Sweets industry looks back on a difficult year in 2021 – sharp increase in prices of raw materials, delivery bottlenecks and the coronavirus impede industry

©Coloures-Pic/AdobeStock

©Coloures-Pic/AdobeStock

For the year 2021, the Association of the German Confectionery Industry (BDSI) can look back on a widely stable development for the industry and its delicious products both in terms of sales and turnover. The production volume was slightly up on the previous year’s level (+1.3%) and turnover increased by +2.2%. However, the statistical data obscures the view of the economic situation in the industry, which is clearly under strain. In addition to the effects of the Corona pandemic, the partly dramatical increases in the prices of raw materials and also the costs for energy, logistics and packaging materials are making life particularly difficult for the over 200 industry manufacturers of sweets and snacks in Germany.

Expensive raw materials, the Corona pandemic and impaired supply chains are strongly affecting the German sweets industry

The companies are currently experiencing huge cost increases in all areas. This applies for the costs of raw materials, packaging, logistics and energy, but also for work protection and staff. This is the first time burdens in this form have occurred.

"The market for important raw materials is depleted, supply chains that have been in place for years are no longer working. This can also have an impact on the imminent Easter business, for instance that not all popular products such as chocolate bunnies can be produced as planned, because important raw materials, packaging materials or freight capacities are not sufficiently available," explained Dr. Carsten Bernoth, Chief Executive Director of the Association of the German Confectionery Industry e.V. (BDSI). "The manufacturers are particularly feeling the significant price increases and partly also the delivery difficulties when buying important agricultural raw materials such as wheat, soya and sugar, but also packaging materials."

The price of wheat rose by 50% on the commodity futures market to an all-time high within one year. And the costs for powdered milk, sugar, sunflowers or soya oil rose sharply too. These circumstances were caused among others by poor harvests, lower imports from third countries, but also by the increased demand in Asia.

The costs for the procurement of packaging materials and in the logistics and energy sections have also risen sharply. For example the electricity prices for industry customers have doubled within a year. On the futures market of the energy exchange EEX, a mega watt hour (MWh) of electricity costs just under €70. The price is also being driven by the equally strong increase in the price of the CO2. Since the beginning of 2022 the price has been €30 per tonne of carbon dioxide.

Furthermore, there continue to be insufficient freight capacities for the international transport of goods by road, rail or container ship. Containers for transporting goods around the globe are a scarce commodity. Many companies have reduced their capacities and stocks as a result of the Corona pandemic and the at times inactive global trade. Now these reduced production capacities are colliding with a surging increase in demand. Whereas transporting a standard 40-foot container from Shanghai to Rotterdam cost around US dollars 2,000 in December 2020, the freight rates cost almost US dollars 10,000 one year later (December 2021) according to the World Container Index.

"The breaking point has been reached. The policy-makers are now called upon to protect medium-sized companies in particular  from further costly and bureaucratic burdens. Otherwise, we risk the loss of the medium-sized economic structure in Germany that was considered to be robust hitherto," continued Dr. Carsten Bernoth.

Furthermore, there is growing concern about staff shortages in the production among the manufacturers of sweets and snacks: Due to the fast-spreading omicron variant there is the threat of higher sick rates and quarantine absences. In individual cases there are already temporary delivery bottlenecks due to Corona outbreaks. "We can say for our industry: The manufacturers and their employees are undertaking all organisational and financial efforts so they continue to be able to deliver during the crisis," explained Dr. Carsten Bernoth.

Increased lack of skilled workers

The sweets industry is a significant and stable source of jobs in all regions of Germany, especially in rural areas, and it makes an important contribution towards affluence and employment. The German sweets industry employed around 50,000 employees in 2021, which makes it the fourth largest sector in the food industry. Central challenges for almost all of the companies include the recruiting of specialists, especially in production, but also in the work fields of logistics and sales. The search for seasonal workers is also becoming increasingly difficult for many companies. In many regions, full-time employees and skilled workers are hard to come by.

Economic development of the German sweets industry in 2021

According to BDSI estimates, the production of sweets and snacks manufactured in Germany remained rose slightly in 2021 up to 3.9 million tons (+1.3%). In terms of value, production also experienced a positive development at approx. €13.1 billion (+2.2%). The BDSI estimates are based on the official figures from the German Federal Statistical Office and the market data from the relevant market research institutes.

In terms of volume, the domestic offer (= production + imports - exports) in 2021 was just under 2.7 million tons (-0.2%), whereas the domestic sales volume was estimated to be €9.2 billion (+2.1%).

Recovery of the important export business with sweets in spite of Brexit

The export business with sweets and snacks that is so important for the German sweets industry was able to recover in the course of 2021 in spite of the global coronavirus crisis and further uncertainties on the world trade front such as the consequences of Brexit. Overall, an estimated 2.3 million tons of sweets and snacks were exported. This represents an increase of +3.4% in comparison with the previous year. The export turnover rose by +4.2% in 2021 up to approximately €8.9 billion and thus reached the level of 2019 before the Corona outbreak. In the year 2020, the German sweets industry recorded declines of 3.3% in the export business due to the Corona pandemic.

On the other hand, the significance of the United Kingdom as an export market has significantly declined. In 2021, the export business with Great Britain declined by 3.7% in terms of volume and by 6.0% in terms of value.

With an export share in volume of over 50%, more than every second ton of German sweets is destined for export. Around 80% of all exported sweets go to member states of the European Union. However, exports to third countries have been rising steadily for years.

Concern about a further fragmentation of the single market

As a result of Brexit, the European single market has lost around 67 million consumers. In addition to this decline, the member states are treading their own paths in terms of nutrition labelling, the environment or recycling labelling. This is leading to huge strains on the companies, since in the worst case they have to use different packaging for each member state. This recently became evident because of Nutri-Score. A law suit is currently been filed against a product in Italy that is sold European-wide and which carries the Nutri-Score label. "As a medium-sized industry we demand that the European policy here enforces uniform framework conditions for the companies and that the national policies take the European single market seriously. Otherwise there is the risk of a market shakeout occuring at the expense of smaller and medium-sized companies due to national legislation," stated Dr. Carsten Bernoth.

Innovations 2022 - delicious products for little everyday pleasures

The sweets industry is one of the particularly innovative industries and will once again in 2022 launch a wide variety of new products onto the market. In addition to the classic, traditional products that have been successful on the market for years, a row of alternatives with reduced sugar, fat and salt content, vegan, gluten and lactose-free products as well as further innovative products are already available today.

At the beginning of 2022, products with natural ingredients such as nuts, dried berries or sesame are on trend. Many manufacturers are betting on plant-based protein sources here. More and more products contain oats, pumpkin seeds, sunflower seeds, soya, lentils or pea proteins for instance. As in the previous years, products with a reduced sugar content are also among the product trends. Among the salty snacks, particularly nuts, nut and nut/fruit mixtures continue to be very trendy. The product ranges of more and more brands on the snack shelves are picking up on consumer-relevant aspects such as naturalness and convenience. As a rule, nuts and pulses are prepared for immediate consumption, i.e. roasted and salted/seasoned. But there is also a demand for unsalted and baked products.

Sustainability and climate protection are among the macrosocial trends, which the German sweets industry also makes a contribution to. The industry's sustainability efforts not only encompass new recipes, the use of certified raw materials and the production processes, but can also be observed in the packaging section. Many companies are testing more and more alternative packaging options or are increasing the share of recycled material in their secondary packaging.

The German sweets industry is showing strong commitment to sustainability

The use of raw materials certified according to sustainability standards in sweets and snacks has been intensively promoted by the German sweets industry for many years. This is especially true for cocoa, the key ingredient in chocolate. Certification is a significant component in the development of a sustainable cocoa sector. In 2020, the share of certified sustainable cocoa in sweets sold in Germany reached 77%. According to the BDSI’s first survey in the year 2011, this share amounted to only approx. 3%. The sweets industry is thus on an excellent course.

The same applies to the palm oil or palm kernel oil used for the production of sweets. 94% of the palm oil used in Germany’s sweets industry is already certified as sustainable. As such, the sector in Germany is playing a leading role.

The BDSI continues to be intensively involved as part of the Sustainable Cocoa Forum, a joint initiative founded in 2012. In addition to members from the chocolate and sweets industry as well as from the food trade, among others the German Government and standards-setting associations like Fairtrade and the Rainforest Alliance as well as representatives from civil society also assert themselves within this organisation. The BDSI is also a committed member of the "Forum for Sustainable Palm Oil" multi-stakeholder initiative.

Development of the individual product groups

Chocolate products

According to the BDSI’s estimates, production volumes of chocolate items showed an upward trend in 2021. In total, approx. 1.2 million tons of chocolate products were produced in Germany (+2.7%). The production value rose by around +5.4% up to approx. €5.9 billion.

The export of chocolate products increased in volume in 2021 (0.2%) and in value (+2.3%).

Biscuits

The manufacturers of biscuits experienced an unsatisfactory development in 2021. The production of biscuits fell in volume by -4.1% based on estimates by the BDSI. In total, 740,000 tons of biscuits were produced. In terms of value, the production sank by -1.3% down to around €2.2 billion.

The exports of biscuits also recorded a decline of -0.4% in terms of volume in 2021. Whereas the export value rose by +3.0%.

Sweets and confectionery

The manufacturers of confectionery recorded a positive development in 2021. Compared to 2021, production rose by an estimated 4.0% to 598,000 tons in terms of volume and by +2.2% in value up to approx. €1.6 billion.

With an increase of +8.3% in terms of volume and +7.3% in value, the development of the exports of sweets and confectionery also experienced positive growth in 2021.

Snack items

The manufacturers of snacks recorded slight negative growth in 2021. According to the estimates of the BDSI, the production volume sank by -1.0% down to around 372,000 tons. In terms of value, production sank slightly by -0.1% to around €1.7 billion.

Exports of snack items also saw a negative development in 2021, falling in comparison with the previous year by -5.7% in volume and by -4.8% in value.

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