Selling to the German Consumer - An Amárach Research Briefing June 2011

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’