Costs overshadow turnover rise for German confectionery in 2008

By Lindsey Partos

- Last updated on GMT

Costs overshadow turnover rise for German confectionery in 2008
Germany's confectionery trade saw a boost in turnover in 2008 across all product segments, but higher raw material and energy costs ate into potential gains.

"Whereas prices increased by about 6.8 per cent on the purchasing side, the price increases on the sales side were only 5.8 per cent,"​ said the organisers of the major confectionery and biscuit show ISM that kicked-off in Cologne this week.

Citing figures released by the Federation of German Retailers, the Association of German Grocery Wholesalers, and the Central Association of German Cooperation Groups, ISM stated that as a percentage of total food turnover, the confectionery business shrank slightly from 9 to 8 per cent.

Despite this contraction, there was actually a 4 per cent increase in turnover across all confectionery areas, which includes sugar confectionery and snack items.

Price pressure

A two-pronged impact, last year was characterised by significant price increases through higher raw materials and energy costs, and the parallel need to pass on these higher prices to customers, even when "not entirely possible because of the widely acknowledged intense competition," ​said the ISM organisers.

Looking forward to 2009 and the issue of price, ISM suggested that industry players "will have to prepare themselves well for the coming years, because the turnover is relativised by increased raw materials and purchasing prices."

Retail trade

Newspaper and web pages are devoting inches to speculation about how consumers, particularly in western Europe and the US, will alter their spending patterns as their budgets start to tighten.

For ISM, 2009 "need not necessarily end in a downward spiral" ​for the industry.

It points out that over the past ten years, turnover in the retail trade has mostly fluctuated in a narrow range of plus or minus 2 per cent around the base line.

"The trade has thus decoupled itself from the development of the overall economy in good times as well as bad,"​ it said.

Positive market impact

Taking the point further, the organiser claims that certain observers believe the current situation could even result in an added positive effect for the confectionery business.

"According to these optimistic views, a difficult economic environment could generally have a positive effect on the confectionery business,"​ writes ISM, suggesting, as many other industry participants and observers have done recently, that the depressing mood could lead the consumer to forage for a small chocolate or ice cream luxury by way of a reward.

Biscuits and chocolate turnover grow by over 5 per cent, suggesting satisfactory growth in turnover across the sector. Bbiscuits rose 6 per cent, sugar confectionery saw a rise of 3.3 per cent, chocolate grew by 5.4 per cent and snack items saw a climb of 5.6 per cent.

In terms of the retail trade, large supermarkets and the discount stores in Germany enjoyed better-than-average growth in the confectionery segment. Smaller companies in the food sector and companies that offer confectionery as a peripheral product were not, according to ISM, about to keep pace with this growth.

Innovation short in 2008

In terms of innovation, 2008 “made no particular mark”,​ said the ISM organiser. Trends like the wellness boom of recent years and functional confectionery have held their own and are now practically part of the standard product range, they continue.

This shift is having a corresponding effect on growth rates, and “there was no recurrence”​ of the soaring growth seen in recent years.

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