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Germany's consumer market is worth €1.5 trillion. That's a lot of opportunity. But German consumers are a demanding lot: giving special priority to quality, but never losing sight of value. The good news for Irish businesses is that Germans have very positive attitudes towards Irish goods and services. Given that Germany will be Europe's strongest growing consumer market for the foreseeable future, then now is a good time to respond to Die €1.5 Billionen Gelegenheit!
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Selling to the German ConsumerAn Amárach Research Briefing
June 2011
© Amárach Research
2
Amárach Research believe there is huge potential for Irish
companies, both small and large, to achieve a presence within
the lucrative German market.
Amárach’s Access Europe service aims to help Irish companies
gain a greater understanding of the German market.
Amárach Research have undertaken a survey of German
consumers to identify key insights and opportunities for Irish
businesses within the German Market.
Background
3
Research Methodology
A questionnaire was designed by Amárach Research
Fieldwork was conducted focusing purely on the German market
Online methodological approach
The total sample was 1,001
Quotas were set to achieve a nationally representative sample of
the German population
Interviewing was conducted between 28th April and 20th May 2011
4
C. Sample Profile – I
13
58
14
3819
20
2834
16
50
4250
18
Male
Female
16-24
55+
25-34
35-44
ABC1
C2DE
North(e.g.
Niedersachsen, Hamburg etc.)
% % % %
Gender Age Social Class Region
45-54
South(e.g. Bayern,
Baden Württemberg)
East(e.g. Berlin,
Sachsen)
West(e.g.
Nordrhein-Westfalen,
Hessen)
Quotas were set on age, gender, social class and
region to achieve a nationally representative sample.
5
26
59
28
15
9
22
18
63
4125
12
C. Sample Profile – II
Married/co-habiting
Single
% % %
Marital Status Household Income Children
Majority are married/cohabiting and have children.
Widowed/ divorced/
separated
Yes
€20k - €40k
€40- €60k
€60- €80k
€80- €100k€100k+
Refused
No
Up to €20k
An average of 2 children
6
MAIN FINDINGS:
Section 1: Household Spending and Consumer Confidence
Section 2: Purchasing Behaviour
Section 3: Online Shopping
Section 4: Attitudes Towards Ireland
Contents
SECTION 1:
Household Spending and
Consumer Confidence
8
Household Responsibility
%
Responsibility for
Bills and Budgeting
%
Responsibility for Main
Food/Grocery Shop
28%
69%
3%
34%66%
Jointly
responsible
No responsibility
Mainly
responsible
Jointly
responsible
Mainly
responsible
7 in 10 (69%) are mainly responsibly for household bills and
budgeting while 2 in 3 (66%) are responsible for main food shop.
(Base: All adults 16+ – 1,001)
Higher for Male: 75%
Single: 75%
Widowed/divorced: 96%Higher for females:
80%
NB: It was a recruitment criteria for respondents to be at
least in part responsible for the household shopping
Lower for
Married/
co-habiting:
61%
Higher for
Married/
co-habiting:
37%
Higher for
Married/
co-habiting:
45%
9
Household Spending Vs Last Year
Increased a lot (+5%)
% %
Household Expenditure Food and Grocery Bill
2 in 3 (66%) have increased household expenditure compared to last year while 7 in 10 (69%) show increase in grocery spend.
Consumers were more likely to have experienced a sharp increase in household expenditure if they have children or are between 45 and 54 years old.
Increased a little (<5%)
Stayed the same
Decreased a little (<5%)Decreased a lot (-5%)
Don’t know
Increased a lot (+5%)
Increased a little (<5%)
Stayed the same
Decreased a little (<5%)Decreased a lot (-5%)
Don’t know
(Base: All adults 16+ – 1,001)
10
45
16
14
8
7
6
Reasons for Change in Behaviour Vs Last Year
(Base: All adults 16+ – 1,001)
Everything is getting more expensive
Increased food prices
Higher utility costs/energy costs
Change in circumstances
Higher petrol prices
Buy better quality products
%
15
13
11
11
8
8
8
%
Change in circumstance
Everything is getting more expensive
Less disposable income
Shopping around
Increased savings
Buy less
Shop differently
Why Increased?
Why Decreased?
Majority spending more, mainly because of inflation. Those spending less
are doing so because of a change in circumstances (loosing job etc.).
(All others 5% or less)
(Base: Those who increased spending - 744) (Base: Those who showed decrease - 84)
11
Outlook and Attitudes – Consumer Confidence
(Base: All adults 16+, 1,001)
I am confident that my income is secure
Germany’s economy will continue to be stable
I am less worried about losing my job thanI was before
I am more relaxed about spending money than I was a few months ago
14
12
15
24
11
7
16
24
29
34
15
16
15
8
14
4
Totally Disagree
(1) (2) (4)
Totally Agree
(5)
Less than half of German consumers are confident about the security of their income & the German economy.
Nearly a third (29%) are less worried about losing their job against a similar proportion who hold the opposite view.
Suggests that Germans will be cautious spenders for the foreseeable future, given the state of the European economy, with only 1 in 5 being more relaxed about spending money compared with a few months ago.
Neither/nor (3)
4/5%
31 44%
39 42%
40 29%
32 20%
SECTION 2:
Purchasing Behaviour
13
The majority of grocery shopping happens in supermarkets– between 55% - 73% of produce is bought in supermarkets– followed by discounters (between 32% - 62%)
German consumers buy the best they can afford– ABC1s do most of their grocery shopping in supermarkets, except for
meat, cold meats & bread/cakes, where they tend to ‘trade up’ and purchase at specialists (butchers/bakers)
– C2DEs do most of the grocery shopping at discounters, except for meat, cold meat & bread/cakes; here their trade up is to buy at supermarkets or butchers/bakers
Purchasing Behaviour
Organic food shops serve a niche market– Lifestyle decision– Across age bands & socio economic groups– Requires a certain income (typically €40k+) to be able to pay the ‘organic
premium’– Important to note: increased availability & choice of organic produce in
supermarkets and even discounters
14
For meats, cold meats & fish, supermarkets are clearly
preferred over discounters
The same is true for dairy products
Shoppers were more likely to buy fruit & vegetables at a
discounter, compared with meat or fish products
Tinned food & confectionary are more likely to be bought
at discounters, compared with other food products
– Suggests that consumers don’t expect a quality benefit
by buying these products from a supermarket, but
decisions are based on cheapest price
Purchasing Behaviour
15
Meat & cold meats are frequently bought at the butchers
– NB:
• German butchers offer not just meat and poultry, but cold
meats, pre-prepared dishes, local delicacies, salads,
tinned meats, and sometimes offer a take away service
• Traditionally, butchers operate on a local level, producing
their own meats.
– Offers reassurance regarding traceability & quality of
the meat & accountability of the butcher
Purchasing Behaviour
16
For bread and cakes, bakers are the preferred source
– Typically, family run, local businesses
– But some regional chains exist
– Supermarkets offering breads & cakes often do so through a
separate bakery within the premises
Purchasing Behaviour
17
20% never buy wine or beer and 29% never buy spirits
12% buy beer and 18% buy wine from ‘other sources’
These are likely to be specialist drinks retailers and in the case of wine –
wine producers
Purchasing Behaviour
Specialist drinks retailers offer non-alcoholic and alcoholic drinks in large
volumes
– Selling by the crate
– Empty crate & bottles are returned for
replacement & recycling
18
1 in 10 shoppers buy fruit and vegetables straight from the
farmer
Also popular: weekly farmers’ markets
Purchasing Behaviour
Germans enjoy and celebrate seasonal produce, e.g.:
• Asparagus season
• Strawberry season
• Federweisser
• Beaujoulais Nouveau
19
Supermarket and Discount Store Use
19
19
16
11
Kaufland
Edeka
Rewe
Real
%
Supermarket
%
Discount Store
25
24
13
7
Aldi
Lidl
Netto
Penny
(Base: All adults 16+, 1,001)
There is a greater variety of national and regional supermarket chains, compared with discounters.Discounters operate on a national level. Product placement in a national supermarket and/or a discounter is likely to achieve the greatest exposure to a large number of consumers.Product placement in a discounter may achieve highest consumer exposure, but needs to be weighed up against price & image & brand considerations & target consumer market. The focus on a regional supermarket chain will facilitate controlled market entry trials.
(All others less than 5%)
20
Purchasing Decisions
(Base: All adults 16+, 1,001)
30
42
37
39
31
30
31
7
60
25
22
12
14
11
10
18
1
5
6
7
15
13
14
58
8
7
11
2
3
3
2
Disagree(1) (2) (4)
Totally agree(5)
–
Very few (9%) would borrow money for holiday, this indicates a certain level of risk aversion.
A large majority (90%) feel it is important to shop around.
It is important to shop around
The origin of product is important to me
You can get better deals online
I prefer to stick to what is tried and tested
I am prepared to pay more for environmentally friendly products
A good relationship with a supplier is more important than saving a bit of money
It is exciting to try new products from around the world
I would borrow money to pay for a holiday
Neither/nor (3)
% 4/5
9 90%
25 67%
32 59%
40 51%
29 45%
39 41%
37 41%
15 9%
21
Product Quality and Characteristics
(Base: All adults 16+, 1,001)
Test results (Stiftung Warentest)
TÜV Approved
CE Certification
Endorsement by expert
Trade magazine review
Product literature
Recommendation by friend/relative
Brand/reputation
Country of origin
Newspaper article
Advertising
Not at all(1) % 2/3
91%
86%
82%
79%
79%
78%
76%
70%
65%
61%
36%
A little(2)
A Lot(3)
Which factors reinforce product quality
22
All factors were important, except advertising– BUT: advertising has of course an important role to play in terms of
raising product awareness and building your brand in Germany
Most important factors in convincing German consumers re product quality were:
– ‘Test’ results & TÜV approved = ie German certifications ahead of CE marking,
Product Quality and Characteristics
Stiftung Warentest– A German consumer organisation involved in investigating and
comparing goods and services in an unbiased way.– Founded in 1964.– Very well-known & has an established reputation as an independent
and reliable organisation.– The foundation has a considerable influence on the buying behavior
of consumers.– Good ratings are often given great prominence in product
advertising and on product packaging.– Stiftung Warentest carries out more than 200 comparative product
tests and investigations of services from nearly all areas of everyday life every year.
23
Country of Origin – Impact on Product Choice(Base: All adults 16+, 1,001)
German
France
Ireland
Italy
Holland
Britain
USA
India
China
Negative(1)
Neutral(2)
Positive(3)
The majority (75%) are ‘patriotic’ towards German goods.A product coming from Ireland is regarded as positive by nearly 1 in 3 of German consumers. This is in line with results from other European countries, except Great Britain, where results were less favourable.There was strong negative disposition towards products from China and India.Germans were mostly indifferent or negative to the ‘brand’ US.
➜ ‘Made in Ireland’ is likely to positively influence German consumers’ purchasing decision.
➜ Irish manufacturers should ensure clear differentiation from Great Britain.
SECTION 3:
Online Shopping
25
44% 56%
Internet Access and Online Shopping
%
Internet Access
at Home
99% 1%
%
Smart Phone (or other
mobile internet device)
%
Shop Online
YesNo
93%
7%
YesNo
Yes
No
Nearly all (99%) have internet at home and 9 in 10 (93%) shop online.
(Base: All adults 16+ – 1,001)
25 – 34 year olds 61%
ABs 59%
26
Products Purchased Online
(Base: All who shop online – 936)
19
18
49
30
27
43
15
25
33
39
61
43
61
78
77
Books/magazines
Clothing
Banking and finance
Holiday/flights
Entertainment – games, music, movies
Medical goods/drugs
Electrical equipment
Computer software
Computer hardware
Telecoms/internet services
Insurance
Sports equipment
Jewellery
Arts & crafts
Groceries
%49
54
27
48
53
39
68
59
52
46
31
49
35
20
21
32
28
24
22
20
18
17
16
15
15
8
8
4
2
2
% %
Never Sometimes Regularly
Books and magazines are the items most regularly purchased online, followed by clothing
and travel. Split attitude towards online banking (50/50). Groceries are least purchased.
27
Other Products Purchased Online
Toys
Animal food/products
DIY
Car products
Furniture
Gardening
products/plants
Collectors items e.g.
Coins/stamps
Presents/Vouchers
(Base: All who shop online – 936)
28
Most popular websites used regularly to shop online
(Base: all who shop online – 936)
Amazon and Ebay are the most popular sites used to shop online
with 2 in 3 (65%) using Amazon regularly. Large variety of websites
were used – over 200 different websites were mentioned.
(All others less than 5%)
6552
12 10 6 5
% % % % % %
29
(Q.2.7)
Importance of Different Factors When Buying Online
(Base: Who shop online – 936)
Product return/opt out options
Cost of delivery
Secure payment option (e.g. Paypal)
Selection of products/services
Speed of delivery
Ease of navigation
Translated into German
German contact number
Origin of product/service
Supplier Rating
Customer comments/forum
German company
Online testimonials
Recommendation by 3rd party
33
33
30
45
48
42
30
35
45
42
41
34
34
26
58
58
59
39
35
38
45
38
27
26
19
18
15
814
9
8
9
6
4
5
5
3
4
3
2
1
1
7
4
4
3
2
1
2
2
1
1
Not at all important
(1)(2) (4)
Very important
(5)
Product return / opt out options and cost of delivery are the most important factor when buying online
– may present a challenge to Irish companies to compete with mainland suppliers.
Other essentials: Secure payment option, translated into German and a German contact number. (NB:
Only 14% rate their English as very good, and 46% quite good, leaving 40% with poor or no English).
––
–
–
Neither/nor (3)
% 4/5
8 91%
8 91%
8 89%
13 84%
13 83%
16 80%
18 75%
20 73%
23 72%
24 68%
28 60%
36 52%
38 49%
45 34%
SECTION 4:
Attitudes Towards Ireland
31
Attitudes Towards Ireland
Ireland = Die grüne Insel
(Base: All adults 16+, 1,001)
Ireland is most commonly perceived as a green island with beautiful scenery and
nature, and indeed butter.
61
31
25
17
12
11
11
11
9
8
8
8
4
Green Island
Beautiful nature/scenery/countryside
Unspoiled nature
Island
Hospitality/nice people
Butter
Economic crisis/unemployment
Rough climate
Holiday destination
Agriculture/organic/high quality produce
Sheep/cows
Whisky
Old/traditional
%
* All others under 4%
32
Prominence of Irish Brands in Germany
(Base: All adults 16+, 1,001)
Bailey’s Irish Cream
Kerrygold
Guinness
Ryanair
Tullamore Dew
Kilkenny Beer
Aer Lingus
Old Irish Marmalade
House of Ireland
Butlers Chocolates
Ever Used
KerryGold and Bailey’s are very popular with 3 in 4 having heard of these brands.
As is to be expected: brand awareness and usage higher amongst those who have
visited Ireland.
Ever Heard of
55
60
34
12
3
8
1
4
14
16
16
15
17
20
27
32
48
62
75
77
Primary
Higher for 35-44
year olds: 82%
Higher for 55+ 80%
33
Irish Products – Wish to Buy More Easily Where Live
(Base: All adults 16+, 1,001)
33
32
26
23
20
20
17
16
16
15
14
14
12
11
Butter
Cheese
Whiskey
Tea
Beer
Jams/ Preserves
Lamb
Chocolate
Beef
Bacon
Biscuits
Music
Clothing
Other sweets/confectionary
%
73%27%
%
Would like to be able to buy
Irish products more easily
YesNo
34
Irish Products – Wish to Buy More Easily Where Live
55+
18
Age
€20k
C2
€60k+
AB
Income
SEG
Biscuits
(w)
Tea
(w)
Chocolate
(w) Sweets
(w)
Clothes
(w)Music
Whiskey
(m)
BaconBeer
(m)
Butter
Beef
(m)
Lamb
(m)
Marmelade
Cheese
Delicacy / Fine Food
Broad Appeal / Family Food
Treat / Indulgence FoodYoung Men on the Make
35
Ireland as a Holiday Destination
More likely to have visited Ireland:
• 25 – 34 year olds
• 55+ year olds
• ABs
• €40K+
• Fluent in English
%
Have you ever visited Ireland?
8%
2%90%No
Yes, more than 2 years ago
Yes, in past 2 years
(Base: All adults 16+, 1,001)
36
Overall Impression of Ireland
(Base: All adults 16+, 1,001)
Ireland is a great holiday destination
I would be concerned to do business with an Irish company because of financial problems the country has
I am less likely now to visit Ireland because all of the negative press
24
4
6
43
6
326
19
54
7
25
Totally disagree
(1)Neither/nor (3)
% 4/5
24 67%
64 10%
40 9%
(2) (4)
Totally agree
(5)
Ireland viewed as a great holiday destination and negative press not
having a major affect. Nevertheless only 2% came here in past 2 years.
37
Visiting Ireland
(Base: All adults 16+, 1,001)
17
36
27
16
31
Very Good (10)
%
Rating as a Destination
53%
(8-9)
(6-7)
(4-5)
(2-3)Very Bad(1)
36
14
25
15
37
Very Likely (10)
%
Likely to Visit
9%
52%
(8-9)
(6-7)
(4-5)
(2-3)
Very Unlikely(1)
More likely to visit
Ireland:
• 18 – 24 year olds
• C1
• €40K+
• No children
Disconnect exists as majority rate Ireland as a
good Holiday Destination yet only 1 in 10 (9%) likely to visit.
38
Holiday Activities Enjoyed by Germans
(Base: All adults 16+, 1,001)
Those likely to visit Ireland
particularly enjoy the following
holiday activities:
• Sightseeing
• Shopping
• Visiting museums/galleries
• Hiking & cycling
• Organised bus trips
• Going to the theatre/shows
All other activities less than 2%
81
68
67
59
49
45
30
29
17
9
6
4
2
City Sightseeing
Relaxing/Doing nothing
Going to the beach
Shopping
Hiking
Visiting museums/Galleries
Organised bus roundtrips
Cycling
Going to theatre/shows
Camping
Fishing
Horse riding
Golfing
%
39
Countries Where Germans Have Been on Holiday
in the Last 2 Years
(Base: All adults 16+, 1,001)
Outside of Germany Austria, Italy and Spain are popular destinations.
Germans visit 1.3 destinations on average per year = 1 – 2 holidays/pa
All other activities less than 5%
66
19
19
18
13
13
10
9
8
6
6
6
5
5
5
Germany
Austria
Italy
Spain
France
Turkey
Holland
Switzerland
England
Denmark
Greece
USA
Czech Republic
Croatia
Egypt
%
88%12%
%
Have been on holidays in
the past 2 years.
Yes
No
40
Most popular Destinations for those likely to visit Ireland
Germany
Austria
Spain
France
Italy
England
Switzerland
Denmark
Holland
USA
%
Ireland’s ‘‘competition’’– Most offer easier/cheaper access– Austria/Switzerland/France & Italy offer summer & winter holidays– Austria/Switzerland/Denmark offer similar imagery as Ireland
• Beautiful nature, peacefulness, freedom– Spain, France & Italy offer warm weather & beach holidays– England & USA for anglophiles
(Base: All likely to visit Ireland - 162)
41
SUMMARY & CONCLUSIONS
42
The research confirmed: opportunities for Irish products exist in
the German market
– 73% of German consumers welcome the introduction of more
Irish products to the German market
As far as food products are concerned, they were particularly
interested in:
– Dairy products (to build on the success of KerryGold)
– Whiskey & beer
– Meat (lamb & beef)
– ‘Breakfast items” : tea, marmalade / jam & bacon
Also popular were: chocolates, biscuits & sweets = indulgence
food & treats
Summary & Conclusions
43
Portrait of a German consumer:
– Shops around
– Looks for value for money• Quality of a product is key
– Is an informed shopper• Reads technical product information & test reports
– Takes a conservative approach • To spending money, eg holidays on credit is not an
option• To product choice, eg ‘tried & tested’ over ‘exciting &
new’
– Experienced online shopper:• Seen to offer better value for money
Summary & Conclusions
44
What will convince German consumers of product quality?
Consumers place great value on German test reports,
certifications & expert opinion
Origin of a product can positively or negatively influence
product choice
Favourably disposed towards Irish products
More so than UK and/or US
Important to achieve clear differentiation
German consumers believe that specialisation & personal
accountability ensure better quality products worth paying a little
extra for, e.g. butchers & bakers
Summary & Conclusions
45
Know who your German target market is
– May be different from your Irish/UK market
• Eg: ‘Young whiskey drinkers’
Ensure marketing strategy and planning fit with the German target
market
Determine the best positioning for your products
– E.g orange marmalade currently considered more of a delicacy,
rather than everyday breakfast item
➜ Do you go along with existing perceptions?
• Sell as a premium product
➜ Do you aim to change perceptions via POS, advertising, etc?
• Achieve wider consumer appeal
Issues for Consideration: ‘Product’
46
Make sure you are aware of German market ‘peculiarities’ that
may affect your sales & success
– Areas where things work differently, compared to the Irish market
• E.g.: the selling & buying of drinks
– Will require:
➜Different packaging – larger packs or crates
➜Recycling considerations need to be taken into account
– Limit the use of secondary packaging
– Different material
– Less use of single portion packs
Issues for Consideration: ‘Product’
47
Target product positioning will determine the type of retailer you
will wish to place your products with:
– Low price / high volume: discounters, with national coverage
– Higher price / possibly lower volume: supermarkets
• More diverse channel with regional & national chains & their
own brand positioning
➜ Consider initial market trials
– Test in one region first, which is very feasible in Germany
Issues for Consideration: ‘Place’
48
Given the popularity of online shopping, websites present an
excellent opportunity to promote and sell non-grocery items.
Particularly:
– Clothes
– Travel & Tourism
Critical for success:
➜ Secure payment option
➜ Product return option
➜ Competitive delivery cost and speed
➜ Translated into German
➜ German contact number
Issues for Consideration: ‘Place’
49
Issues for Consideration: ‘Price’
Income levels in Germany are (still) lower compared with Ireland
However, the standard of living in Germany is high
– Lower cost of living
– Lower retail prices
E.g. 1l bottle of carbonated water:
– German supermarket: 30c – 50c
– Aldi/Lidl Germany: 13c – 15c
– Aldi/Lidl Ireland: 25c – 39c
– Tesco Ireland: 25c - €1.86
➜ Irish businesses need clear understanding of retail & wholesale
pricing structures
– Margins not comparable with Ireland
– The cost of transport & logistics needs to be factored in
50
Successful branding as a ‘premium, high quality’ brand is critical
– Low margin on ‘commodity’ products
‘Made in Ireland’ likely to positively influence food/fmcg
purchasing decision
– Reinforces important associations of:
• Free-range
• High quality
• Family run & specialist
• Skill, experience & tradition
To demonstrate that you are serious about the German
consumer and the German market, packaging, advertising, POS,
websites, etc have to be in German
Issues for Consideration: ‘Promotion’