September 23, 2015

EU migrants – a plus for European retailers

EU migrants welcomed in Frankfurt (source: Franz Ferdinand Photography)
German proverb: "Food and drink keep body and soul together"
As the migrant tragedy unfolds and the EU struggles to cope, many European retailers & fmcg manufacturers have joined charities and private individuals in rendering humanitarian aid.

Merely one positive example would be Rewe Group, Germany's second-largest retailer by sales. The Cologne-based company states, among a raft of other measures, that it is donating €500,000; providing 11,000 coats, 2,000 warm trousers and 10,000 blankets; as well as organising trainee jobs specifically for young refugees.

Understandably and wisely, however, the trade is generally not prepared to comment on the potential benefits arising from an influx of young migrant labour and increased consumer spending. Neutral experts, however, clearly believe this to be the case.

Demographic trends in Germany have made it increasingly difficult for retailers and suppliers to recruit young people in sufficient numbers over the last few years. The unexpected arrival of 800,000, and probably more, new citizens, which will boost Germany's ageing population of 81m by more than 1 per cent, has solved this problem at a stroke and made all past population prognoses redundant.

German food retailers stand to profit most from this influx because the migrants' immediate needs will be basic foods and staple goods. This will be a particular boon to the discounters (Aldi, Lidl, Netto Marken-Discount, Penny, NETTO, and Norma), says Manuel Jahn, chief consultant at the Geomarketing Division of consumer research company GfK.

If one works on the basis that an average discount store needs to have around 4,000 people in its catchment area, then there would be potential for at least 200 new outlets.

Customer donates products, Edeka Hamburg (photo: Carsten Milbret)
A customer donates products at an Edeka store in Hamburg
This transfusion of new blood for Germany's huge, but anaemic retail market (€456bn), which grew by only 0.5 per cent last year, is surely welcome. Food & toiletries (€221bn) increased only slightly more (+1.2 per cent).

Manufacturers also see big chances. "More people must eat more," says Christoph Minhoff, CEO of the German Federation for Food Law & Food Science (BLL). "Those coming to us will probably have different tastes and preferences, but that will only make the overall consumer offer broader and more exciting."

Meanwhile, a bright proposal is currently being touted in EU-Commission circles: The EU milk lake could be distributed among the refugees. Presumably Brussels is working on the basis that if you can't rescue migrants, then we should at least save our opulently subsidised dairy farmers from "ruin".

Sheer bureaucracy will doubtless scupper any such talking-shop notions. Otherwise, given an agricultural budget of more than €370bn till 2020 and a world-wide glut of 6m tonnes of milk, we very much hope that all refugees love lots and lots of milk.

Related articles in German: By Lisa Neumeyer in Lebensmittel Zeitung (LZ), no. 38, 18.09.2015, and by Dirk Lenders in LZ, no. 37, 11.09.2015

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  1. Ruth Raphel
    Created 24 September, 2015 04:06 | Permanent link

    Mike, a very interesting article. The Republicans in the US Congress should read how Germany can give new life to so many migrants and, at the same time, give new life to the aging German demographics: a win-win situation.

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