BMI View: The German food and drink market has been growing steadily during the past five years thus demonstrating the industry's ability to withstand changing economic and consumption trends over time. Despite the relative maturity of the market, we believe the growth in the country's food and drink industry will maintain its momentum and expand at a compound annual growth rate (CAGR) of 3.6% between 2014 and 2019.
Key Forecasts (local currency)
Total food consumption growth year-on-year (y-o-y) in 2015: +4.0%; compound annual growth rate (CAGR) 2014-2019: +3.6%
Food consumption per capita growth (y-o-y) in 2015: +3.8%; CAGR 2014-2019: +3.5%
Total soft drinks sales growth (y-o-y) in 2015: +2.5%; CAGR 2014-2019: +3.0%
Alcoholic drinks sales growth (y-o-y) in 2015: +0.2%; CAGR 2014-2019: +0.5%
Total mass grocery retail sales growth (y-o-y) in 2015: +3.9%; CAGR 2014-2019: +4.5%
Key Company Trends
Hain Celestial Buys Mona Group : In late July 2015, organic food manufacturer Hain Celestial Europe bought plant-based foods and beverages producer Mona Group for an undisclosed sum. Mona operates units in Germany and Austria, manufacturing and distributing products under the Joya and Happy brands in Central and Eastern European countries. The acquisition will provide Hain Celestial with three facilities producing plant-based beverages - two in Germany and one in Austria - helping it to expand its European product offerings. The deal will increase the scale of Hain Celestial's plant-based operations to over USD100mn net sales in Europe, while providing the company with additional manufacturing capacity, noted president and CEO Irwin D Simon.
Metro Targets Online, International Expansion : According to reports in June 2015, Germany-based retail chain Metro Group was planning increased investment in its online and international operations. The decision comes after the EUR2.8bn (USD3.18bn) sale of its Kaufhof department store chain, according to CEO Olaf Koch. 'We plan an expansion of our investments in digital businesses, modernisation of older stores, more stores for Media Markt and Saturn as well as for Metro Cash & Carry, also in new countries,' Koch said.
Edeka Appeals After Kaiser's Deal Blocked In May 2015, Germany-based supermarket chain Edeka applied for special ministerial approval for its acquisition of retail group Tengelmann's grocery unit Kaiser's. In early April, competition watchdog Bundeskartellamt stepped in to block the proposed acquisition due to competition concerns. 'We are convinced that the actual macroeconomic benefits of our proposed merger far outweigh the antitrust criticisms of the Bundeskartellamt,' said Tengelmann's CEO Karl-Evian Haub.
Drugmaker Perrigo Acquires Dietary Supplement Brand : In July 2015, Ireland-based generic drugmaker Perrigo signed an agreement to purchase Germany-based Naturwohl Pharma, along with its dietary supplement brand, Yokebe. The second-largest dietary brand in Germany in terms of market share, Yokebe comes in a shake/liquid form and is distributed within the 'meal replacement' category. The brand is estimated to generate net sales of about EUR30mn (USD32.9mn) in 2015. The deal is likely to have an immediate positive impact on Perrigo's 2015 adjusted earnings per share. The acquisition has been approved by the board of directors of Perrigo and Naturwohl Pharma and is expected to be closed in Q315.
There are risks posed by the dramatic sell-off in German bonds in early May, with the 10-year bund yield rising from near zero to above 0.70% at one point over a period of a few days. This is the fastest rise in basis point terms since the beginning of the euro era in 1999, both a sign of strength in the economy as well as a potential risk. Rising yields suggest that markets are becoming less concerned about the secular stagnation and deflation story. However, the disorderly move higher for yields could also hurt confidence and potentially make the government consider an even tighter fiscal policy. The same can be said about the sharp simultaneous rebound in the euro, which - if it is not capped at USD1.20/EUR, as we expect - could hurt corporate and household confidence.