Downard retail pricing and input cost volatility hit German confectioners' profits

The trade body said that volatility in raw materials prices over the past few months has been especially dramatic for cocoa and wheat, and has also been driven by speculative funds. It notes that the prices of sugar, butter and vegetable oils and fats have also risen sharply.

The German confectionery manufacturing sector, which includes a substantial proportion of small and mid-sized companies, has not been able to pass all or part of increased raw material costs on to the purchasers, continued the BDSI.

Moreover, there was additional cost pressures from the sector arising out of the fact that retail confectionery prices for 2010, citing the German Federal Statistical Office's official figures, were generally lower than in the previous year by an average of 1 per cent.

Securing a sustainable supply of high-quality agricultural raw materials at competitive prices is a high priority and the BDSI is demanding that the German government “revokes the subsidies for biogenic energy production so that agricultural raw materials will be preferentially available for the production of food.”​

“In the wake of the financial crisis, financial institutions have discovered commodities trading and their speculation is affecting developments on the commodities markets. The results are increased fluctuations in prices on the markets for agricultural produce and higher prices overall,”​ stressed the confectionery trade body.

The trade group is also seeking increased market regulation and transparency to make it more difficult for market speculators, who themselves have no interest in agricultural raw materials, to force up the prices of food raw materials such as cocoa and wheat.

Export recovery ​

But it was not all doom and gloom for the sector in 2010, continued the trade group, with notable recovery in exports resulting in an increase of overall confectionery production of by approximately 1.8 per cent in comparison to the previous year.

“The overall value of the year's production increased by approximately 1.4 per cent to around €12.3bn and so reached the level last seen in 2008,”​ continued the German association.

Trade countries such as the US and Russia recovered due to more favourable exchange rates, it added.

“Overall, on the basis of the figures released by the Federal Statistical Office, the BDSI estimates that export volumes have risen by 7.4 per cent to 1.67 million tonnes. In terms of value, this amounts to a recovery in exports by around 9.5 per cent to almost €5.3bn​,” said the BDSI.

Exports led to an increase of 3.3 per cent in the quantity of chocolate products produced in Germany in 2010. “The increase in value, in contrast, was around 1 per cent.”​

Production of sugar confectionery though fell 2.3 per cent in terms of volume and 2.1 per cent in value. Here, the rising exports to important markets such as the UK, France or Austria were insufficient to compensate for the decrease in production, said the BDSI.

Gum growth ​

The German chewing gum market saw positive development, with the association estimating that a growth in turnover of around 1.8 per cent was achieved relative to the previous year. “The corresponding volume of turnover amounted to a total of €662m,”​ commented the BDSI.

Per-capita consumption of confectionery items in Germany fell by around 0.6 per cent to 30.57 kg in 2010. In terms of value, per-capita consumption was around 0.9 per cent lower at €109.73, reported the German association.

The confectionery trade body strikes a note of caution in relation to 2011 performance, pointing out that factors such as recovery in the global economy has been accompanied by pronounced variations in exchange rates, set to create continued uncertainty for the export dependant German confectionery sector.