Since January 2002, more than 300 million European consumers have had something in common - the same currency. But the advent of the Euro does not mean that differences in trade structure or in prices have disappeared.

Europe and the Euro: a boost for Mediterranean countries
Right now, Europe is creating a new alphabet. It runs - A, B, D, E, F, Fin, GR, I, IRL, L, NL, P: all abbreviations that officially designate Euro-zone countries. But, within the unified Euroland there are many regional differences; for example, between the northern and southern members. Three of the most highly populated and economically important countries - France, Italy and Spain - border on the Mediterranean. Then, there is Greece and - if you wish - Portugal. Though it lies on the Atlantic, Portugal is a country that has strong ties with Spain, its Mediterranean neighbor.

Euroland, consisting of the 12 starter candidates, is strongly influenced by its Mediterranean members. Thanks to enormous support from EU funds, these countries are no longer economically weak - or at least as weak as they once were. So the question now for the international food industry is: What future business opportunities does the Euro offer in this region?

The countries that border the Mediterranean have highly differing trade structures and there is considerable variation in the degree of trade concentration. For example, in France the five biggest commercial enterprises account for more than three quarters of retail food sales. The quota in Portugal is more than 60% and in Spain, over 50%. In Italy and Greece, on the other hand, small businesses and sales outlets still predominate. Major differences can be seen, too, in the product ranges available, above all as far as the role of brands and private labels is concerned.

Information Resources provides information for The Netherlands, France, Italy, Spain, Greece and Germany as well as the UK. This information is based on current and derived data from InfoScan and PromotionScan.

Germany: the Euro shakes up prices
The Euro is here and has been generally accepted by German consumers. However, this does not mean that they are happy about everything the currency change has brought along with it. Scarcely anybody comes back from a shopping trip without complaining that a number of products have become considerably more expensive. At the same time, the trade has been putting out the opposite message and, ahead of everyone else, the discounters demonstrated in the first Euro days that they controlled pricing. However, others held back, hinting that they had not let go of the chance of gearing up their marketing to meet the costs of the Euro launch.

How are prices really developing at this time in the German retail food trade? To answer this question something more is required than a quick look at the figures or reliance on simple gut reaction. Real information about price movement in Germany since the beginning of 2001 is available in the Category Performances Indicator from Information Resources GfK GmbH. The figures provide a comparison of the first 26 calendar weeks of 2000 and 2001 for the retail food trade and drug stores (including Schlecker) with outlets
of at least 200 m2.

Information Resources GfK GmbH has 226 product groups in the analysis, which takes a wide variety of retail food and drugstore ranges into account. In order to provide an improved overview, the large number of categories was summarized into 18 product segments. The segment for hot drinks or instant drinks, coffee and tea includes, for example, 8 categories. The snacks and confectionery segment comprises 32 categories.

The results from the analysis show that the average price in the first six months of 2001 rose by 4.4% across all of the product groups involved. The most significant price rises turned out to be in the dairy product/ milk segment, those product groups that came under pressure due to the BSE difficulties and supply of raw materials. The most evident price reductions were seen for hot drinks (instant drinks, coffee and tea).

There are of course a variety of reasons for the price increases or decreases. Apart from real price increases or decreases, other factors are reflected in the weighted average prices. For example:

• Product differentiation due to packaging changes
• Changes in consistency in the case of concentrates etc.
• Quality changes in premium or basic segments and in many other levels
• The balance between regular and promotion business

The reduction in extra-aggressive promotion pricing in the first six months of 2001 together with a reduced level of promotions - as well as the tactical switch to every day low price programs - provide clear evidence on price increases and decreases during this period.

Higher prices do not always result in more money taken at the checkout. However, the Key Performance Indicator from Information Resources GfK GmbH shows that in two thirds of the categories under investigation, added-value strategies were employed:

• 22% of the categories obtained higher consumer prices of 5% and more
• 25% achieved price increases between 2% and 4.9%
• Additional 20% managed a price rise of up to 1.9%

For a detailed analysis of the causes and consequences of this pricing policy, Information Resources GfK GmbH offers an EAN-based analysis. Further analyses and future consumer reaction can be derived from the data.

The Euro: it's all about consumers
The Euro occupied center stage in the days after its launch. But the reality is that consumers play the key role. Both manufacturers and trade will have to adjust their strategies and tactics to consumers' behavior and expectations.

Information Resources GfK GmbH provides up-to-date and detailed data for strategic planning. It supports industry and trade in evaluating price, positioning and communication.

Contact:
Information Resources GfK GmbH
Nordwestring 101 ° D - 90319 Nuremberg ° Germany

Karl-Heinz Roiger ° Email: karl-heinz.roiger@infores.de
Telephone: ++49 (0)911 395 2396 ° Fax: ++49 (0)911 395 4065

Wolfgang Kappler ° Email: wolfgang.kappler@infores.de
Telephone: ++49 (0)911 395 3370 ° Fax: ++49 (0)0911 395 4011