FTI-Andersch study: Consumer goods manufacturers planning to cut capacities and personnel

• 78 percent will relocate sites as part of the restructuring or have already started to do so
• One in four (26 percent) expects a wave of insolvencies
• Almost two-thirds (62 percent) see an opportunity for acquisitions in the consolidation

When it comes to job cuts, only the non-food retail sector is outperforming the consumer goods manufacturers (86 percent of retailers in the restructuring process are planning or have already implemented job cuts). In the mechanical engineering (73 percent) and automotive (41 percent) industries, significantly fewer companies are planning to do so, partly due to the shortage of skilled workers. When it comes to reducing production and service capacities, the mechanical and plant engineering (23 percent implementation, 25 percent planning) and automotive (22 percent implementation) industries are also lagging well behind the consumer goods industry.

“The consumer goods industry in Germany is undergoing massive structural change,” says Dorothée Fritsch, Managing Director and consumer goods expert at FTI-Andersch. ”The current location conditions mean that manufacturers continue to utilize their often significantly more cost-effective plants in Eastern Europe, but are increasingly reducing production capacities and thus also personnel in Germany. They are doing this more consistently than other manufacturing companies. What we have also been observing for months is that cutbacks are increasingly turning into closures.”

Relocations are in the planning stage – or are already being implemented

For example, 38 percent of the consumer goods manufacturers surveyed who are currently undergoing restructuring have indicated that they have already started relocating or relocating production, while 40 percent are planning to do so. By comparison, 42 percent of the mechanical engineering firms undergoing restructuring are also planning relocations, but only eight percent of them have already implemented this. In addition, 30 percent of the consumer goods manufacturers are planning to sell or close down areas that are outside their core business (eight percent are already implementing this).

“Once industry has migrated out of Germany, it will not come back for the foreseeable future,” says Dorothée Fritsch. “However, major disruptions in supply chains and the availability of goods are not expected, as the new production capacities have already been established for the most part and Eastern Europe is in the immediate vicinity.”

The three biggest challenges that consumer goods manufacturers say they face in Germany as a business location: a shortage of labor and skilled workers (84 percent), bureaucracy (82 percent) and energy prices (74 percent). In general, 72 percent are dissatisfied with the competitiveness of Germany as a business location. Around half (46 percent) have also observed an increase in insolvencies, with a quarter (26 percent) even speaking of a “wave of insolvencies”. “The same main factors have been mentioned in our surveys for over three years, even though energy prices have become increasingly relevant,” says Dorothée Fritsch.

Consolidation wave is seen as an opportunity by the majority

However, a large proportion (62 percent) of the companies surveyed also see opportunities for possible takeovers in the looming consolidation. 40 percent of manufacturers are already considering taking over potentially insolvent competitors and suppliers. By contrast, eight percent of consumer goods manufacturers see their own existence threatened if the feared insolvencies occur.

“We expect that only a small percentage of companies will disappear from the market. Those who actively prepare for the inevitable now can benefit from the situation – for example, by acquiring attractive targets,“ says Dorothée Fritsch.

Industry focuses on increasing profitability while maintaining stable business models

“The automotive industry is currently the focus of public discussion,” says Dorothée Fritsch. “On the one hand, this is due to its high relevance as an export-oriented basic industry in Germany. On the other hand, it is also due to the fact that it is not only an economic crisis, but also a structural one.”

Dorothée Fritsch continues: “In the consumer goods industry, the economy is currently having a strong impact, triggered by the rise in inflation and the consequences of the structural crises in other industries. The business models are largely intact, due in no small part to the local markets in the consumer goods sector, and the degree of consolidation is already very high. In this context, we are seeing that many consumer goods manufacturers are currently critically examining their existing product and brand portfolios in order to further increase their profitability in their core business.”

About the Verian study:

As part of the 'German Economic Pulse' study, the market research company Verian (formerly: Kantar Public) was commissioned by the management consultancy FTI-Andersch to conduct a telephone survey of 200 companies in Germany from the automotive, mechanical and plant engineering, consumer goods and retail sectors on current topics related to economic outlook, restructuring, insolvencies, refinancing and other structural challenges.

The companies' sales amount to at least 50 million euros. Around a quarter of the companies surveyed generate more than 500 million euros a year.