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Frozen food freshness will quickly conquer the east.

Frozen Food Freshness Will Quickly Conquer the East

Up to now, the 62.5-million-person West German frozen food market has registered a respectable growth rate. Per capita consumption last year was about 18 kilograms. After unification of the two German states, the population grew by 16.5 million to 79 million. What effects will this have on the QFF industry?

For years, frozen food has been one of the fastest growing product groups in the "old" Federal Republic's food industry. That applies as much as to the consumption by private households as to the use of frozen food in the catering sector. In 1989 sales by volume grew by 9.2% to reach more than one million tons (including raw meat and game, but exclusive of poultry and ice cream). Per capita, West Germans ate 16.6 kg of QFF (compared with 15.2 kg in 1988). Sales of deepfrozen products increased by 11.6% over 1988 to DM 6.4 billion.

Precise figures for 1990 are not yet available. The German Deepfreeze Institute's considered estimate is that per capita consumption in West Germany rose to about 18 kg.

The most important motivations for buying QFF remain the greater degree of freshness due to rapid freezing, the wide available variety of different prepared and partially prepared dishes, problem-free preparation in the microwave, and limitations on effectively storing fresh food at home.

About 54% of total sales were accounted for by private households. The remaining 46% fell to the different bulk consumer segments, such as restaurants and industrial catering.

This positive trend is also verified by consumer surveys and the predictions of leading market research organizations. For example, one of the largest German companies, based in Nuremburg, three years ago projected a growth of 143% by the year 2000 for deepfrozen products in the West German retail grocery market. At that time, however, no one had considered the effects of unification of the two German states. According to the figures of the German Deepfreeze Institute, sales of QFF to private households increased by 18% in the years 1987-89. For the predictions of the market researchers to come true, a yearly increase of 7% from the year 1990 on would be enough. Those were quite normal growth rates that were being realized almost as a matter of course by private consumers in previous years.

The predicted expansion for individual product sectors show a clear continuation of the trends of previous years to prepared dishes and easily prepared products. Prepared dishes stand at the front of the line, with growth of 252% anticipated by the year 2000. Baked goods follow with a projected sales increase of 154% between 1987 and 2000, then come potato products with expected expansion of 152%, and pizzas and especially baquettes with 139%. It is forecast that sales of vegetables to private households will rise 92%, with fish volume advancing 91%.

These predictions have been overtaken by the unification of Germany. On one side, frozen food is booming in the west, while on the other, there is an enormous demand in the eastern part of the country for frozen products that up to now have been almost unknown. The net result has already been bottlenecks in distribution of several product lines in the west as well as the east.

While demand exists in eastern Germany, a multitude of problems loom, making it very difficult to satisfy appetites for deepfrozen products.

In contrast to West Germany with its high standard of offerings in the retail grocery market and the everexpanding home delivery services, East German stores are relatively poorly equipped with storage and sales equipment for frozen food. Yes, freezer cabinet space had already existed in the old DDR. These areas were outfitted with sales equipment, however, that for today's requirements was technically obsolete, and in which a large amount of poultry but relatively little sophisticated QFF in the Western sense was sold. This old merchandising equipment still exists. However, it is now filled with high-quality frozen food from western Germany. And there are considerable difficulties in maintaining the necessary temperatures and creating a sales-encouraging atmosphere in the antiquated cabinets. New equipment has not yet appeared in most stores, since in many cases the organizational prerequisites can only be very slowly put in place. There are a large number of distribution agreements with West German partners, but these western trade groups have so far established only a relative few stores of their own in the eastern part of the country.

In this respect, there have so far been only a few instances of transferring the deepfreeze concept from the west to the east. There is still much improvisation here that is largely due to legal uncertainties, as with the unanswered question of to whom the land on which the stores stand actually belongs. Then there are innumerable logistics problems with the transport and the distribution of QFF in the former DDR. The transportation structure is completely out of date, there is a lack of modern delivery trucks with good cold storage equipment, and there are no modern trans-shipment facilities for frozens. Thus, in many cases and in many areas in East Germany, distribution and logistics are not administered by the western partners; instead, important functions in the frozen food chain are assumed by the cold storage warehouses, many of which are completely obsolete.

In spite of all these difficulties, QFF is a hit in eastern Germany. The demand for the trusted products, to a great extent presold by the commercials on western TV, is very large. In some areas this has had serious effects on the production capacity and the delivery ability of West German manufacturers.

Some facets of the developing East German market are fundamentally different from the way the market in West Germany developed:

The buying power of the former DDR is still very small. That will hinder the purchase of frozen convenience products for some time. The most popular products in the east are the same ones that performed the market opening function for the west in the 1950s, namely fish sticks, French fries, ice cream, chicken fricasse, and the like. East German buyers are more hesitant about products that -- unlike vacation-experienced West Germans -- they are unfamiliar with. Western consumers have, for example, encountered pizza, lasagna, and Asian dishes at the many pizzarias and on extended vacation trips abroad. The East Germans don't have this experience. That will quickly change, however, just as much else has changed quickly in the unification process.

The Catering Scene

The deepfreeze industry has similar problems in the catering sector. The economic infrastructure is completely obsolete everywhere, including at East German restaurants. Of course, there are some food stands that sell large amounts of fries, wursts, and simple standard products from the frozen food industry. Overall, however, there has been no change as yet, and no use of frozen food comparable to that in the west. Kitchen technology is obsolete, there are too many employees engaged in make-work, and there is essentially no storage capacity for QFF in the restaurant trade.

Industrial catering is in a similar state. Here, too, equipment is obsolete, the infrastructure is non-existent, and, as in all sectors, there is overstaffing. Given the very bad economic situation in Germany's eastern states, industrial catering emerges also as a strong social factor. Great opportunities for frozen food could appear as a result, since social programs involving food distribution to the needy can be best and most quickly carried out with the use of frozen menus.

For many reasons, the former DDR built an elaborate system of social care. For example, compared with the west there was a much larger number of kindergartens and other social institutions. But here, too, the technical equipment is obsolete and worn out, and there are too many employees. Unlike industrial catering, however, there is a necessity to continue the services. The people are already in the hospital or old-age home and must be cared for. Formerly, the service was provided by factory kitchens. These facilities are now closed for the reasons stated above.

This works to the advantage of frozen food. By far, QFF offers the most modern system, it can react flexibly to fluctuations in the number of people being cared for, and it is hygienically safe. Frozens are better from the industrial processing and manufacturing point of view, and above all they are of high quality and simple to handle. Here enormous opportunities exist for the QFF industry, particularly when the West German social services establish themselves in the old DDR. They know the advantages of frozen food.

The united German deepfreeze industry will have to blaze pioneering trails in many respects in eastern Germany, from the establishment and expansion of a functioning communication system to the renovation and growth of retail cabinet space to the modernization of the transportation system. Some of the existing manufacturers will be taken over by western partners, and together will produce western-standard frozen food. The great European cold storage warehouse companies will cooperate with East German warehouse to some extent, but will also build their own modern warehouses. The large German home delivery services will set up an area-wide distribution network in the former DDR and in a short time the market structure will closely resemble that of western Germany.

The packing material bottleneck will be eliminated, and in a relatively short time a functioning distribution system with technically modern vehicles will be set up. Frozen food will become one of the most successful product groups in the food industry in East Germany as well, although one of the most important statistical figures will show an unexpected change. The per capita consumption of about 18 kg in West Germany will sink in the united Germany for a while until the eastern portion reaches western consumption levels. As long as this is the only "negative" change for the all-German deepfreeze industry, those involved should do everything they can to use this unique opportunity to quickly and thoroughly introduce 16.5 million potential customer to the high-quality offerings of frozen food manufacturers.

Manfred Sassen Managing Director Deutsche Tiefkuhlinstitut
COPYRIGHT 1991 E.W. Williams Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:QFFI Special Market Report: United Germany
Author:Sassen, Manfred
Publication:Quick Frozen Foods International
Date:Apr 1, 1991
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