The Germans are increasingly buying cheap meat or doing without schnitzel, steak and bratwurst altogether. According to a recent study, rising food prices are at the expense of animal welfare and environmental protection: issues such as better husbandry or sustainable packaging are becoming less important for consumers.

Regionality alone continues to be very important to consumers. The meat industry is already preparing for further falling sales – especially for more expensive products. “Inflation is causing a change in consumer behavior,” said Klaus Martin Fischer from the management consultancy Ebner Stolz WELT.

In April, food in Germany cost an average of 8.6 percent more than a year earlier. This is the highest value that the Federal Statistical Office has determined since March 2008. Meat and meat products are even higher at 11.8 percent. Inflation is likely to rise further in the coming weeks and months.

The meat industry is already clearly feeling the consequences, said Fischer. Discounters would gain with their cheap offers, full-range retailers and butchers would lose. “There have recently been an enormous number of copies of high-priced goods,” said Fischer. In plain language: The shops had to dispose of unsaleable goods. He expects clear consequences: In the foreseeable future, short-time work and site closures can no longer be ruled out in the meat industry.

Fischer and his team surveyed the 100 largest companies in the meat industry in Germany for the first survey of the “Industry Echo of the Meat Industry” by the consultancy and the dfv media group. And at least 79 percent of the participants report an increased demand for inexpensive meat and sausage products.

Nevertheless, companies see consumption as a whole on the decline. 84 percent of the manufacturers expect a drop in demand for the coming weeks and months, one in five even in the order of ten percent and more. Especially since two things are currently coming together: the sharply rising prices and the already existing trend towards vegan and vegetarian meat substitutes.

Their sales have been increasing noticeably for years. For 2021, the Federal Statistical Office reports an increase in sales of 17 percent to almost 100,000 tons, with sales even increasing by more than 22 percent to 458 million euros. And in the first quarter of 2022, this development continued seamlessly, as the market researchers of the GfK Group report.

The bottom line for 2021 is meat consumption of just 55 kilograms per person, reports the Federal Agency for Agriculture and Food. That is 7.8 kilograms less than ten years ago. The biggest loser is pork. And expert Fischer expects the numbers to continue to fall, even quickly due to the high rate of inflation.

One way out for the meat and sausage industry in recent years has been export. But according to the study, sales abroad are now also difficult. This should mean in particular the severely collapsed business in China.

This has consequences: According to the survey, almost 60 percent of butchers and manufacturers are dissatisfied with the capacity utilization of their plants. Above all, the big players in the industry, who have always been cost leaders in the past due to high capacity utilization, now have too little to do.

The result is noticeable shifts in the industry, even during the Corona crisis. “The winners of the last two years are the medium-sized companies, the losers in the market development are above all the large companies with concentrated locations,” says Ebner-Stolz-Partner Fischer: “The formerly leading companies in the industry are now suffering from the volume decline. Where they previously had major competitive advantages in terms of cost efficiency, companies with highly concentrated locations are now experiencing significant competitive disadvantages.”

In addition, the smaller suppliers have adapted significantly better to the topic of regionality, which is what customers and, consequently, retailers want. “Supermarkets and discounters have been changing their volume purchases for some time and are positioning themselves more broadly and diversely,” says Fischer.

The expert only expects a consolidation in the industry and refers to the survey results. According to this, two out of three companies in the top 100 in the German meat and sausage industry are now striving for alliances and cooperation with companies in the upstream and downstream value-added stages. “The industry echo shows structural breaks in the entire value chain,” confirms Christian Schnücke from the dfv media group.

Meanwhile, economists are urging the federal government to act on food inflation. “Politicians shouldn’t wait any longer, but act now to avoid social hardship at an early stage,” said Marcel Fratzscher, President of the German Institute for Economic Research (DIW). It should, for example, increase the benefits for recipients of basic security and at the same time implement a flat-rate food allowance, similar to the energy flat-rate, for people on low incomes.

“If that turns out to be too bureaucratic and difficult, then politicians should temporarily abolish the reduced VAT rate of seven percent for basic services,” suggests Fratzscher. “That would not only help people with low incomes, but it would have the great advantage that it can be implemented very quickly.” However, Federal Finance Minister Christian Lindner (FDP) has already said that he sees the proposals “with great skepticism”.

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