No turnaround in sight

The German baking industry’s nominal turnover rose by 2.9% to EUR 18.59bn in 2012 and was thus only just above the consumer prices inflation rate, which according to the official statisticians reached 2.0% in 2012. Those are the bare figures. However, 2012 was also the year in which flour prices were sometimes extremely high and were used by almost all businesses as an argument for considerable price increases. So there is strong evidence to indicate that the baking industry’s sales more or less stagnated in 2012, whereas volumes fell significantly in view of the higher prices per unit or kilogram.

VAT Statistics 2000 to 2012

However, these sales were distributed among increasingly fewer businesses. A total of 1,388 baking businesses finally disappeared from the market in Germany in 2012 alone, with the result that the total number of companies occupied in manufacturing baked products (excluding long-life baked products) amounted to 13,411 at the end of 2012.

The hemorrhaging affected mainly the smallest. Only net movements in the size categories can be documented, because the VAT statistics do not reveal who changed from one turnover size class to another by moving upwards or downwards, or simply threw in the towel.

According to these figures, the group that lost comprised the businesses with an annual turnover of less than EUR 1m, a net total of 1,454 members in 2012, while all the higher turnover classes recorded slight increases. The number of members remained constant at five companies in only the highest turnover category “above EUR 250m”, after one company had climbed to that Olympian height in each of the years 1009 and 2010.

Net changes in numbers of companies broken down by turnover size classes:

A five-year comparison shows the drastic nature of the structural change occurring in the German baking sector and the severity with which it is accelerating. From 2008 to 2012 a total of 3,397 of the smallest companies either failed to survive the competition, did not find a successor or threw in the towel for other reasons – or were able to cross over the magic million boundary. However, only a few succeeded in that. The net growth in the group of companies with annual sales of EUR 1m to 10m in the five-year period was 64. The increase in companies across all the higher turnover classes was 115.

Considered over all the categories, more than half of these upwardly mobile did not move into the respective higher turnover class until 2012. In detail it looks quite different. The majority of the migration movement had already taken place in the previous years, especially in the group of companies reporting an annual turnover of EUR 10m to 50m. Exactly four companies entered in 2009, but in 2010 this group recorded a net figure of 13 entrants, a net total of 14 new members in 2011 and a further 11 in 2012. In the size class EUR 1m to 10m annually there was even a net loss of 52 companies in 2009, which was made up for only slowly in the following years: 1 more in 2010, 63 more in 2011 and finally a further increase of 52 companies in 2012.

Turnover is stagnating, the number of companies is declining and concentration is proceeding apace. As was already happening in previous years, market shares in the baked products market are shifting towards large-scale operations.

Here again, a particularly drastic feature is the loss in importance of the small businesses with annual turnovers of less than EUR 1m. Their market share fell by almost 5%. The companies with an annual turnover of EUR 1m to 10m also suffered slight losses in their collective market importance, while all the other turnover size classes were able to expand their share, whereby the businesses with an annual turnover of EUR 50 – 250m, with a growth in their market share of 1.32% in the five years, achieved almost as much growth as the companies with a turnover of more than EUR 250m, who collectively added 1.38%.

The very smallest companies with an annual turnover of less than EUR 1m benefited in at least one point from the decrease in the operating figures in this category. At any rate their average sales rose by 15.9% from 2008 to 2012. The companies with an annual turnover of EUR 1m to 10m find themselves between a rock and a hard place. Their number has increased, their market share had declined and average sales per company have risen by barely 4.3% in five years.  Businesses with turnovers between EUR 10m and 50m have done slightly better. Their number has increased through promotions from the lower ranks, and so has their market share, whereas the average turnover has remained the same.

The fact that companies upwardly mobile into the next higher turnover class ruin their average turnover is evident in the upper ranks, due not least to the small number of companies present there. If the three who are aiming for the billion mark are joined by two who have just succeeded in jumping over the 250 million barrier, that ruins the average but in no sense their market importance.

The German Federal Statistics Office publishes the turnover statistics with a delay of slightly more than one year on each occasion, due to reporting deadlines and the consolidation of the figures at a federal level. To be precise they are the data reported to the tax offices by the companies as advance turnover tax returns. It is entirely possible that the data for the actual assessment may differ slightly, but these are not available until considerably later.

This Country Report was researched by our baking+biscuit international“ editorial department. A collection of recent market profiles was published in the European Bakery Market Review.

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