Price, promotions remain key in Germany

19 May 2010

BERLIN: Brand owners active in the food category in Germany believe low prices and promotions will continue to be the main factors shaping the trading climate this year.

Sempora, the consultancy, conducted a survey of leading executives in the country in order to establish their outlook for 2010.

While the vast majority suggested that negotiations with retailers regarding pricing and discounts would be critically important, only 10% said these discussions are now "constructive" in tone.

More positively, 87% argued that having a strong brand, or stable of brands, would strengthen their position and enable them to resist pressures to run repeated offers on their products.

A third of participants agreed that the current environment provided them with a chance to differentiate themselves from the competition in the eyes of retailers.

However, 80% predicted the rise of own-label would present further challenges this year, and 79% thought the "Europeanisation" of purchasing would ultimately serve to push trade prices down.

Almost half of the featured firms expected the smaller brands in their ranges to coming under increasing pressure as a result of these trends.

In response, 51% of the panel were seeking to either streamline or reposition their portfolios to reflect the changing conditions in the market.

"For many companies, an adjustment in  their portfolio will be inevitable," said Kai Mönnekes, a principal at Sempora.

"Companies should use this situation as an opportunity to pro-actively focus on their strongest products in order to strengthen these still further." 

In terms of forming closer partnerships with retailers, 85% of contributors said the areas where both parties stood to benefit included innovation and service.

A further 59% posited that these alliances could take the form of data exchanges, joint implementation and other "non-monetary" initiatives.

When asked to name a company that has delivered with regard to value and its overall approach in the downturn, 27% of the panel cited Ferrero as demonstrating best practice in these areas.

This total stood at 11% for Jägermeister and 8% for Procter & Gamble, with Reckitt Benckiser among the other firms perceived to have navigated effectively through the recession to date.

While issues like sustainability and e-commerce were not considered to be a top priority by many firms, Mönnekes suggested brands making moves in these areas could directly connect with shoppers.

Data sourced by Sempora; additional content by Warc staff