Economic report on the food market: How manufacturers can grow in 2025
Price-conscious consumers, inflation and little growth – after sales losses last year, the outlook for the German food market in 2025 is subdued. The cost of energy and raw materials is also weighing on manufacturers. In order to increase their sales, manufacturers need to identify potential with pinpoint accuracy and quickly occupy growth areas.
The German economy is still looking for a way out of the crisis. Is the food industry an exception? After all, people are always eating. In fact, the Federal Association of the German Food Industry (BVE) reported slight sales growth of 2.1% year-on-year in its latest economic report for September 2024. However, only foreign countries contributed to this – sales within Germany declined. At least the production index increased slightly.
From dairy products and meat to fruit and vegetables, convenience food, confectionery and snacks: the heterogeneity of the food industry is already evident in the price trends for raw materials. While producer prices for animal products rose, they fell for plant products. The development of the various energy sources, which make up one of the largest expenditure items for food production, is similarly diverse. In terms of the business climate index, the BVE sees a clearly negative development overall.
Manufacturers rely on efficient food and packaging machines in order to produce efficiently. The machinery and plant engineering sector is also struggling to increase business in the tense market environment for food production: In the latest report from the food machinery and packaging machinery sector, the German Engineering Federation (VDMA) reports an order intake that is 12 percent below the previous year’s figure. This is due in particular to falling domestic demand. According to the report, orders from Germany in the last reporting period in September were 34% below the previous year’s high figure. On the other handorders from euro partner countries rose by 38% year-on-year, while orders from non-euro countries fell by 17%. In the first three quarters of 2024, manufacturers of food and packaging machinery recorded a total of 8% more orders than in the same period of the previous year, according to the VDMA.
Hopes for growth in the year that has just begun
External observers are somewhat more optimistic about the situation than the associations. Statista’s analysts also state that the German food market is currently only experiencing low growth, which is influenced by changing consumer preferences, increasing health awareness and the growing popularity of online food services. However, market observers are forecasting an increase in turnover of just over EUR 231 billion for the year 2025, which has just begun. By 2029, the forecast assumes a market volume of EUR 267 billion – this would correspond to annual sales growth of 3.62%. The largest market segment this year is expected to be dairy products and eggs with a market volume of around EUR 41 billion.
The share of online retail remained small in 2024, but it is growing continuously: from 3.3% in 2023 to 4.0% last year. Further growth to 4.7% is expected for 2025. Also noteworthy: out-of-home sales, which had slumped to EUR 38.3 billion in 2020 due to the restrictions caused by the coronavirus pandemic, exceeded the 2019 figure (EUR 54.6 billion) for the first time again in 2024 at EUR 58.4 billion. Further growth is also expected here in 2025.
The share of organic food has recently fallen as a result of general price increases caused by factors such as the coronavirus pandemic and Russia's war of aggression against Ukraine. It fell for two consecutive years in 2021 and 2022. Growth was achieved again in 2023 and 2024, with the share most recently standing at 8.3%. Statisticians also expect only slight growth in the coming years.
How food manufacturers can grow now
However, the experts also see opportunities in customer preferences such as the desire for organic products, sustainability and regional production: for example, by manufacturers increasing transparency along their supply chain and strengthening regional cooperation. Certifications for organic and Fairtrade products could also create additional trust – and sales. Manufacturers can meet the growing demand for plant-based products and those with the organic label by expanding their product portfolio, increasingly developing alternatives to animal products and focusing on healthy recipes.
The growing online grocery trade, which is driven by convenience and time savings, offers further potential. Grocery retailers in particular can score points here by investing more in digital platforms and delivery partnerships in order to remain competitive. Traditional brick-and-mortar stores, on the other hand, face the challenge of adapting their business models to digital demand. For food , there is at least the long-term opportunity to market their products directly online or to cooperate with delivery services and thus tap into new target groups.
With traditional retail structures under pressure, manufacturers generally need to be more flexible and adapt their business models to new market conditions in order to remain competitive. For example, more and more consumers appreciate time-saving convenience products that can also be advertised as healthy and sustainable. Manufacturers should therefore invest in the development of sustainable, healthy convenience products that meet these requirements.
The sometimes enormous price increases of recent years have particularly affected discount products. This is because manufacturers had greater leeway in pricing premium goods. Producers can also exploit this potential by developing specialties and innovative product ideas. High disposable incomes and consumers’ willingness to pay more for high-quality food are opening up opportunities in the premium segment. The situation is similar for aspects such as fair working conditions, reducing the carbon footprint and conserving resources. Manufacturers should not leave it at general communication here, but implement these values credibly in order to boost their sales.
Artificial intelligence promises efficiency and innovation
At the end of 2024, the German Food Association highlighted the particular potential for increasing efficiency and innovation in the food industry. Developments in generative AI could help to develop new recipes or suggest optimized production processes, the association cites Christian Janiesch, Professor of Enterprise Computing at TU Dortmund University. “Generative AI makes it possible to discover ingredient combinations and production methods that better meet the wishes of consumers and may be more cost-effective at the same time,” says Janiesch in an interview with the association. “In general, manufacturers could use digital technologies to make processes more efficient, make supply chains more transparent and respond more quickly to consumer demands,” the researcher continues. However, in order to make effective use of the opportunities, companies need to develop the relevant technical, analytical and organizational-strategic skills.
People will always eat – but that is why food production is by no means a sure-fire success. Manufacturers operate in an environment characterized by fluctuating energy and raw material prices, changing consumer sentiment and fierce competition. The forecasts for the year that has just begun are better for the food market than for other sectors. Producers who want to exploit the potential identified by market researchers and associations must be aware of their strengths, eliminate weaknesses and remain agile in order to occupy growth areas – then they can meet the needs of end consumers and grow faster than the market.
