Market Monitor Food Germany 2017

Market Monitor

  • Tyskland
  • Mat

12 desember 2017

As food processors and retailers demand longer payment terms from their suppliers, a wave of longer payment terms is being created along the supply chain.

  • The domestic market situation remains difficult
  • Increased credit risk in the meat subsector
  • Fraud cases remain an issue

According to the German Food Association BVE, nominal turnover increased 5.7% year-on-year in H1 of 2017, to EUR 87.2 billion, mainly due to higher market prices in Germany and the main export markets as well as increasing sales abroad.

Domestic market conditions have become increasingly difficult for food producers and processors during the last couple of years, due to rising input costs, including labour costs, and shrinking margins. The German food retail market is the most competitive in Europe, with structurally low market prices due to the overwhelming power of the leading food retailers and discounters. This, together with tough competition and price wars in the food retail sector indicate that food producers, processors and suppliers have found it difficult to pass on costs.

While the situation in the dairy segment has stabilised since the end of 2016 due to higher sales prices and less milk production, overcapacities remain an issue in the beverage subsector. Many meat processors and producers currently suffer from higher procurement prices, especially for pork, while their ability to pass those increases on to retailers is limited due to long-term contracts. The introduction of a minimum wage has also contributed to pressure on margins and liquidity, while the market situation is characterised by a surplus supply of standardised meat products. 

Food producers and wholesalers pay, on average, within 30 days, while payment terms of food retailers often vary from 45 to 90 or more days. With food processing companies and retailers demanding longer payment terms from their immediate suppliers to improve their working capital, a wave of longer payment terms is being created along the whole supply chain. The already low profit margins are further decreasing for many businesses, and the risk of rising payment delays and insolvencies has increased, especially in the troubled meat segment. Most at risk are (smaller) businesses that lack export opportunities or do not offer specialised products, and those companies with already poor financial strength.

Our underwriting stance remains overall neutral for the food sector, with a more restrictive stance for meat production, meat processing and beverages, as we expect the difficult business environment in those subsectors to continue in 2018.

The German food sector remains affected by considerable fraud cases which are still rising and getting increasingly tricky and professional. Especially in the fish, fruits and vegetables segments criminal buyers order goods which are easy to resell on credit terms. Therefore we pay close attention to the number of credit limits that are applied for within a short period, especially where the buyers are recently established and where management and/or shareholders have recently changed or the buyer’s business sector does not match with the goods ordered (e.g. a steel company ordering food items).


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