Study German lessons
There is now a gap of 40% between agricultural and industrial incomes in Germany. And in one year alone, the country has lost more than 10,000 cattle farms.
In Germany’s sluggish economy, farmers, at the bottom of the food chain, have been squeezed out. Floods in 2002, and the summer drought in 2003, hurt also. But farmers’ greatest difficulty is they cannot live with hotter competition in the food industry.
Food processors have felt the pain also, forced to cut 70,000 jobs in ten years.
For eight years, the German economy has been the slowest in the EU, dragged down by the financial burden of absorbing the bankrupt former communist-run East Germany in 1990. Many of the country’s greatest firms and institutions are in trouble.
Citizens have rallied to the cause; according to farmers and food processors, there is an “obsession with saving money”, reflected in 11% of income going into savings.
The five or six supermarket chains which dominate in Germany have helped consumers, by mercilessly squeezing dairies, beef processors and mills for the last cent. And the hard times are passed onto farmers, the ultimate food raw material source.
The good news is that consumers have saved billions on food, because food prices are virtually unchanged since the mid-nineties. Now, only 12.1% of household expenditure goes on food; at the end of the 1970s, it was 20%.
Irish consumers know how their German counterparts feel, because they are visiting the same shops, Aldi and Lidl.
Among German retail giants, Aldi are ranked No 3, and the Schwarz Group, which includes Lidl are at No 5.
By concentrating on low price, they and other discount stores have played a big role in cutting the profits of German farmers and food processors, who now fear that their industries are caught in a deadly downspin.
They say they can no longer use quality, regional origin or brand image to overcome consumers’ price obsession, which is pandered to by the discount stores which now have 40% of the German market.
And when even a slight surplus of any farm produce arises, prices are dictated without mercy by the major discount stores to farmers and processors, whose last resort now seems to be a moan about food’s low cultural standing in their society.
They are also appealing to Germany’s politicians to revive national confidence in the future, in the hope that thriftiness will no longer be such a valued social virtue. The alternative, say farmers and processors, is a continuing food price war, with consumers always looking for the next and cheaper offer, and as a result, goods tending to stay on the shop shelves longer.
Could it happen in Ireland? Yes, and if it does, the only defence for farmers is to present a united front to counter merciless retailers in a cut-throat market.
