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1992 mania takes back seat in Germany as cold store operators look eastward.

1992 Mania Takes Back Seat in Germany As Cold Store Operators Look Eastward

The attitude of the West German Cold Storage Federation to the EC Common Market and creation of a genuine free market after 1992 has cooled slightly over the past months due to the political, social and economic changes which have shaken Eastern Europe in general and East Germany in particular. Important financial support for the realization of German unification comes from the Federal Republic's hefty trade surplus and overall economic health (growth of GNP was 4% in 1989, while January to April 1990 figures show an uptick of 4.4%).

For the cold storage industry, the satisfying economic development means certain help in the difficult structural adaptation of German warehouses that lie ahead. The shifts toward decreasing occupancy rates, faster turnover of inventory, and extension of the service sector would be harder in times of recession.

In 1989 members of the German Cold Storage Federation were hit with a severe 16% cut in turnover. Particularly hard hit were warehouses holding a high share of butter stocks in previous years. The bottom line is that there has been no increase in cold storage capacity for the year as seen in the figures below:

1985, 3,838,287 cubic meters, +5.2%; 1986, 4,296,660, +12%; 1987, 4,525,086, +5.3%; 1988, 4,703,086, +3.9%; 1989, 4,666,725, - 0.8%.

Estimated local distribution of cold storage capacity and existing capacity in 1990 is likely to stand at 4.66 million cubic meters, with daily freezing capacity of 4.16 tons. This compares to East Germany's 1.2 million cubic meters (approximately 26% of that available in the Federal Republic), and a freezing capacity of 1.88 tons (45%) daily.

In previous years utilization of German cold stores was characterized by fluctuating occupancy caused by unpredictable shifts of intervention by governments buying up surplus to subsidize farmers. Occupancy rates varied as follows: 1984, 88.5%; 1985, 90.8%; 1986, 84.1%, 1987, 79.8%; Jan.-June 1988, 74.9%; July-Dec. 1988, 81.7%; 1989, 67.1%. (Occupancy levels before and after July 1988 are not comparable due to the implementation of a different system for calculating stocks.)

The average utilization degree for the occupied space respective of the maximum number of pallets was 67.1%, based on a calculated net usable volume of 2.65 million cubic meters or 1.02 million standard pallets (industrial size P 10/ height 1.75 m). The latest figures for April 1990 show an occupancy of only 60.9% on stock of some 450,416 tons.

With a share of more than 40%, meat was the most important product for cold store operators. Purchases of beef in public intervention in the EEC in 1987-88 (April to March) reached 488,106 tons. It dropped to 368,724 tons during 1988-89, and fell to 178,218 tons in 1989-90 (the first year of intervention by a tender system). West Germany's share of the latter figure was 75,543 tons.

Increasingly, German public cold stores have profited from the good development of the foreign meat trade. The total exports (fresh and frozen beef, pork and lamb) amounted to 666,000 tons - 250,000 tons of that to EEC-third countries. Total imports were 787,000 tons, with 105,000 from EEC-third countries.

The first year during which the EEC market organization did not buy up butter was 1989. Hence intervention stocks declined to 20,300 tons (1,784 tons in West Germany). At the same time, private stocks with EEC subsidies reached a top level of about 300,000 tons. Countries with particularly high interest rates such as Belgium, France and Ireland benefited from higher stocks. In West Germany private stocks remained stable at 69,000 tons, while the Netherlands, also affected by lower interest rates, saw stocks reduced from 62,000 to 46,000 tons.

From January to April 1990 about 91,000 tons of surplus was bought by EEC governments (West Germany took 20,621 tons). Only very small quantities represented intervention stocks in May, thus private tonnage was supported.

The future development of butter intervention is uncertain. Although the self sufficiency rate of the EEC is 115% (actually 10% of consumption is subsidized), the extent of intervention and private storage depends on the various instruments for market regulations. For example: the financial support of certain sales channels in the Community, or exports to EEC-third countries.

As detailed elsewhere in this issue (see pages 62-78), 1989 was a very successful year for sales of frozen food (up 9.2% to 1,028,349 tons, not including ice cream and poultry). As far as distribution goes, German cold stores benefited appreciably from this increase. But the average annual stock of 82,336 tons was below that of 1988. As deep frozen food gains in importance, further investment in in-plant logistics is one of the most challenging tasks before the German cold storage industry.

Looking East

The West German Cold Store Federation informed Quick Frozen Foods International that the unification of West and East Germany and the effects on both cold storage industries was a major topic of discussion at the organization's annual meeting in Wurzburg on June 8.

The director of the VEK Kuhlund Lagerwirtschaft, Herr Wolf, reported that the capacity of East Germany's 39 cold stores is 1.2 million cubic meters. More than 60% belongs to warehouses of the Treuen and Rostock type which were constructed in the 1960s and '70s.

Although these energy-inefficient facilities do not have loading banks and lack in sophistication, Wolf is convinced that they are usable. But immediate investment in technical equipment as well as modernizing the buildings themselves is needed. Freezing capacity amounts to 1,873 tons per day, and occupancy is estimated at 81%.

In the DDR it is usual for most warehouses to operate as combination public cold stores and production plants for frozen food, ice cream, fruits and vegetables. As for distribution, carriers are utilized since operators do not have their own fleet of vehicles. Actually there are severe problems in supplying rural regions, mainly in the southern part of East Germany.

In general, improvements in the care of goods must be realized if East Germany is to fulfill the various standards of hygiene and food quality required to maintain cold chain integrity.

During the second half of 1990, following the de-cartelization of the combines, nine newly independent enterprises will manage the refrigerated warehouses. Plans are also being made to establish a cold store agency with a staff of 32 (the previous body had 140 employees) to take over central management functions and be responsible for foreign trade. The acceptance of this agency is said to be extremely questionable, although it is aiming to be financially self-supporting.

Another point which was thoroughly discussed in Wurzburg is the determination of real existing assets. Since the questions of property in general, and the behavior of land property administering trustees, are still not clarified, it is not yet possible to estimate necessary investment levels needed to achieve sufficient competitiveness within a unified Germany and the EC Common Market.

Herr Apel, director of the German Intervention Board (BALM), described the future problems of East German cold stores. Owners of current stored goods are stuck with stocks which cannot be sold in the DDR or in world markets, he said. The only possible way to get rid of the surplus stock (much of which is already deteriorating) is by exporting it at highly subsidized rates to East bloc countries, or to give it away.

A consensus reached at the meeting was that only a marked reduction in employees and the introduction of qualified market economy-oriented managers in leading positions would guarantee the survival of the East German cold storage industry. It was evident that the important West German cold stores are interested in cooperation and joint ventures, but realization of this is still impeded by what remains a very unclear legal situation.

Table : Stocks in West German Cold Stores by Weight, 1988 and 1989
 July-Dec. July-Dec.
Product 1988 1989 1988 1989
 Tons Tons % %
Butter 72,427 31,663 12.3 6.4

Quarters, Halves, Whole
 Beef, Pork, Lamb 160,600 112,909 27.2 22.9
Meat in Poly Sacks 18,626 8,008 3.2 3.6
Meat in Cartons 59,019 59,470 10.0 12.0
Offal 11,992 12,910 2.0 2.6
Poultry and Game 18,613 17,306 3.2 3.5
Frozen Food 89,650 82,336 15.2 16.7
Ice Cream 26,456 25,924 4.5 5.3
Fruits in Crates 24,344 26,104 4.1 5.3
Fruit in Barrels 13,146 13,286 2.2 2.7
Vegetables 32,578 38,823 5.5 7.9
Fish in Plates or Cartons 42,489 39,304 7.2 8.0
Fish, Whole 1,518 1,125 0.3 0.2
Other Food Items 12,672 10,712 2.2 2.2
Non Food Items 5,247 3,791 0.9 0.8
Total 589,377 493,671 100.0 100.0

Table : A Regional Look at Cold Storage in Germany
Schleswig Holstein 163,950 cubic meters 360 Tons/Day
Hamburg 653,947 cubic meters 446 Tons/Day
Bremen 222,917 cubic meters 110 Tons/Day
Lower Saxony 886,561 cubic meters 780 Tons/Day
Northrhine Westfalia 1,069,976 cubic meters 1,133 Tons/Day
Hessen 401,272 cubic meters 260 Tons/Day
Baden-Wurttemberg 361,428 cubic meters 220 Tons/Day
Bavaria 727,357 cubic meters 728 Tons/Day
West Berlin 198,108 cubic meters 128 Tons/Day
Total 4,665,516 cubic meters 4,165 Tons/Day
East Germany 1,200,000 cubic meters 1,873 Tons/Day
COPYRIGHT 1990 E.W. Williams Publications, Inc.
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Article Details
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Title Annotation:German warehouse industry
Author:Brown, Morrison
Publication:Quick Frozen Foods International
Date:Jul 1, 1990
Previous Article:Poultry irradiation gets FDA approval but packers seem 'chicken' to use it.
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