Projected BVE Outlook 2024: German Food Sector Faces Challenges
2024 took a toll on the German food sector ❌🫤💸
The German food industry pumped the brakes in 2024, grappling with a myriad of challenges that dented its competitiveness. Economic uncertainty, deteriorating business conditions, and a mounting bureaucratic burden resulted in a real decline in revenues, with preliminary estimates suggesting a 0.6% dip to €232.8 billion.
Christoph Minhoff, CEO of BVE, shared his concerns, "The food industry is under the jackboot due to relentless cost pressures and politically-driven interventions, particularly soaring energy prices. These have dented our sector's competitiveness against international rivals, and becoming a significant factor in location decisions."
Initial figures indicate a 0.2% decrease in foreign revenues, while domestic sales took a hit of 0.8%. Nominally, revenues inched up by 0.6%, with foreign business inching up by 2.5% to €81.3 billion, and domestic sales declining by 0.8% to €148.5 billion. The foreign share of total revenues increased slightly to 36.2%.
According to a survey by the BVE among over 160 companies, the bureaucratic machine churns on, proving to be an existential threat for some. A whopping 95% of the companies reported an increase in bureaucratic demands over the past three years, with only about 4% remaining intact. Small and medium-sized enterprises (SMEs) view these burdens as existential, with 22% of small and 18% of medium-sized companies expressing grave concerns.
Businesses are also turning their backs on Germany when it comes to investments. Only 18% plan to boost investments in Germany, while a stark 35% intend to reduce them, and 6% are mulling an exit.
The surveyed companies expect changes from the incoming federal government. Over 96% demand a significant reduction in bureaucracy, 94% wish for an overhaul of economic and location policies, and a hefty 85% called for a reevaluation of the current energy transition policy.
Minhoff sums it up, "Flagging revenues, sagging productivity, and climbing costs are obstructing needed progress and draining the resources of German food manufactures. While other nations ease up on their businesses, we are piling on more burdens, thereby losing our edge in the global market. Politicians must come to the party and ease bureaucratic red tape, improve location factors, and bring a touch of certainty – that's the key to long-term growth."
The bureaucratic demands of sustainability reporting are also triggered a staffing headache for the food industry:
- Larger corporations require one to three additional employees to meet the demands of sustainability reporting, with 13% needing more than five full-time positions.
- Medium-sized firms manage the additional workload with up to one full-time position, with over 21% needing up to two, and about 3% needing more than three additional full-time positions.
- Small firms mainly hire up to half a full-time position. 26% need up to one, nearly 8% up to two additional employees, while about 21% employ no additional staff.
In summary, the German food sector confronts several troublesome hurdles, including soaring ingredient costs, escalating energy expenses, animal health issues, consumer safety anxiety, and regulatory pressures. Combined, these issues serve as formidable challenges to the German food industry, making it increasingly difficult for the sector to remain competitive in the global market.
- The German food industry's challenges extended beyond 2024, with policy-and-legislation and politics becoming significant factors. The relentless cost pressures and politically-driven interventions, such as soaring energy prices, negatively impacted the sector's competitiveness and location decisions (Christoph Minhoff, CEO of BVE).
- As a response to the mounting bureaucratic burden, businesses are considering reducing investments in Germany, with 35% intending to reduce their investments and 6% contemplating an exit (survey results by the BVE).
- In light of these challenges, the incoming federal government is expected to address the sector's concerns, with over 96% of the surveyed companies demanding a significant reduction in bureaucracy, an overhaul of economic and location policies, and a reevaluation of the current energy transition policy (Minhoff).
