The German Market for Sweet Peppers

The German Market for Sweet Peppers

Target Market Confirmation Study

Conducted by CAMIB for USAID/CNFA’s

Agribusiness Development Project

July 2006

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CONTENTS

Key Observations and Recommendations

Background

Production Trends

Import Trends

Market Access

Tariffs

Information on Companies Interviewed

Major Clients and Markets

Product Requirements and Preferences

Varieties and trends

Size

Packaging

Logo/brand

Quality and certification requirements

Food safety, quality and environment-consciousness

Moldovan Produce: Buyer’s Perceptions and Recommendations

List of Reference Materials

Annexes

Imports of fresh and chilled sweet peppers by Germany

Average Weekly Sales Prices of Fresh Sweet Peppers at Wholesales Markets in Germany

TABLES AND FIGURES

Table 1. Availability of sweet peppers branded “Classic Dutch” in % per month

Table 2. Availability of sweet peppers in by on season and country of supply, 2004

Table 3. Turnover (sales) of sweet peppers by retailer, 2004

Figure 1. Consumer prices for Class I Sweet Peppers in Germany by Month in 2003 and 2004

Table 4. Wholesale market prices for sweet peppers imported from Spain in main distribution markets in Germany

Key Observations and Recommendations

Germany is the largest import market for fresh fruit and fresh vegetables in the European Union.The German market is, however, considered mature and is increasingly competitive and saturated. With a population of 82 million people and average per-capita income approaching $40,000 per year, Germany has one of the highest standards of living in the world. However, despite relatively high wages, consumers are cost conscious, and the German retailmarket is one of the most heavily discounted markets in Europe, with discount stores taking an ever largershare of consumerspending.

Tomatoes, sweet peppers (capsicum), lettuce and onions are the major fresh vegetable products imported by Germany. Whilst there is a strong demand for specialty products, particularly in sweet peppers, such products should be attractively, originally packaged and labeled to be successful in German market.

Moldovan exporters of sweet pepper wishing to penetrate the German food market should be aware of the many requirements of their trading partners. Exporters need to comply with EU legislation and have to be aware of the many market requirements. These include audited Codes of Practice coveringfood safety, product traceability, maximum pesticide residue levels (MRLs), Good Agricultural Practice (GAP), HACCP, environmental protection, labour health and safety,and packaginglabeling and recycling.

Convenience and health concerns are becoming increasingly important considerations for the German consumer and there is a growing demand for products that address these concerns. Germany has one of the most diverse organic markets in the world. German consumers view organic food as a way of ensuring food safety, while protecting the environment. This,along with low labor costs, rich soils and climatic conditions for sweet pepper growing create good opportunities for Moldovan companies to supply organic fresh sweet peppers to Germany, provided the required quality standards and supply periods can be achieved.

Background

Production Trends

In 2005 worldwide aggregated pepper production (sweet and hot peppers) was25 million MT; China (12.5 million MT) was the largest producer of peppers, accounting for 50% of world production.Mexico (1.85 millionMT) and Turkey (1.7 million MT) each accounted for another 7.4%and 7.0% respectivelyof world production, followed by the United States (978K MT, 3.9% of world production) and Spain (953K MT, 3.8% of world production). Other important producing countries include:Indonesia (871K MT), Nigeria (720K MT) and Egypt (460 K MT).

Among European countries, in 2005 in addition to Spain, the biggest producers of sweet and hot peppers included Italy 377K MT, Netherlands 315K MT, and Hungary 115K MT.

(Source: FAOSTAT). Germany has a reportedly small amount of sweet pepper production;[1] the main local production of whichis in greenhouses and on organic farms.

Import Trends

Sweet peppers (capsicum) are the second most importantvegetableimportedinto Germany (after tomatoes). In fact, Germany is the leading EU importer of Capsicums, accounting for 30% (283K MT) of all EU imports in 2005, followed by the United Kingdom (14%).The overwhelming majority of imports are fromthe Netherlands and Spain (85% from the two countries combined). Another striking aspect is that of 283,121MT of sweet peppers imported into Germany in 2005, only 4946MT (1.7%) were imported from non-EU countries. See Annex 1, Table 1.

It is useful to note that Germany is one of the largest organic markets in the world and that 2005 was an extremely successful year for the whole organic industry in Germany, with sales of all products rising by 15 % to 4 billion EUR. (Source: Organic Europe. Germany Country Report.

Market Access

The EU common market for agricultural products sets quality standards for many products, which Moldovan producers and products have to meet in order to access EU Member State markets. Compliance with food quality and safety requirements is a prerequisite for access to the German market.All imported food products must comply with EU and German food law regulations regarding quality, pesticide residues,, labeling and packaging, as well as phytosanitary requirements.

Tariffs

EU policy allows for free movement of goods and capital within the EU member states, and sets common tariffs on imported goods coming from non-EU countries - the Common Customs Tariff (CCT), an ad valorem tariff, is payable only once, at the point of entry into the EU. Rates differ for different products, different exporting countries (subject to different trade agreements) and often at different times of the year.Under the General System of Preference (GSP) Moldovan sweet peppers qualify for 0% tariff. In order to claim GSP-status, a GSP certificate of origin, signed and stamped by the authorities in the exporting country, must accompany the products. The certificate is valid for 10 months.It is the responsibility of the exporter to ensure that these requirements are met.

Information on Companies Interviewed[2]

German sweet pepper market importers and buyers of fresh sweet peppers in the target markets were interviewed by telephone. The aim of the survey was to identify current market preferences, demand for sweet peppers,trends in varieties on the German market, as well as sources of supply, major competitors, minimum and maximum prices paid to suppliers. In addition, recommendations from German importers addressed to Moldovan sweet peppers exporters,were sought, concerning requirements for quality, safety, packaging and labeling.

Representatives of 28 companies from German commercial centers were contacted, of which only eight wholesalers and importers responded to the majority of questions: four from Munich, two from Berlin and two from Hamburg. Turnover of fresh sweet peppers in these companies was generally very small, ranging from 20 to 200 tons/year.Major supermarkets contacted expressed no interest in Moldova or willingness to answer general questions on imports.

Sources of Supply and Import Seasonality

According to the interview results, suppliers of fresh sweet peppers can be divided intotwo major categories: the first category belongsto EU countries (Spain, the Netherlands, Greece, Belgium, Italy, France and Hungary); and the second category involves third countries: Turkey, Israel, Bulgaria etc. Other third countries, especially those which can cover the deficiency of sweet peppers in the German market in winter and spring seasons (such asMorocco and the Dominican Republic) are also included in this second category.

Most respondents indicated that their fresh sweet peppers supplies originated from EU country members: - the Netherlands, Spain, Italy, Hungary, Belgium and Greece, and some suppliers receive sweet pepper grown in Germany.

Sweet peppers are available on German marketsall year-round, but the largest volumes are imported in summer and autumn months. Table 1below shows availability of sweet pepper exclusively selected and packed under the label "Classic Dutch” fromthe Netherlands:

Table 1. Availability of sweet peppers branded “Classic Dutch” in % per month

Sweet peppers imported from the Netherlands are usually available in spring, summer and autumn, but not in the winter months. Sweet peppers from Spain and Turkey are imported and marketed year-round (with lower availability of Spanish peppers in the peak Northern Europe season (June, July and August).Sweet peppers domestically produced in Germany are available on the market only in July, August and September. Capsicums imported from Hungary are also available mainly in the summer and autumn.

As demonstrated in Table 2 below, there is availability of EU produced sweet peppers ofEU, and Turkish origin, all year around.

Table 2. Availability of sweet peppers in by on season and country of supply, 2004

Source: ZMP, 2005

Major Clients and Markets

Sweet peppers are a popular vegetable in Germany and consumption of bell peppers is expected to continue expanding due to theirnutritional value.Sweet peppers imported from EU countries and non-EU/overseas countries are generally sold by food retailers. The main food retailers in Germany (turnover in 2004, EUR1000) are shown in Table 3 below:

Table 3. 2004 Turnover (sales) of sweet peppers by retailer

Source: ZMP, 2005.

German importers of vegetables are mainly large wholesalers and supermarket chains.They resell products to smaller German supermarkets, food manufacturers and greengrocers.

The major potential clients for Moldovan sweet pepper suppliers can be wholesalers of fresh vegetables such as: Reimer Hauschildt GmbH Großmarkt, Brodersen & Schacht GmbH,and Marktverkauf, Großmarkthalle in Hamburg; G.S.M Import-Export GmbHGroßmarkthalle and Alfred Franz Großmarkthalle in Berlin;and Kugler GmbH & Co.KGin Munchen.

Moldovan suppliers should be aware of quantity requirements, frequency of supplies, products requirement and preferences of importer.

Product Requirements and Preferences

Varieties and trends

There are estimated to be about 2000 hundred different varieties of Capsicum annum developed throughout the world. Sweet bell peppers of all varieties and colors are abundantly available year-round in supermarkets in Germany. Orange and red colored varieties of bell peppers are generally high priced. Most specialty colored peppers are imported from Holland and are becoming more available in supermarkets. They tend to be more expensive. Most respondents (five) have mentioned that they import sweet peppers of all colors (red, yellow, orange and green), two imported mainly red and one green-yellowish.

Size

Sizes of sweet peppers include Small, Medium, Large, and Extra Large/Jumbo. The required minimum standards are set out in the EU MARKETING STANDARD FOR SWEET PEPPERS.(See Quality/certification requirements below.) Capsicum should be a uniform and have thick walls. According to this standard distinction of sweet pepper shape is made for four commercial types:

• elongated sweet peppers (pointed);
• square sweet peppers (blunt);
• square sweet peppers tapering (peg top);
• flat sweet peppers (tomato peppers).

Size is determined by the shoulder diameter (width) of the sweet peppers. The width of sweet peppers may not be less than:

• 20 mm for elongated sweet peppers (pointed),
• 40 mm for square sweet peppers (blunt) and square sweet peppers tapering (peg-top), and
• 55mm for flat sweet peppers (tomato peppers)

All respondents interviewed reported that German consumers prefer large and extra large sweet pepper. In any case sizes of sweet peppers should be in compliance with standard requirements.

Dutch companies supply the German market with mainly Premium Quality (Superclass) and ClassI sweet peppers of different sizes: 70 - 90 mm - Preferred for Retail Prepacks;80 -100 mm - Ideal Size for Direct Consumer Sales; 90 -110 mm - Jumbo: Extra Large.

Packaging

Packaging design should take the following into account: suitability for cooling, storage and transport; standard packaging sizes; recyclable materials or two-way systems (returnable/re-usable plastic produce crates); and attractive and sales-promoting design. Sweet peppers must be packed in such a way as to protect the produce properly. Two major types of packaging were specifically mentioned:

• 5 kg standard cartons with one or two layers sweet bell peppers (30 x 40 x 19 cm) and
• 5 kg boxes lined with perforated plastic.

Cartons of bell peppers are placed on pallets, then shipped, primarily by truck to different markets and wholesale receivers. Generally, the fresh sweet peppers are shipped on clean, wooden pallets of international size,100 x 120 cm (80 cartons). Corner supports and plastic horizontal strapping are added to the loaded pallets to make the consignment more stable during transport. Packaging is an essential factor in determining the product's quality.The transportation volume must be as efficient as possible and a high level of uniformity of packaging is desirable in order to optimise transportation.

Logo/brand

Labeling requirements are subject to legal standards established by the European Union.EU labeling regulations state that labeling, presentation and advertising of food stuffs must not mislead the consumers regarding the foodstuff's characteristics and it must not attribute properties for the prevention, treatment or cure of a human illness without scientific proof. Labels must include the name under which the product is sold, contact informationfor the exporter, traceability information for the crop, box weight/product count, quality/class etc.For more information about regulations concerning labelling as well as packaging, refer to CBI’s AccessGuide at

Quality and certification requirements

Fresh sweet bell peppers imported to Germany include mainly Superclass and Class I. The marketing standards for quality and labeling of fruit and vegetables are included in basic regulation EC 2200/96 (of 28 October 1996), in the framework of the Common Agricultural Policy (CAP). Products that do not comply with these standards are barred from the market. Sweet peppers are the subject of EC Marketing Standards as determined in regulation EC No 1455/1999 (Website:

German importers increasingly give more attention to imports Certification. Therefore Moldovan exporters of sweet pepper should contact the German importer directly as to learn about their requirements.

Food safety, quality and environment-consciousness

Many of the legal requirements for primary food production (food safety, environmental protection, and labour health and safety) can be met by following Good Agricultural Practice Protocols, such as that produced by the Euro-Retailer Produce Working Group for Good Agricultural Practice, EUREPGAP®. Working according to EurepGap standards is highly desirable for export business. For more information on the EurepGap Protocol, refer to

Imports of fresh sweet peppers to Germany must comply with the regulations for Maximum Residue Levels (MRLs) of a large number of pesticides. The type and maximum levels for pesticide residues in certain products of plant origin, including fruit and vegetables, are detailed in Council Directive 90/642/EEC.

EU standards for organic food production and labelingare detailed in Council Regulation (EEC) 2092/91. This regulation and subsequent amendments establish the main principles for organic production at farm level and the rules that must be followed for the processing, sale and import of organic products from third (non-EU) countries. Under EU legislation, in order to be legally labeled organic, produce has to come from a farm, which has been inspected and certified by a recognized and registered organic accreditation body/organization.

HACCP (ISO 22000) and ISO 9000 are strongly increasing in importance in Europe. The Hazard Analysis Critical Control Point (HACCP) system is applicable to companies that process, treat, pack, transport, distribute or trade foodstuffs. German importers will require Moldovan exporters to work with HACCP. Certification may be a vital factor in the selection process applied by trade partners in Germany.

Tracking & traceability is a major issue for exporters when supplying German importers serving supermarket chains. Current food safety requirements have made the tracing of goods increasingly important in case of product recalls along the supply chain, but also in case of product liability issues. 'Tracking' refers to the location of products – where they have been distributed and 'tracing' refers to where products originate.

Prices

Prices of fresh sweet peppers are dependent on several factors, such as the total supply of the products, the quality of the product, size and variety, and its origin. In winter and spring prices are higherthan in summer and autumn when the market is saturated. Sweet peppers imported from EUcountries are generally more expensive than sweet peppers imported from third countries.

Wholesale prices for sweet peppers tend to differ as there is competition between the exporters, importing companies and market players. At the retail level, prices differ mostly according to the sweet pepper variety and origin. For example in Hamburg minimum and maximum prices ranged from €3.91/kg (Dutch green large) in October 2002 to €16.17/kg (Dutch yellow) in August 2003.

Whilst average retail and wholesale prices for fresh sweet peppers fluctuate depending on sweet pepper variety and season of import, exporters should be aware that many large importers and especially large supermarkets, prefer to have a seasonal fixed price for products, rather than paying according to market conditions.

Average monthly consumer price information for fresh sweet peppers in Germany in 2003 and 2004 are shown in Figure 1 below:

Figure 1: Consumer prices for Class I Sweet Peppers in Germany by Month in 2003 and 2004

Source: ZMP - Marktbilanz GEMUSE 2005