Consumer Trends Bakery Products in Germany

International Markets Bureau MARKET ANALYSIS REPORT MAY 2010 Consumer Trends Bakery Products in Germany

Consumer Trends Bakery Products in Germany EXECUTIVE SUMMARY With 15% of Germany s national expenditure (roughly US $241 billion) going toward the purchase of food and beverages, Germany is the largest market for food and beverages in Europe. Germany is a highly desirable marketplace for many exporters. Two-thirds of Germany s imports come from other European Union (E.U.) countries, making it a competitive market. In 2009, baked goods increased by 2% in retail value sales, mostly due to the higher cost of cereal imports. Bread constitutes a large part of the baked goods sector as it is a main component of German meals. Biscuit sales value increased by 3% in 2009, experiencing growth despite the recession; biscuits found success as a budget-friendly alternative to more expensive treats. INSIDE THIS ISSUE Retail Trends 3 Retail Sales 4 Forecast Sales 5 Bread 6 Cakes and Pastries 7 Biscuits and Breakfast Cereals 8 New Products 9 Breakfast cereal sales value grew by 5% in 2009, driven by strong growth in the muesli sector. CONSUMER TRENDS Germany is extremely health conscious, particularly the baby-boomers, who will dominate the market for the next decade. They are one of the fittest and healthiest generations in German history and, as they age, they grow even more health conscious. Their healthy lifestyles will drive the market for health-conscious foods. This trend has caused cakes and pastries to lose their appeal in favour of healthier snack options. Convenience is also very important to Germans when it comes to selecting food. With more wage-earning women and single-person households, people have less free time to cook and bake. Moreover, the younger generation is looking for convenience with products that can be eaten on the go. When shopping, consumers increasingly prefer to shop for all their grocery needs once a week, for the sake of convenience. As a result, the number of traditional bakeries is decreasing, as consumers shop instead at in-store bakeries. The German market is incredibly price conscious when it comes to food and beverage purchases. Since the 1980s, the number of discount stores has risen significantly and more than 41% of all food and non-food purchases are made at discount chains in Germany. Aldi is the leading discount food retailer, with 17.4% market share. In 2008, private label products made up 22% of the German baked goods market, 37% of the biscuit market, and 39% of the breakfast cereals sector. PAGE 2

RETAIL TRENDS Discount stores now account for 35% of baked goods sold in Germany, as they can offer both lower prices and convenience. Private label products continue to hold a large share of the market at 22%. However, private label market share is not expected to grow in the future as this segment is no longer able to offer a significant price advantage in this sector. Multi-packs have become increasingly popular as they have lower per-unit prices than single-portion products. They also allow consumers to exercise portion control, which appeals to those who are concerned about health and fitness. Local German companies continue to dominate the market for baked goods. International players have been unable to enter the German market due to the short shelf life of baked goods and their limited knowledge of German consumers tastes. The biscuit market is very developed, offering a wide range of products. The level of saturation has deterred international competitors from entering this sector. The breakfast cereal market is split between domestic and international companies. The large international companies, like Kellogg, benefit from strong brand names and customer loyalty; while domestic companies, like Köllen and Oetker, focus on healthier products that appeal to German consumers. Bakery Sales in Germany ($US millions) Categories 2005 2006 2007 2008 2009 Bakery products 18864.4 19070.1 19366.8 19965.3 20317.5 Baked goods 16287.6 16467.9 16691.0 17145.0 17396.5 Biscuits 1799.7 1810.1 1846.8 1913.4 1967.7 Breakfast cereals 777.1 792.1 829 906.9 953.3 PAGE 3

RETAIL SALES Sales of Baked Goods in Germany by Sub-Sector Retail Value in Euro Millions 2004-2009 Sub-Sector 2004 2005 2006 2007 2008 2009 Bread 9,103.30 8,898.42 9,037.17 9,166.03 9,407.33 9,589.71 Packaged/industrial bread 3,964.13 3,968.10 4,031.39 4,074.86 4,146.94 4,197.94 Unpackaged/artisanal bread 5,026.46 4,817.28 4,891.94 4,975.11 5,141.77 5,272.37 Bread substitutes 112.71 113.04 113.84 116.07 118.62 119.39 Pastries 1,141.52 1,143.80 1,144.64 1,150.68 1,172.47 1,181.35 Packaged/industrial pastries 671.69 673.03 675.05 679.17 695.67 703.46 Unpackaged/artisanal pastries 469.83 470.77 469.59 471.51 476.79 477.89 Cakes 2,580.17 2,574.74 2,574.80 2,612.73 2,701.36 2,704.93 Packaged/industrial cakes 636.67 650.68 654.58 671.01 704.49 717.05 Unpackaged/artisanal cakes 1,943.50 1,924.06 1,920.21 1,941.72 1,996.87 1,987.88 Baked goods 12,824.99 12,616.96 12,756.60 12,929.45 13,281.15 13,475.99 Lieken AG (previously known as Kamps AG) continued to be the leader in baked goods, accounting for 10% of the market; their best selling products were Golden Toast and Lieken Urkorn. Sales of Biscuits in Germany by Sub-Sector Retail Value in Euro Millions 2004-2009 Sub-Sector 2004 2005 2006 2007 2008 2009 Sweet biscuits 1,144.53 1,184.68 1,190.88 1,222.59 1,266.20 1,302.34 Plain biscuits 491.35 510.51 516.84 532.76 554.18 575.18 Cookies 25.80 25.67 23.50 22.43 21.91 21.00 Chocolate coated biscuits 341.99 359.78 364.27 375.38 389.91 403.79 Sandwich biscuits 112.39 117.11 115.58 118.54 121.53 123.15 Filled biscuits 172.99 171.61 170.68 173.48 178.67 179.21 Savoury biscuits and crackers 208.36 209.40 211.29 208.01 215.96 221.92 Biscuits 1,352.89 1,394.08 1,402.16 1,430.60 1,482.15 1,524.26 Griesson de Beukelaer is the largest biscuit manufacturer in Germany, constituting 26% of the market share. Sales of Breakfast Cereals in Germany by Sub-Sector Retail Value in Euro Millions 2004-2009 Sub-Sector 2004 2005 2006 2007 2008 2009 Ready-to-eat cereals 591.10 602.00 613.60 642.20 702.53 738.43 Family breakfast cereals 353.16 361.45 371.26 397.06 446.49 477.32 Children's breakfast cereals 237.94 240.56 242.34 245.15 256.03 261.10 Breakfast cereals 591.10 602.00 613.60 642.20 702.53 738.43 Kellogg is the leader in breakfast cereal in Germany accounting for 19% of market share. Kellogg can credit this success to product innovation and a large advertising budget. PAGE 4

FORECAST SALES Forecast Sales of Baked Goods in Germany by Sub-sector: % Constant Value Growth 2009-2014 Sub-sector 2009-14 CAGR 2009/14 TOTAL Bread -1.38-6.73 Packaged/industrial bread -0.17-0.86 Unpackaged/artisanal bread -2.41-11.49 Bread substitutes -0.52-2.59 Pastries -0.33-1.65 Packaged/industrial pastries -0.04-0.21 Unpackaged/artisanal pastries -0.77-3.77 Cakes -0.64-3.16 Packaged/industrial cakes 0.74 3.74 Unpackaged/artisanal cakes -1.15-5.64 Baked goods -1.14-5.56 Sales of baked goods are forecasted to decrease between 2009 and 2014. It is expected that unpackaged/artisanal bread will see the largest decrease. Forecast Sales of Biscuits in Germany by Sub-sector: % Constant Value Growth 2009-2014 Sub-sector 2009-14 CAGR 2009/14 TOTAL Sweet biscuits 0.19 0.97 Plain biscuits 0.82 4.14 Cookies -1.24-6.03 Chocolate coated biscuits -0.15-0.77 Sandwich biscuits -0.18-0.91 Filled biscuits -0.64-3.16 Savoury biscuits and crackers 0.37 1.86 Biscuits 0.22 1.10 Cookies are expected to show the largest decline in value sales between 2009 and 2014 with a total decrease of 6.03% over the period. However, savoury and plain biscuits are forecasted to perform well between 2009 and 2014 as they are considered a healthier option than sweet biscuits. Forecast Sales of Breakfast Cereals in Germany by Sub-sector: % Constant Value Growth 2009-2014 Sub-sector 2009-14 CAGR 2009/14 TOTAL Ready to eat cereals 1.67 8.64 Family breakfast cereals 2.29 12.00 Children's breakfast cereals 0.49 2.49 Breakfast cereals 1.67 8.64 Cereals like muesli, are expected to grow between 2009 and 2014. This is because they are considered to be a healthy choice for breakfast. PAGE 5

BREAD Germans consume about 80 kg of bread per person every year, making Germany one of the largest bread-consuming countries in Western Europe. Bread had the largest retail sales growth of all baked goods in 2009; however, this was mainly due to a price increase in bread, and not an increase in volume sold. Bread is divided up into three categories: packaged/industrial bread, unpackaged/artisanal bread, and bread substitutes. Unpackaged/ artisanal bread had the highest retail value sales in 2009, whereas bread substitutes had the lowest retail value sales. Wholegrain bread is the most popular type of bread in Germany, followed by multigrain and rye. Whole and multigrain breads are popular because they are seen as a healthy option when it comes to bread consumption, whereas white bread is unpopular as it is associated with obesity. There is an increased demand for ethnic breads in Europe, thanks to immigration and foreign travel. According to the Federation of Bakers, Germany produces more than 500,000 tones of Turkish bread for the large Turkish-German population, accounting for 10% of all German bread production. In 2009, many companies introduced healthier toast options to appeal to consumers who were concerned about health issues. An excellent example of this is Harry-Brot which introduced Balance Plus Toast Bread. This has proven to be very successful in the German market due to its high fiber content. The most popular claims made by new bread products introduced in the German market have to do with either health or convenience. The top three claims in 2009 were: no additives/ preservatives, wholegrain, and organic. This highlights the importance of healthy foods to the German consumer. It is anticipated that in the coming years, artisanal bread product sales will decline as packaged bread sales increase. Consumers are looking for convenience, and packaged products have a longer shelf life, which will allow consumers to shop just once a week. Claims of New Bread Product Introductions In Germany Between 2004 and 2009 Claims 2004 2005 2006 2007 2008 2009 No Additives/Preservatives 4 7 27 15 37 51 Wholegrain 2 7 24 12 21 44 Organic 13 15 19 14 16 42 Premium 13 0 9 5 7 2 Time/Speed 15 0 4 0 10 7 Low/No/Reduced Allergen 2 0 2 1 4 14 Microwaveable 6 0 6 1 4 9 Vitamin/Mineral Fortified 2 4 8 1 2 1 Low/No/Reduced Fat 3 1 5 2 2 8 Limited Edition 5 0 8 2 2 5 PAGE 6

CAKES AND PASTRIES German consumers are eating fewer cakes and pastries in response to the increasing health and wellness dietary trend. From 2008 to 2009, the volume of pastries sold decreased by 0.47%, and the volume of cakes decreased by 0.27%. However, pastries of French origin, like croissants, are becoming increasingly popular in Germany. Croissants are a single-portion, convenient food, making them an excellent on-the-go breakfast. American pastries have also become popular in Germany. Most notably, the muffin can now be found in almost all bakeries and coffee shops. Cake manufacturers are looking for ways to reduce sugar content in order to appeal to an incredibly health-conscious population. The top claims of newly introduced pastries in 2009 were: no additives/preservatives, seasonal and premium. Future sales of cakes and pastries are expected to decline between 2009 and 2014. Volume sales of pastries are anticipated to be down 2.85% over the period, and cakes down 1.25%. Claims of New Pastry Product Introductions in Germany Between 2004 and 2009 2004 2005 2006 2007 2008 2009 No Additives/Preservatives 32 6 23 10 19 41 Seasonal 11 8 9 9 16 38 Premium 13 8 6 8 4 14 Low/No/Reduced Fat 23 0 1 5 5 16 Microwaveable 1 2 13 4 6 21 Low/No/Reduced Sugar 23 0 1 5 12 1 Ease of Use 0 0 4 8 1 18 Diabetic 23 0 1 1 5 1 Children (5-12) 5 3 6 2 3 9 High Protein 23 0 1 0 1 1 Pastries % Breakdown by Type: % Value Breakdown 2004-2009 Germany % retail value rsp 2004 2005 2006 2007 2008 2009 Apple turnovers 5 5 5 5.5 6 6 Cinnamon rolls 7 7 7 7.5 8 8 Croissants 15 15 14.5 14 13.5 14 Danish pastries 8 8 8 7.5 7 6.5 Krapfen 11 11 11.2 11.4 11.5 11 Muffins 5 5 5 5.2 5.5 6 Pain au chocolat 5 5 5.2 5.4 5.5 5.7 Tarts 9 9 9 9 9 9 Windbeutel 2 2 2.1 1.7 1.5 1.6 Others 33 33 33 32.8 32.5 32.2 Total 100 100 100 100 100 100 PAGE 7

BISCUITS Biscuit sales were relatively successful in 2009. Volume sales of biscuits increased by 1%, and sales value grew by 3%. The success of biscuits in this period was due, in part, to an increase in the price of cocoa, which increased the price of chocolate confectionery. German consumers on a tight budget used biscuits as a substitute for chocolate, resulting in the growth of biscuit sales. Plain biscuits saw the highest retail sales growth between 2008 and 2009, while savoury biscuits and crackers saw the largest volume growth during this period. Convenience plays an important role in the biscuit market. German consumers want a product that they can eat on the go with no mess, like Leibinz Coco sticks. This product has been dipped in chocolate at just one end which enables consumers to eat it on the go and not have to worry about cleaning their hands afterwards. Once again, the claims for new product introductions were dominated by health claims, with the top two being organic and no additives/preservatives. The German biscuit market is mature and thus significant growth is not expected. Retail volume growth is forecasted to be just 1% during the 2009-2014 period. BREAKFAST CEREALS Breakfast cereals experienced growth in both sales value and sales volume in 2009, growing 5% and 4% respectively. The economic crisis had a positive impact on breakfast cereal sales, with consumers seeing it as a budget-friendly and convenient alternative to breakfast at a coffee shop. Breakfast cereals are relatively new in Germany and have had to compete with the traditional morning meal of bread and jam. However, the younger generation is looking for quick, convenient meals, which has enabled success for this product. German consumers are looking for healthy products to start their day, which is why muesli has been the most popular sector of cereals. In 2009, muesli experienced growth of 10%, making it the fastest growing sub-sector for cereal. In order to compete with domestic companies in the muesli market, like Köllen and Oetker, Kellogg introduced their own muesli cereal in Germany called Kellogg s Extra Muesli. Köllen has successfully introduced new packaging for muesli cereals. The muesli now comes in its own small bowl, which allows users to eat the product on the go. It is expected that other companies will follow suit with similar packaging. Although it is anticipated that the growth of breakfast cereals will slow in the coming years, it is still expected to increase by 8% between 2009 and 2014. PAGE 8

NEW PRODUCTS This section includes a small sample of the new product introductions in the German marketplace. Organic Chocolate Muesli Mymuesli2Go has launched Organic Chocolate Muesli (Bio Schoko-Müsli). This product is perfect for consumers who need to eat on the go, as it comes in a serving cup that can be used with milk or yogurt. Company: mymuesli. Source: Mintel, 2009. Mini Whole Grain Rye Bread Slices Harry Das Volle Korn has introduced Mini Whole Grain Rye Bread Slices (Minikaten). This product is free from preservatives and is sold in environmentally-friendly packaging. Company: Harry-Brot. Source: Mintel, 2009. Source: Mintel, 2009. Biscuit Assortment Lambertz Madeira Biscuit Assortment includes the following biscuits: butter hearts, lemon tart cookies, Neapolitan wafers, lemon cream filled cookies, American cookies with chocolate chips, stracciatella cookies, almond bread cookies, crackers, hazelnut cream filled cookies, souffle summer pastry cookies, and butter pastry cookies. Company: Henry Lambertz. Traditional German Fruit Mini Cake with Butter Kronen has launched a Traditional German Fruit Mini Cake with Butter (Butter-Stollen). The fruit cake retails in a 200 g package and is also available in the German Marzipan Cake (Marzipan- Stollen) variety. Company: Kronenbrot. Mini Filled Pastries Source: Mintel, 2009. Aerzener Unsere Minis are frozen, filled, mini pastry pockets. There are six pastries in each package and are available in apple, cherry-pudding and nut-nougat varieties. Company: Aerzener Brot & Kuchen. Source: Mintel, 2009. PAGE 9

The Government of Canada has prepared this report based on primary and secondary sources of information. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada assumes no liability for any actions taken based on the information contained herein. Consumer Trends: Bakery Products in Germany Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6615 Market Indicator Report AAFC No. 10520E Photo Credits All Photographs reproduced in this publication are used by permission of the rights holders. All images, unless otherwise noted, are copyright Her Majesty the Queen in Right of Canada. For additional copies of this publication or to request an alternate format, please contact: Agriculture and Agri-Food Canada 1341 Baseline Road, Tower 5, 4th floor Ottawa, ON Canada K1A 0C5 E-mail: infoservice@agr.gc.ca Aussi disponible en français sous le titre : Tendances de la consommation: Les produits de boulangerie-pâtisserie en Allemagne