The expected landscape of consumer goods – especially those produced by – in Europe’s largest economy, Germany, presents an extensive report by Handelsblatt, today (2.1.2025). Although food companies and other daily goods, such as detergents and cosmetics, have long been seen as predictable, cost inflation and consumers (who continue to pay great attention to prices) show that even multinational companies are under enormous pressure to increase their prices further. CORVERSE Almost all manufacturers of branded products are in a sales crisis. They only increase their sales because they increase their prices. Producers are faced with the following tugs: On the one hand, they are struggling with increasing costs for energy, raw materials, logistics and staff, and on the other hand they must promote higher prices in retail trade if they want to keep their profit margins stable. At the same time, consumers react very sensitive even to smaller price increases and buy less. And this difficult situation will not change even the new year. Euromonitore International market researcher predicts minimal growth for 2025. Sales of daily consumer goods in Germany are expected to increase by 0.6% to around 298 billion euros, adjusted to prices. Even at the level of producer administration, they are disappointed: In early 2024, there was still hope that the situation would recover, says a senior executive of a well-known consumer goods manufacturer. “But it is already clear that 2025 will be a difficult year for everyone in the industry”. CORVERSE No recovery of the consumer climate In fact, experts do not expect a sustainable recovery of the consumer climate. In particular in Germany, consumers save in the face of unclear political and economic developments. Increasing concerns about their own jobs are likely to further reduce the willingness to spend in 2025. “The trend of many manufacturers will be to negotiate with retailers zero prices for most products. This is because they recognise that many consumers are within the limits of their budget,” says Chehab Wahby, a partner of the OC&C consultancy company. Climate change increases food prices According to market research company Yougov, consumers in Germany had to pay about 1.5% more at supermarkets in 2024 than last year. In 2025, consumers can expect a similar moderate increase in prices on average. In 2023, the prices paid had increased on average by 9.4%. However, there is also a threat of significant price increases for certain foods in the new year. This applies in particular to olive oil, orange juice, coffee and chocolate. This is due to climate change, which causes more and more crop failures. Prices here have recently climbed to record levels. Businessmen expect this trend to intensify. “Climate change reached the supermarket,” says Andreas Ronken (Andreas Ronken), head of Ritter Sport. There will be no return to the familiar. Lars Wagner, head of the largest juice producer in Europe Eckes-Granini, also warns: “A new wave of prices coming towards us”. It indicates Brazil, the main orange producing country, which expects another historically low harvest with a 30% drop. Wagner expects an additional cost of over 100m euros in 2025. “As a medium-sized company, we can’t just absorb this”. Eckes-Granini recently achieved a turnover of EUR 917 million. Companies also want to further increase the prices of certain products. Expenditure on many primary products will continue to increase, says Carsten Knobel, head of Persil and Pril manufactured by Henkel. “In this respect, we should also adjust prices to certain categories in 2025”. What about brand names and private labels in 2025 The branded companies follow a strategy to maintain at least their profitability despite cost increases – which the groups in particular have achieved. In this way, many consciously accept the loss of market shares. In the long term, however, it is a dangerous strategy. Moreover, it will be difficult to win back customers who have turned to their own retail brands such as ‘Ja’ (Rewe) or ‘Gut & Günstig’ (Edeka). These benefit from inflation and gain market share because many consumers believe they offer similar quality to branded products, but at a lower price. Although the same brands have also become significantly more expensive, according to the Smhaggle price comparison, consumers can still save an average of 38%. OC&C partner, Wahby, expects private labels to continue to grow in the new year and that brand manufacturers will lose sales. Loyalty to individual brands has decreased. “Consumers increasingly wonder what expensive products offer them truly added value”. However, they are also willing to pay more money for high quality and unusual products. This proves no less than the noise surrounding Dubai chocolate. “For manufacturers, more premium products and innovations are the way to get out of today’s dead end,” Wahby says. With a new formula for the Perwoll brand, Henkel promises to restore the color of the clothes to their original form. And Dr Oetker has launched a new premium frozen pizza called “Superema”, whose dough is triple matured. Its retail price is 5.49 euros. Consumers can look forward to even more products in special offers in the new year. Retail dealers achieved about 30% of their sales with branded products on offer. In this way, manufacturers want to keep normal prices on their shelf at high levels. However, in the long term there is a risk that consumers will only buy branded products when they are on offer. This reduces producer income. “The wave of promotional actions has hit the credibility of many brands,” says Werner Motyka, a partner in the consulting firm Munich Strategy. Consumer goods manufacturers must save – but invest in advertising In order to increase their sales numbers, many manufacturers want to advertise their products more than they do today. Nestlé, in particular, increases its marketing budget. New CEO Laurent Freixe wants to invest 9% of the 93 billion Swiss francs (100 billion euros) in advertising, compared to 7.7% in 2023. In return, Nestlé wants to make huge savings from elsewhere: 2.5 billion Swiss francs (2.9 billion euros) by 2027. Pressure for resolution is likely to intensify for other manufacturers: Unilever (Knorr, Dove), for example, cuts costs of EUR 800 million. This will also be achieved by cutting up to 6,000 jobs worldwide. Like other manufacturers, the British company wants to focus only on profitable key brands. Group CEO Hein Schumacher focuses on 30 key brands, which account for 70% of sales. The ice cream section with brands such as Ben & Jerrys and Langnese is also to be split. Even adorable brands like Coca-Cola have to make savings. Since companies reduce their activities, particularly in the field of focus, the bottler company Coca-Cola Europacific Partners closes five production and logistics facilities in Germany in 2025 in order to ‘place more economically efficient’. More than 500 jobs will be lost. Trump’s punitive duties affect medium-sized producers However, Donald Trump’s election to the US presidency does not need to be bad news for everyone in the industry, notes Handelsblatt. Large manufacturers generally produce in local markets. The possible duties with which Trump threatens will therefore not directly affect consumer goods companies. Furthermore, “Trump’s policies could trigger a certain consumer dynamic in the US. Producers should benefit from this,” says Councillor Wahby. America is the most important single market for many consumer goods companies. However, medium-sized manufacturers exporting to America could be under pressure: “The duties would be massively damaging,” says Michael Folke (Michael Volke), head of the Mast-Jägermeister alcoholic drink producer. Trump had already imposed punitive duties on liquor from Germany in 2019, for example. For Jägermeister, the US is the most important market after Germany. Folke speaks for the entire industry when he says: “We are watching with concern increasing trade conflicts”.
Food price increases are expected in Europe this year
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