Germany’s food and drink manufacture: overview
- Germany’s grocery market is one of Europe’s most concentrated, with Aldi, Lidl, Edeka and Rewe controlling around 80%
- Rising energy costs and record minimum wage increases are putting food manufacturers under pressure
- Food sector consolidation is accelerating, with smaller processors disappearing and larger players gaining market share
- Retailers are expanding further into food manufacturing, increasing their influence across the value chain
- Despite weak domestic sales, exports are growing and helping support Germany’s €232bn food and drink industry
It’s hard to argue that Lidl’s launch of its “biggest ever price reduction” in its German heartland last year went to plan.
Not only did rivals Edeka, Rewe and Aldi quickly respond and, in some cases, even boost sales as a result, but a German court eventually ruled Lidl’s original claim to be misleading.
For most of the German food industry, however, this provided little schadenfreude. Lidl may have got a bloody nose but this was in reality just a tiff between some of the most powerful players in the sector.
Lidl and its arch rival discounter Aldi together hold over 45% of the market, according to the EHI Retail Institute, while adding in Edeka and Rewe brings the total to around 80%. This makes it one of the most concentrated supermarket sectors in Europe, ahead of the UK, France and Poland, according to one EU study.
For shoppers, at least, this is no bad thing. Germany has some of the lowest food prices in Europe with its citizens spending only about 14% of their income on food and beverages. According to the International Trade Administration, this is the direct result of “high competition between discounters and the grocery retail sale segment”.
But as ever, for those companies further down the supply chain, low prices can be hard to reconcile with sustainable profitability. Nowhere is this more apparent than Germany.
Retailers dominating German market
“Retailers are the ones dominating the market,” says Arthur Oesterle, a partner at Food Strategy Associates focused on central and western Europe. “There are only a handful of food producers that are able to stand up against the big retailers.”
Alongside global giants like Nestlé and Unilever, there are a few German companies that fall into this bracket. Haribo, for example, or Dr Oetker, which today makes more from its sales of frozen pizza than its launchpad ranges of home baking products.
But others are less familiar to those outside Germany. Südzucker, for instance, the largest sugar producer in the world with 30 sugar factories and three refineries across Europe. Or DMK, Germany’s largest dairy cooperative owned by around 7,000 milk producers and making everything from cheese and ice cream to baby food, dietetics and other health products.
Over the last 20 years, the balance of power has shifted even further in Germany from small businesses to large corporations, according to one study published early this year.
Researchers at Freiburg University found that the number of food processing businesses in Germany fell by 44% to around 25,000 between 2002 and 2022, while in the most affected sectors like milling, bakery and meat processing, it was as high as 60%
It means that with many craft businesses shutting down completely, large industrial companies are gaining an increasingly concentrating market share with 83% of the sector’s turnover (€239bn) accounted for by just 3% of all businesses in 2022, the study found. In many sectors, the market share of the four largest companies now exceeds over 50%.
One of the primary drivers is supermarkets expanding into food processing, according to lead researcher Arnim Wiek. This means “control along the entire value chain – from access to raw materials to shelf placement – is becoming increasingly concentrated within the retail sector, which also shapes prices and product standards”.
Edeka, for example, is increasingly acquiring bakery chains and, from early 2025, began making more moves into dairy, he said. Schwarz Produktion, a subsidiary of Lidl owner Schwarz Group, is now the third-largest food processing company in Germany, while Rewe Group also operates its own sizeable network of meat processing plants.
Key food and drink manufacture in Germany
Bakery, in particular, is a hot topic across Germany right now with a strong push away from local isolated champions towards bigger, nationwide bakery platforms, explains Oesterle.
Perhaps the most notable case came at the start of this year when Argos, a European investment company, bought the well-known bakery chain Kamps, building on its acquisition of Bäckerei Schmidt in 2024 to create a network of more than 400 bakeries across the country.
But the pressure on Germany’s manufacturing sector isn’t just coming from powerful supermarkets. Germany has some of the highest energy prices in the world due to its previous reliance on Russian gas, the transition to renewable energy and rising oil prices from the war in Iran, and this is forcing many businesses to either scale back future plans or, in some cases, shut down altogether.
About a third of German companies are now delaying investment due to expensive energy, while almost one-fifth are considering either cutting back capacity in Germany or shifting production abroad, a survey by the Association of German Chambers of Industry and Commerce found in July.
While the government did introduce some tax cuts and relief schemes, these were only targeted at high-energy industries and therefore most food-producing companies aside from the likes of bakeries and sugar extraction didn’t benefit.
The cost pressure on German food companies is only compounded by the largest minimum wage increase in the country’s history this year, which will see it rise over two stages and ultimately go from €12.82 to €14.60 per hour by January 2027. This poses a major challenge to companies to try and find the extra money and is pushing many to reassess their future plans.
This all matters because the strength of the German food industry is not just a concern for the food businesses themselves but the rest of the German economy and even global trade. Germany’s food processing industry is the fourth-largest industrial sector in the country, producing about €232bn of processed food and drink in 2024, according to the USDA.
But it’s suffering from stagnant growth, which saw the industry’s total domestic sales drop by 1.3% to €150bn in 2025 – the second consecutive year of decline, according to the German Federation of Food Industries.
This will be a concern to food and agriculture businesses around the globe who rely on Germany as the world’s third-largest importer of consumer-oriented agricultural products – behind the US and China - and therefore the most important European market for foreign suppliers. While about 80% of these imports come from other EU countries, Brazil and the US are not too far behind.
It’s largely wealthy population also mean that for markets like organic, Germany is the world’s second-largest market and the largest in Europe. According to the Agricultural Market Information Company, organic sales have now rebounded after a period of inflation-fuelled decline to hit over €18bn in 2025.
Domestic market falling short
Fortunately for the German businesses themselves, where the domestic market is falling short, exports are managing to pick up some of the slack. In contrast to falling sales at home, foreign revenue grew 2.2% in 2025 and now represents 37.5% of the industry’s sales, up from 35.1% the previous year.
Germany is especially strong abroad in branded processed foods such as beer, meats and confectionery with much going to EU countries like the Netherlands, France and Poland, often driven by integrated supply chains and export hubs such as Rotterdam.
Beyond Europe, the US is an important buyer of German beer, confectionery and speciality goods, while China imports dairy products and infant formula.
The German food industry’s other big export is waste.
Germany was the world’s largest exporter of plastic waste in 2025, sending more than 810k tonnes overseas abroad, according to an analysis of trade data by Watershed Investigations and the Basel Action Network, much of it going to Turkey, with Malaysia and Indonesia also regular destinations.
Unlike larger countries like the US, China and India, Germany handles less waste domestically through landfill, incineration and recycling, but can count exports towards specified recycling targets set by the EU.
It is yet another headwind facing an industry that for decades has delivered some of the cheapest food in Europe. But the bill is becoming harder to ignore. Germany’s food manufacturers are being squeezed between ever more powerful retailers on one side and rising labour and energy costs on the other, while consolidation is steadily reshaping the industry.
If the pressures continue unchecked, the country’s reputation for innovative production and low prices may come at the expense of the diverse manufacturing base that helped build it.
