10 golden rules for success in Germany Top retailers Germany – 1. EDEKA Group Top retailers Germany – 1. EDEKA Group • Co-operative • Head office in Hamburg in charge of listing PLs and national mainstream brands / companies such as Mars, Ferrero, Marlboro and Coca-Cola. • 7 individual regions • Manufacturing facilities: meat, sausages, bread and bakery products • A further characteristic is the high number of independents. These are individually owned stores / groups of stores (up to 25) operating under the EDEKA banner and buying primarily from EDEKA wholesale. In total 6,300 independent stores, turnover € 20 bn. • EDEKA