Dusseldorf People always eat and drink, as the saying goes. The market for everyday goods is considered to be crisis-proof. But even this industry suffered during the pandemic – and it will continue to do so in early 2022.
The food industry is looking at a mixed second corona year. The high demand in the supermarkets is dampened by the paralyzing business in the catering trade. According to the Ifo Institute, business expectations for the first half of the year are twice as bad as at the beginning of 2021 with an indicator of minus 25.9 points.
“Although the expectations for employment and sales prices are mostly positive, the production plans and export expectations have clearly collapsed,” says Stefanie Sabet, managing director of the Federal Association of the German Food Industry.
Consumer goods companies such as Nivea manufacturer Beiersdorf or Persil manufacturer Henkel have recovered from the corona low in 2020. But 2021 was only mixed for the industry, says analyst Jörg Philipp Frey from Warburg Research. “The demand for everyday products has only developed sluggishly because of the corona restrictions.” Travel warnings and wearing masks weighed heavily on sales of sunscreens and creams.
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Business was better with luxury goods and high-quality care products. Well-to-do customers can still afford them in times of crisis. The development in the coming months should also be divided into two parts.
The market researchers from Euromonitor International expect a slight increase in sales for everyday goods in Germany in 2022. It should be just under 246 billion euros, after just under 243 billion last year. Consumers can expect it to be more expensive, greener and more digital. An overview.
More expensive: higher prices for consumer goods
Consumers will have to dig deeper into their pockets for everyday items in 2022. Manufacturers are struggling with soaring raw material prices. Henkel, for example, expects this to go up by ten to 15 percent – more than it has been in 15 years. “We cannot fully compensate for these price increases,” said CEO Carsten Knobel, saying that they must also be passed on to retailers.
According to Edeka boss Markus Mosa, the Düsseldorf company is said to have demanded a surcharge of twelve percent on purchase prices in the latest price negotiations. But not all manufacturers get away with their demands. “The stronger the brand, the easier it is to get higher prices,” says Christophreiber, partner at OC&C.
Manufacturers are therefore increasingly investing in profitable brands. For mid-range brands without a strong profile, however, it could be difficult, says Mirko Warschun, Head of Consumer Goods and Retail Europe at the Kearney consultancy. This gives the consolidation of the range a boost.
“Gaps in the shelves mean that new brands are moving into the focus of consumers,” says Warschun. Many young brands are already well known on social media and are in the starting blocks to be listed in retail.
Price pressure will not decrease in 2022 either. This can also be explained with the globally disrupted supply chains. Even packaging material from cardboard to cans is scarce. “Companies react to the bottlenecks by investing in their own logistics capacities and trying to work with more local raw material suppliers,” observes Klaus Ballas, Head of Consumer Goods and Retail at EY.
Dirk Van de Put, head of the Milka and Philadelphia manufacturer Mondelez, hopes the situation will stabilize from the end of 2022. “However, food prices will remain at a high level.”
Greener: More sustainable packaging and products
Although prices rise and margins fall, manufacturers have to invest. There is still some catching up to do when it comes to sustainability. There is increasing pressure on the industry to make cultivation and packaging more sustainable, and to reduce emissions and waste. “Initially, these are high investments. But they will significantly reduce our costs in the long run, ”says Mondelez boss Van de Put.
EY expert Ballas says: “In 2022, the issue of sustainability will primarily be driven by the legislators. The manufacturers are getting more and more requirements for packaging, for example. ”The companies are trying to use less virgin plastic and are experimenting with more sustainable packaging.
Corona has sensitized consumers to sustainability, regionality and fairness. Consultant Driver observes that manufacturers are therefore investing more in sustainable and high-margin future fields such as meat and milk substitutes. “Declining sectors with a bad image in terms of health or sustainability are being rejected.”
With the increasing demand for climate-friendly and animal-friendly alternatives, the Hochland family cheese dairy also started the vegan cheese business six years ago. The Allgäu family company is the German market leader with its “Simply V” brand. Hochland boss Peter Stahl predicts: “In 20 years only every second ‘cheese’ on supermarket shelves worldwide will come from cow’s milk.”
More and more companies are suffering from the consequences of climate change. For example, brewers complain that harvests are becoming increasingly unpredictable. Jan Niewodniczanski, Managing Director Technology and Environment at Bitburger, says: “Extreme weather conditions such as heavy rain and drought hit our business hard.”
More digital: Investments in online channels necessary
Lockdown and the mask requirement have changed shopping behavior. “The pandemic has accelerated the trend that customers are increasingly buying everyday goods online. This development will continue even after the crisis, ”says Sandra Deutschländer, partner and consumer goods expert at BCG. Many large manufacturers would continue to invest in their online offerings in 2022 in order to reach customers.
Beiersdorf, for example, plans to invest an additional 300 million euros in sustainability, digitalization and growth markets over the next five years. “The pandemic was a catalyst for e-commerce,” said CEO Vincent Warnery.
Providers have the opportunity to offer their customers personalized products on their own online sales channels. You can also collect valuable data on shopping preferences. But the whole thing is still a niche. Beiersdorf, for example, makes ten percent of its net sales through digital channels. Cosmetics manufacturer L’Oréal has almost 30 percent.
Warburg analyst Frey says: “Companies that sell a larger proportion of their products online will also come through the crisis better in the future.”
Series: Industry Outlook 2022
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