The baked products market in Germany
The times when a large number of artisan bakery businesses supplied the public with baked products are gone. In 2012, according to official statistics, 53.51% of sales were accounted for by no more than 2% of the total of 13,411 businesses that manufactured baked products in the Federal Republic of Germany and submitted a VAT declaration.
Behind this lie exactly 256 companies, large chain stores as well as industrial operations. However, the sales statistics make no distinction between the markets in which these sales are made. Industrial companies state their sales as ex-factory prices, whereas artisan businesses say how much money comes into the till. The 256 probably includes the majority of the companies in the Federal Republic of Germany that sell their baked products to the retail, wholesale or other resellers rather than direct to end consumers, irrespective of whether they supply fresh or frozen goods. If their products are valued at ultimate consumer prices, the market share of this group of big chain stores and industries is probably at least 60% of the total market, if not 70%.
The breakdown of the demand between bread and bread rolls clearly shows who are the winners and losers. The big winners are the food discounters, and one must take into account the fact that the number of baking stations in that sector increased greatly in 2013. The losers are the bakeries in checkout areas, regardless of whether they are individual bakers or chains, who have been compelled to accept not only volume losses but also turnover losses in both bread and bread rolls, in spite of large price increases. On the other hand, however, the number of outlets here has also decreased. Nonetheless the outcome for artisan bakers is bitter, especially since bakeries without a checkout area, i.e. the independent branches, do not offer any compensation but only make the losses bigger. No wonder the Central Association at the German Consumer Research Society (GfK), Nuremberg, Germany, is pressing for the figures not to be published.
Nevertheless: it’s not the end of the world, but it has changed. It offers opportunities for small businesses as much as for big ones. But not guaranteed for all. There are many starting points for this. There are qualities and manufacturing processes which the retail and/or its suppliers cannot copy. The Austrian Viennese Kaiser roll is one example. Three times the price has been paid for this piece of living baker’s culture for as long as anyone can remember, although not by all consumers and not always. But they are doing so more often now because the desire for quality is growing. The selection and quality of the products was the decisive factor in the decision to buy in 42% of all cases in Germany in 2013, and the trend is upwards. Some consumers are even willing to travel further to find them. In the past, shop accessibility was often the reason for buying from this or that baker. That was still true in 57% of cases in 2013, but with a clearly decreasing trend (-1.9%).
Not just mumbling as you hand the goods over the counter, but representing one’s own baking culture, standing in the shop oneself, living the tradition and telling stories – there is a whole series of strategies to appeal to consumers’ emotions. Opening times are another topic. Increasing numbers of companies are extending the use of their outlets into the evening and even into the night. That’s certainly not the silver bullet for everyone everywhere, but it is one way that is worthwhile thinking about. Another example is the concept of regionality, which the industry and retail are currently overusing without being very precise about what it means. Bakers can put life into the concept if they want to. For the majority of their raw materials they could say where they come from, on which field the cereals grew, on which meadow the cow stood and where the hen laid the eggs. The objection that such raw materials are too expensive is irrelevant because the others are better at making cheap things.
However – and this is the crux of the matter – the chance to shape the future will remain open only to those who are financially sound, because these changes require investments together with the ability to survive a lean period even if the change is approached with care.
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.