LSIRD NAPLIO CONFERENCE PAPERS

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I. General Importance of Direct Marketing in Germany

Bernd Wirthgen & Heike Kuhnert,
University of Kassel - Witzenhausen

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Summary

In Germany the direct marketing and the on-farm processing showed a clear increase since the mid of the eighties. Regional focus points are South- and West Germany as well as the some regions in East Germany. The mostly offered products are eggs, potatoes and slaughter poultry from conventional farms and potatoes and vegetables from organic working farms.

In Germany the direct marketing is less popular in disadvantaged areas than in others, although especially this marketing way is frequently the recommended concept.

Regarded from the economical point of view, only for a little group of farmers, the direct marketing and the on-farm processing can be considered as a competitive alternative to the conventional agriculture with multistage marketing.

1. Focus points of direct marketing and on-farm processing

In Germany, direct marketing is far more popular than in the UK, but still has not yet reached the same importance than in France. There are not any exact data available about the number of direct marketing farms. Assuming 25,000 direct marketing farms (without the numerous farms with farm gate sale of milk, seasonable poultry or honey), in other words more than double than the data base of our department has registered, this would be 4.5% of all farms (550,000 in 1995) in Germany. However, this comparison does not show the actual economic importance of direct marketing, as the part of part-time farming is much less within direct marketing farms than in the general number of farms.

The annual turnover in the direct marketing including the direct sales to large-scale consumers (catering) and retailers accounts a self estimated amount of DM 4 thousand millions and more. This would be roughly 7% of the total agricultural sales. Considering this, the direct marketing is more than a niche existence. The direct marketing in Germany is more spread over South- and West Germany than over North Germany. In East Germany as well, in some regions (around Berlin, in Saxony and Thuringia) there is a relative strong development toward direct marketing favoured by the fact that here numerous big farms - mainly co-operatives) entered especially the direct marketing of meat (WIRTHGEN/SCHEUMANN, 1995).

The high increase in direct marketing can be explained by supply and demand:

• The change in the agricultural policy since middle of the eighties (milk quota, extension, decrease of agricultural prices) has led more and more to the search for additional income by farmers. The growth rates in the direct marketing increased. Furthermore the high increase of organic farms led to an increase of direct marketers in nearly the same extend as approximately 80% of the organic farms are direct marketing farms.
• Direct marketed products have a positive image while consumers show distrust towards numerous industrial produced products. The consumer cannot comprehend the industrial way of production. Again and again new food scandals increase the distrust and make the consumer sensitive towards the purchase direct from the farm. In particular organic direct marketing farms benefit from this (WIRTHGEN, 1996, p. 6).

A survey of 200 direct marketing farms presents that in 1994/95 nearly 28% of the participated farms with all the land are situated in disadvantaged areas. (KUHNERT, WIRTHGEN, 1997). In comparison to that, in West Germany there were 57% of the full-time farms situated in less favoured areas, while most of them are forage-growing farms with a high part of grassland and density of dairy cows (BMELF 1996, p. 24).

The reasons for the occurrence less than the average in disadvantaged areas are that certain activities of the direct marketing depend on locality. Economic advantaged places with buying power over the average favour the direct marketing. Places in disadvantaged areas - compared to other regions - require much higher sales effort by the establishment of direct marketing.

2. Product assortment

'One-product-enterprises' are an exception for direct marketing farms in Germany. Referring to the above quoted survey (n = 200) more than 80% of the German direct marketing farms offer additionally on-farm processed food (KUHNERT/WIRTHGEN, 1997).

The most usual on-farm produced products

- of conventionally working farms are:

· Eggs and

· Potatoes in the same strengths, followed by

· Slaughter poultry and

· Fruits

- and of organic farms are:

· Potatoes,

· Fresh vegetables,

· Cereals (corn) and

· Fresh beef.

The strongest products contributing to the turnover of direct marketing products

- of conventional working farms are:

· Eggs (13% of the participated farms),

· Potatoes (9.6% of the farms)

· Fresh beef and

· Asparagus.

- and of the organic working farms are:

· Fresh vegetables (22% of the participated farms),

· Fresh beef (20% of the farms),

· Cheese, as well as

· Potatoes and wine.

The strong differing product assortments of the conventional and organic working farms present the various consumption habits of the consumer groups as well as the sales problem within the multistage marketing of the organic products.

Listing the direct marketing products of the on-farm processing, registered in the direct marketing data base (see footnote 1), the following four product groups should definitely be named:

1. Pork and beef,

2. Poultry,

3. Cereal products (bread, cakes, pastries, and pasta) and

4. Milk products (from cows, goats and sheep).

The first named product group (pork and beef) offered by approximately 60% of the direct marketers (including bought-in products) and therefore roughly three times more than the other product groups.

In disadvantaged areas, especially products from the product groups 1 and 4 play an important role:

- beef as well as

- dairy products from cows, goats and sheep.

Aiming the stronger support of disadvantaged areas and its agriculture, new innovative distribution and marketing ways need to be developed.

Currently there are the following obstacles:

• Distribution ways close to the consumers such as "case-subscription", mobile sale and market supply are more cost effective for places in less favoured regions far away from the market than for places close to the market.

The sale directly from the farm, offered by nearly all direct marketers, contributes usually too small annual turnovers in disadvantaged areas; an exception are high touristic less favoured regions.

• Beef offered from suckler cow keeping showed a relative high increase in the last years. The direct marketing to the end consumer experiences limits for this product in several regions.
• The German market for dairy products from on-farm processing is still developing. France, Belgium and Great Britain show much higher consumption of dairy on-farm processed products compared to Germany (WIRTHGEN et al. 1996, p. 91).

3. Economic relevance of direct marketing

The direct marketing and the on-farm processing offer a possibility of additional income for numerous farms, and create jobs for the region. The "average" direct marketing farm employs approximately one worker in the direct marketing. This person realises with direct marketing on average approximately annual turnover about DM 150,000. The 'upper quarter' of the questioned farms (n = 47) in Germany reaches per worker a turnover of approximately DM 200,000 with direct marketing, while the 'lower quarter' (n = 44) only records less than DM 60,000 (WIRTHGEN, KUHNERT, 1997).

Generally in Germany the part of the value added from the turnovers in direct marketing is on average a little higher than from the remaining agriculture. This shows that the direct marketing can be a competitive alternative to the conventional marketing way, in particular if the direct marketer works like the farms of the 'upper quarter'.

References

BMELF 1996: Agrarbericht der Bundesregierung 1996.

KUHNERT, Heike und Bernd WIRTHGEN, 1997: Die Bedeutung der Direktvermarktung als Einkommensalternative für landwirtschaftliche Betriebe in der Bundesrepublik Deutschland - Eine Situationsanalyse. Forschungsbericht BMELF (unveröffentlichtes Manuskript).

KUHNERT, Heike und Bernd WIRTHGEN, 1996: Hofeigene Verarbeitung von Fleisch auf konventionell und ökologisch wirtschaftenden Betrieben. Berichte über Landwirtschaft, 74 (4).

WIRTHGEN, Bernd, 1996: Direktvermarktung: Nutzen oder schaden Lebensmittelskandale. DGS (Die Geflügelwirtschaft und Schweineproduktion) 51/52, p. 6.

WIRTHGEN, Bernd und Uwe SCHEUMANN, 1996: Ausgewählte Aspekte der Fleisch- und Wurstdirektvermarktung in ostdeutschen landwirtschaftlichen Großbetrieben. In: Direktvermarktung und hofeigene Verarbeitung im In- und Ausland. Hrsg. B. Wirthgen, H. Kuhnert, R. Bokermann. Arbeitsberichte zur angewandten Agrarökonomie, Nr. 21, GhK-Witzenhausen, p. 41-48.

WIRTHGEN, Bernd, Bertil SYLVANDER und Irene MELET, 1996: Verbraucherakzeptanz von Produkten aus hofeigener Lebensmittelverarbeitung. Ein Vier-Länder-Vergleich anhand nationaler Verbrauchererhebungen 1994. In: Direktvermarktung und hofeigene Verarbeitung im In- und Ausland. Hrsg. B. Wirthgen, H. Kuhnert, R. Bokermann. Arbeitsberichte zur angewandten Agrarökonomie, Nr. 21, GhK-Witzenhausen, p. 87-97.

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