German confectionery sector continues growth pattern
Despite ongoing challenges, there have been some encouraging signs for the German confectionery sector. Neill Barston examines the market, with additional reporting from Euromonitor International and the VDMA.
An improved economic outlook in Germany during 2018 boosted sectors including the manufacture of confectionery production equipment, as well as finished product confectionery ranges.
According to figures from Euromonitor, chocolate sales experienced 2% growth, and improved by a total of 1% in volume, amounting to €7.2 billion and 656,000 tonnes over the past twelve months. Consequently, the market is expected to experience similar increases in the next few years, reaching a value of 7.5 billion by 2023. For equipment manufacturers, an overall pattern of strong export sales provided a platform for growth – especially within the packaging and wrapping market.
Firms such as Theegarten-Pactec have continued to enjoy global success with its series of flexible machinery performing strongly within export markets. Similarly, Gerhard Schubert has experienced demand for its advanced packaging lines including its Flowmodul and recently launched lightline variant, underlining a broader demand for confectionery and wider food processing requirements for new, faster and flexible confectionery production solutions.
Another one of many German businesses reporting strong sales is WDS, which offers a number of systems targeting the confectionery market. With many confectionery companies facing increasing overheads, delivering greater levels of automation to bring down production costs has also proved a prevailing trend within the sector. As for the finished product market, products offering premium chocolate or indulgent experiences have performed strongly, with Ferrero retaining the leading market share (at 22% of sales).
Consequently, retailers such Edeka and Rewe have made additional effort in providing attractive shelf positioning and store displays, further influencing sales. However, there have been key challenges that have drawn concern, including pressure mounting from increases in the price of ingredients.
In addition, consumer trends for products perceived as healthier options with greater use of environmentally friendly packaging has further added to the cost base of many manufacturers. Reflecting the drive towards ‘better-for-you’ items, sugar confectionery declined 1% in retail value and volume, with sales of €2.7 billion, and 397,400 tonnes respectively.
As research from Euromonitor revealed, prospects for the segment ‘remained bleak’ with competition from indulgence ranges, with the domestic market being described as saturated within Germany. Packaging market uncertainty Consequently, in 2017, total confectionery packaging was found to have stagnated at 17.7 billion units. This resulted in a growing trend for smaller pack sizes, and resealable and on-the-go packaging have increased demand. Other trends included chocolate pouches and bags in plastic pouches and also pastilles, gums, jellies and chews in flexible plastic also saw growth, due to more convenience snacking, an increasingly mobile population and portion control Within the gum segment, other rigid containers continue to be fashionable, with well-known brand Mentos said to have observed the trend strongly.
As a result of an uncertain sales picture, total confectionery packaging is expected to decline at a marginal CAGR, falling to 17.4 billion units in 2022. The decline within packaging is set to be particularly marked with products that are perceived as unhealthy, as well as those with high sugar content and larger pack sizes.
Manufacturers that are able to offer smaller pack sizes, switch to more-sustainable packaging or attract consumers through new convenience formats, such as portion control and resealable packaging, will mitigate this negative tendency. Machinery export growth According to the VDMA in Germany, the engineering of confectionery machines is characterised by a high level of specialisation and very extensive know-how of process engineering.
The product range includes machines for cocoa processing and the production of cocoa paste, chocolate, sugar confectioneries, biscuits and wafers. The German production value for confectionery machines was around 440 million Euro in 2017 according to the German Federal Statistical Office. In the first half year of 2018 the machinery production of the sector grew by 14 per cent. Including packaging machines, the overall market volume is expected to amount to around 700 million Euro in 2018. As the VDMA highlights, German manufacturers of confectionery machines are proving international leaders, with a share in foreign trade of 35 per cent. They are exceptionally active particularly in non-European countries.
In 2017, the export volume for the product group “machines for the production of confectionery, cocoa and chocolate” was 270 million Euro – an increase by 10 percent compared to 2016. According to the export data for the first three quarters of 2018 the most important sales region for confectionery manufacturers was Asia with a share of 30 per cent followed by the EU with 21 per cent.
The region “Europe, other” reached 19 per cent with Russia as the most important individual market. 11 per cent of German exports were delivered to Latin America, 8 per cent to North America, 6 per cent to the region Near/Middle East and 4 per cent to Africa. Regional distribution of the exported confectionery machines is influenced by different factors: Multinational companies are investing in promising growth markets, building up production capacities to be able to serve the market.
At the same time, local medium-sized manufacturers are investing to keep up with the competition. According to the VDMA, there is a notable focus on quality improvement, with countries investing in modernisation and enlargement of production capacities. Their focus is on energy efficiency and the reduction of production costs.
The top sales market for the German manufacturers of confectionery machines for the past year are Russia, Japan, Uzbekistan, USA, Italy, China. Netherlands, Brazil, Spain and Indonesia. Confectionery machines “Made in Germany” are delivered to more than 100 countries. Though some manufacturers are opting to unveil key equipment developments for next year’s Interpack, events in Cologne are pointing towards a pattern of continued growth for German markets.