Bitter competition

Even as the world's largest fair for food, agriculture and horticulture was set to open, more fuel was being poured onto the already heated debate over food prices and quality.

This week, a number of food discounters in Germany - led by market leader Aldi - continued an ongoing price war with yet another round of cuts, this time on items ranging from vegetable oil to breakfast cereal to snack chips. There were 12 such major price reductions over the course of 2009.

Speaking at the fair, German Agriculture Minister Ilse Aigner said she was "very concerned" about what she saw as "acrimonious competition" as the discounters vied for market share.

"If pricing sets the rule in our country, then at some point the quality will suffer, and in the end, so will the consumer," she said. "Society must know the value of high-quality and safe foods."

Earlier in the week, food industry association BVE sharply criticized the "ruinous competition" in food production, and called for it to stop immediately.

According to BVE, discount markets account for 44 percent of the food sold in Germany.

The Green Week comprises 1600 exhibitors from 56 countries. Two-thirds of those exhibitors come from Germany, and the issue of food prices is a serious one for the country's food industry as a whole. With penny-pinching customers flocking to the discounters, help for food producers may have to come from outside the German borders, if at all.

Spending less, getting the same amount

Germans only spend 11 percent of their income on food, according to industry statistics, and producers are feeling the pinch. Revenue in 2009 fell four percent from the previous year, food industry spokesman Juergen Abraham told Deutsche Welle, despite the fact that unit sales remained constant.

"Consumers haven't eaten less, but the food industry has had to adjust to a reduction in revenue. It's dramatic for the 5,800 companies and 530,000 workers who have suffered from the situation."

It isn't only the food industry, agricultural producers are also groaning about the problem. Prices of milk, butter and meat are as low as ever in Germany, meaning they have to depend on exports. Currently, about a fifth of all meat and dairy products as well as 12 percent of sweets and packaged baked goods made in Germany are sold outside of the country.

Yet export numbers have been falling as well, dropping 5 percent from 2008 to 2009.

"The financial and economic crisis has hit exports hard, since in many importing countries the currencies have crashed," said Gerd Sonnleitner, president of the German Farmers' Union (DBV). "For us in the agricultural sector it is very important to get the world economy going again."

World food trade due for a rehaul?

Agricultural products "made in Germany" have a good reputation both inside and outside of the country, Sonnleitner said, but they aren't in the top price segment.

Some 80 percent of German agricultural exports go to EU countries, while in industrial food production that number reaches 84 percent. Outside the EU, Russia, Switzerland and the US are the key importers of German foodstuffs. Now Germans are hoping to improve their market share in emerging and developing countries.

But what may save the German food industry may also be the death of the food industries in developing markets. The sale of cheap agricultural products from industrial countries is harmful for them, according to Olivier de Schutter, the UN Special Rapporteur for the Right to Food. The trade in food throughout the world, he said, needs fundamental change.

"We all know that the current trading system doesn't work to the advantage [of people in developing countries]," he told Deutsche Welle, explaining that it hurts producers in poor countries who don't have access to highly developed markets. It also distorts competition in their own countries, because industrialized nations can offer highly subsidized, and cheap, foods.

The issue of milk powder

For example, imported milk powder in a developing market can be less expensive than local milk. In Bangladesh, farmers recently protested, demanding a stop to milk powder imports.

But the farming association head Sonnleitner rejects those arguments, saying it is mostly problems such as civil war, corruption, and a lack of civil rights that distort the marketplaces there.

"I always find it unfair that we are accused of destroying these countries with agricultural exports. Small sums of money and small amounts of foods are blown up out of proportion," he said.

And as long as the German market remains difficult for food producers, there will be a strong incentive to look abroad for solutions.

Author: Sabine Kinkartz/AFP (jen)
Editor: Michael Lawton