Founded in the Hanseatic city of Bremen in 1804, the Eggers & Franke Group is one of Germany’s leading distributors, with six companies supplying all levels of the trade, from discounters to leading restaurants. Meininger’s spoke with Markus Hotze, managing director, for his insights on the German market.
From the outside, Germany looks like a very complex and confusing market. The first point of confusion is that national retailers may actually be regional e.g. although they’re a big chain, the individual stores may be owned by franchisees who make their own buying decisions. Could you describe the situation a little bit?
We have, just as in other markets, different types of retailers. For instance, with the hypermarkets, you can select between national or more regional. A national hypermarket would be Real or Kaufland, which means the chain is operating on a national level; the regional hypermarkets are chains that are more focused on specific regions.
I think regional could make sense when you have limited resources, whether it is budget or investment, or also if there is uncertainty regarding the potential of a product. Sometimes, when it comes to highly competitive segments, it could make sense to focus on a specific region with a dedicated distributor. For example, in Bavaria the intake of Italian products are stronger. For a French wine, start in Baden Württemberg.
We as an importer look at where the potential could be for a specific wine. You have shops like Edeka where it’s possibly easier to get a listing compared to a hypermarket like Real or Kaufland. At Edeka, you need a ticket from the purchase manager and if you get this permission, you can work shop by shop. So you go to a retailer and present potential new products.
Top customers for us are Edeka and Rewe and if a producer is starting from scratch, we would definitely not get a central listing from them, meaning the wines are mandatory for a whole region. First you have to qualify, which means building distribution shop by shop and then the buyer is more open.
Many buyers say to try out or test the product on the shop level, then come back and discuss a central warehouse listing, which would mean that you are qualified and mandatory for all the shop. Kaufland and Real don’t have this mechanism, because they carry national assortments. You have to make the product interesting, or offer a certain amount of promotional support, and then they decide.
Are listing fees typical if a producer is looking to enter a big chain?
You normally discuss and offer a kind of listing package, which is also linked to sales promotion. The room on the shelf is not that big and to get one of the slots you have to offer something. The product is key and they look into the potential of the product, but they also normally expect or require an offer.
If the wine has major points or awards, does that make it more attractive?
Awards, points and medals definitely help. For me it’s easier to market or sell this product. However, we have see an invasion of competitions and ratings and you have to distinguish between them. Mundus Vini has a very good acceptance so we would definitely communicate that, along with the highly appreciated international awards. However, sometimes scores of less than 90 points are not strong arguments any more, or silver medals.
Can you build a brand in the on-trade?
Yes. Sometimes it’s interesting to start in horeca and when you get to a certain level to enter the off trade. That could be an intelligent move.
What sort of trends are you seeing in Germany?
I don’t really think you see big trends, because Germany is a very mature market. However, we are benefiting from the trends towards more sweet wines; we’re seeing sweeter, fruitier wines, but also wines with crispness. But the Germans always drink sweeter wines, so it’s a bit difficult to say this is a trend. In the semi-sweeter category, we also see a strong demand for, let’s say, classic European origins – Bordeaux, Rioja, Tuscany are quite successful. The overseas [New World] category is stagnating. New Zealand is doing well, but Sauvignon Blanc is a growing category.
What sort of packaging should producers think about for the German market?
Packaging is a very crucial issue, for sure. We have cases where we grow only by changing the packaging. Sometimes it’s looking a bit old or 1990s and then when you get a little twist it can really boost the business. In general, packaging is crucial in Germany. Consumers don’t get any information at the shelf, so they get lost. Their orientation is colour and then origin. We have learned that the German consumer is very conservative and likes traditional labels. We receive offers for wines that do well in the UK but they don’t work here like they do in the UK. There are some exceptions – Yellow Tail is doing well – but in our experience, modern labels rarely work well.
What’s the best way to approach a distributor like Eggers & Franke?
It really depends. We get a lot of samples and we’re tasting a lot. We have different tasting panels within our company and if we taste something interesting, we offer it to the sales organisations for off-trade or on-trade. Sometimes people contact me and then we look into it the wine and make a decision on whether this wine or product is interesting. Then we would make an appointment.
Sometimes we are actively researching. We sometimes contact companies abroad when we have a gap. We also screen potential partnerships.
We are a classic importer, but German wines are becoming more and more relevant and we look for opportunities to work together with German wineries.
We definitely require samples, but also the USP of the wines and the winery, with information about the history, targets and vision. It would be good to have an indication regarding the pricing. This would give us a good basis for an internal discussion.
What would you like producers to understand about Germany?
From the outside, the German market looks extremely attractive. There’s low unemployment, the business is developing well, salaries are developing well, the people are open to imported wines, so the perspective from the outside is positive. But the suppliers have to understand that this market is very challenging and competitive and sometimes people forget. It’s a low price market and dominated by the discount business. It’s also stagnating market. Wine consumption is flat. Consumers are conservative and relatively old. It’s an extremely fragmented market. It’s also a retail driven market, which is different from other markets. Horeca is 15% to 20% maximum and half of the retail is made up of discounters.
When people are coming to us, the first question we have is “What vision do you have? What do you want to achieve?” Everybody who wants to enter this market has to be clear. Then they have to understand that the German market requires a very individual treatment or strategy and that concepts that worked in the UK don’t necessarily work in Germany. Consumers here are different. You need to work with an importer on a specific strategy to develop this market.
Interview by Felicity Carter