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German cold storage industry sputters following 10-year period of expansion.

German Cold Storage Industry Sputters Following 10-Year Period of Expansion

With capacity peaking at 4.7 million cubic meters, government intervention cuts have hit warehouses in Federal Republic as hard as most others in EEC. Construction slows to crawl, but refurbishment is active enough to keep building and design firms going.

West Germany's economy is very healthy, to say the least. In 1988 national productivity increased by 3.4%, and this favorable climate continued into the first three months of 1989 to show a GNP growth rate of 4.2%. However, in spite of this positive economic situation, the German cold store industry is showing a declining business pattern which is probably due to intervention cuts.

Last year the domestic refrigerated warehouse industry responded to diminishing stocks by restricting investment in the building of new coldstore facilities. After almost a decade-long period of steady growth, capacity peaked out at 4.7 million cubic meters. Development of warehouse capacity has to a certain extent gone hand-in-hand with the growth of intervention goods. Recent curtailment of government-subsidized stocks explains the stagnation.

In the past, utilization of German coldstores was characterized by fluctuating occupancy caused by unpredictable intervention supplies.

Comparisons of stocks in German warehouses during 1987 and 1988 clearly demonstrate how intervention uncertainties affected cold store levels. Butter storage fell dramatically from 304,155 tons to 72,427 tons. The total drop of 231,868 represented 76.2% of previous holdings. Against this intervention meat has shown a positive side in the same period, increasing from 201,868 tons to 250,237 tons--up by 48,369 tons to reflect a 24% increase.

However, the overall figures for storing intervention-type products showed a drop of 183,359 tons -- a tremendous loss of business in such a short time. A further decline in the storage of deep frozen food has also taken place in the same period, dropping from 117,935 tons to 89,650 tons -- a 28,285 ton difference. Although other categories of business have increased, the overall picture shows a general decline from 802,137 tons to 589,377 tons. That's a reduction of 212,756 tons, or 26.5% in a two year period.

Storage capacity figures show that meat accounts for nearly 50% of stocks -- too high a figure to be comfortable with. The PRW industry is keeping its collective fingers crossed that meat stores will continue to expand or at least hold their own. Certainly with current trends the likelihood of new cold store building in Germany in the foreseeable future is limited. In the meantime, refurbishment is keeping refrigerated warehouse construction companies in business.

Companies wishing to enter the German market should take note of local distribution patterns of cold storage as well as freezing capacities. The country is divided into nine regions, offering some 4,666,725 cubic meters of warehouse space. Freezing capacity facilities can handle up to 4,165 tons a day.

In view of prevailing conditions, the German cold storage industry is now concentrating its efforts on deep frozen foods, particularly the domestic FF home services section which has a share of more than 30%. This market with a per capita consumption of 15.2 kilos has every chance of showing considerable growth assuming there is improvement in both the freezer capacity in private households and the quality of refrigerated display cabinets at retail trade levels.

Cold stores mainly profit in the field of handling, while stocks are kept at minor levels. The improved application of EDP has enabled producers and retailers to realize "just in time" efficiencies, and this has led to less stock as raw materials are purchased more frequently. Items such as fruit and vegetables are directly imported without intermediate storage, and finished products are processed in order.

There cannot be a straight compensation between intervention foodstufs and deep frozen products. Suppliers of non-intervention goods are now looking for value-added services and improved logistics which will need a lot of investment. Cold storage companies therefore will have to start looking at diversifying into related industries to countermand current trends. This could include introducing their own transport distribution service, and increasing freezing facilities to include re-packaging.

In spite of the disappointing state of cold storage there is at least one successful story from the associated industry of distribution. U.K.-based Christian Salvesen plc has expanded international distribution business by opening an office in Germany to service the frozen food industry. The company was registered in 1987, quickly asserting itself. In just two years it has built up a network of 14 depots based in 11 locations throughout West Germany, including Berlin. Some 1,300 people are employed, and 300 trucks operate under the Salvesen/Agro livery.

Salvesen's services are currently utilized by an impressive list of customers including such names as Dr. Oetker, Langnese-Iglo, Aldi, Co-op, Leibrand and Reichert.

PHOTO : Distribution is the name of the game for Christian Salvesen's cold storage operations in

PHOTO : West Germany. In two years' time it has greatly boosted its presence in there.
COPYRIGHT 1989 E.W. Williams Publications, Inc.
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Title Annotation:Warehousing World
Publication:Quick Frozen Foods International
Date:Jul 1, 1989
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