Doing business in Germany How to succeed Sylvia Tunmore – Head of Trade Germany 1 Size matters  World’s 4th largest economy  UK’s 2nd largest trading partner and our largest European export market  Exports up 21% since 2009  UK exports to Germany are treble those to China 2 Why export to Germany? • Certainty and predictability • Highly developed infrastructure - easy access from UK • Good base to build exports elsewhere in Europe • Global leader in international trade fairs 3 Trade fairs • Two-thirds of world’s leading trade fairs • 150 trade shows annually - 170,000 exhibitors and 10 million visitors • Great way to do global business • Require preparation 4 Challenges • Highly developed market • Quality and price • Fierce competition • Technical regulations and standards 5 Business Culture • Direct and precise • German or English? • Quality, reliability and reputation • Long-term business relationships 6 Marketing yourself  Quality and innovation – what is your USP  Focus on niche segments  Local adaptation (language, product name, standards, business culture, pricing)  German literature and webpages 7 Making the right impression • Don’t use first names • Don’t waffle – be prepared • Don’t arrive without an appointment • Don’t be late • Don’t expect too much on your first visit Don’ts “Qui • Don’t delay – reply quickly 8 Going the extra mile  Flexibility  Study the market – do you meet German standards?  Quote cip prices – and in euros  Product guarantees and after sales services 9 UK Trade & Investment in Germany – how can we help? • Market information • Identify potential German business partners • Receptions, seminars and product launches, press service • trade fair visits and/or meetings with prospective clients or partners 10 Our teams Sector Trade Adviser Clothing, Footwear and Fashion / Consumer Goods inc Food and Drink James Scott Biotechnology / Pharmaceuticals / Chemicals / Financial & Business Services Ayça Kiliçli Healthcare and Medical Julia Kay Creative and Media/Tourism/Consumer Goods / Education Miriam Ducke Agriculture / Horticulture and Fisheries /Energy & Environment Kerstin Rath Construction / Transport / Railways / Security Gisela Heine Automotive & Motor Sports Astrid Ritter-Heinrich Engineering / Aerospace / Airports Katja Schlaug ICT / Electronics Heike Bieber 11 Conclusion  Huge market – but requires preparation  Speak the language – metaphorically  Long term relationships  Use UKTI 12 13 Overview of Sectors and Opportunities • Life Sciences • • • • • • • • • • • • Healthcare Chemicals Infrastructure & Rail Automotive Energy & Renewables Mechanical Engineering ICT Consumer Goods Creative Industry Fashion Industry Food & Drink Financial, Professional & Business Services Life Sciences, Biotech & Pharma Overview  The Biotech industry is highly innovative  Germany is home to 343 universities and over 330 research institutes  Germany is the largest Biopharma industry in Europe (UK is number 2)  Over 500 dedicated Biotech companies  25 different Biotech clusters, 63 universities and 26 technical colleges.  Biotech/Pharma industry employs 27,000 people.  Red biotech is the largest with revenues of €29 billion, of which 14% is spent on R&D. Life Sciences Opportunities  The biotech industry consists of 4 important segments: 1. Medical 2. Industrial 3. Agricultural 4. Services and Suppliers  There is room for growth in: 1. Medical Technology 2. Nanotechnology 3. White biotech 4. Agro Chemicals – All the above offer good conditions for an active UK engagement. Healthcare - Sector Overview Largest healthcare market in Europe, third worldwide after the US and Japan Biggest industry sector of today’s German economy. The current spending of EUR 294 billion (=11.3 percent of the GDP) is expected to rise by an annual average of 2.8%. Actors on the market are •134 Statutory Health Insurances, 43 Private Health Insurances, 2,041 hospitals, prevention and rehab institutions, 88,620 doctors’ practices, 21,238 pharmacies, 23,660 care providers (in-patient: 11,634 and out-patient 12,026), 35 university hospitals, 11,000 medical device companies, 975 pharmaceutical and 500 biotech companies in Germany (2011). Healthcare Sector: Opportunities / Obstacles  wide range from wound care products to hi-tech medical device  private market for healthcare products  trend towards an everageing population  dual healthcare system  registration for reimbursement  highly regulated market  fierce domestic and international competition Chemicals Overview  Germany is the 4th largest chemicals market in the world.  Exporting 75% of its total sales, Germany is the global exporting champion of the past five years.  German market turnover amounts to 12% of the world market share.  BASF, in Ludwigshafen, is the world’s largest chemical company.  The UK is the 6th largest importer of German chemical products.  German companies provide nearly every fourth chemical industry job in the EU.  The main production sectors: fine chemicals 32.5%, polymers 20%, pharmaceuticals 35% and petrochemicals 12%.  Germany imports 8 billion Euros worth of chemicals from the UK. Chemicals Opportunities  The German chemical market is highly developed and very competitive.  Companies that offer unique, specialised, high technology products to niche markets.  Large companies such as BASF or Bayer no longer invest in the production of specialised products in small amounts.  They work with experienced niche-product developers = outsourcing highly specialised products. Infrastructure/Rail Sector Overview  - Germany – Europe‘s largest railway market: Heavy rail lines 41,000 km Light rail/tram lines 2,700 km Underground lines 360 km Traction units 15,400 Passenger coaches 12,000 Freight wagons 103,000  -  Germany’s road transport infrastructure: Motorways 12,800 km Federal roads 39,900 km Regional roads86,600 km District roads 91,700 km Other infrastructure: - Inland water ways 7,700 km - Oil pipelines 2,400 km - Electricity grid 1,780,000 km Infrastructure/Rail Sector Overview  Investments in the German Rail Sector (Infrastructure) 2012-2015 : > EUR 5 bilion per year for - maintenance - modernisation and - construction of new lines  Investments in the German Road Infrastructure 2013 : Federal budget  • Deutsche Bahn (Germany’s main railway operator ) : Annual purchasing volume of approx. EUR 28 bn (in 2012) - 10% for rolling stock - 7% for vehicle replacement parts - 50% for construction - 33% for electronics, signaling, IT and misc. Approx. EUR 10 billion from Construction Sector  The German construction industry is a strong sector of the German economy  Its GDP share is 9.9 %, which equals EUR 260 bn  About 73,000 companies, mostly SMEs  With a total of 2.46 m workforce, one of the largest German employers  Construction industry in Germany is booming  Increasingly focussing on energy efficiency and sustainability  Scope for UK suppliers to deliver innovative building materials and become involved in planning and design processes. • Automotive Sector Overview - Germany  Largest market in Europe  More than 43 million cars on the road  World Production of German OEMs - 14.1 million cars  Domestic Production of German OEMs - 5.4 million cars  Export markets cars in Europe: 1. UK 2. France 3. Italy 4. Turkey 5. Spain  8 major OEMs are headquartered in Germany  All major suppliers are located in Germany  Total employees 760,450 of which 438,550 with OEMs Automotive Sector Opportunities  The car market is dominated by - the premium segment with BMW, Mercedes, Audi, Porsche - VW as Europe‘s largest volume manufacturer  About 1,300 companies are direct suppliers to OEMs  Engineering Service Providers (ESP) - large organisations as system suppliers  Fragmented market of purchasing groups and distributors  Opportunities in - small series, niche products, motorsport, commercial vehicles - innovative products - development of alternative technologies – hybrids, e-vehicles, fuel cells Energy & Renewables Sector Overview  Energy remains one of the most important investment sectors  Germany has third highest energy prices in Europe and a feed-in tariff for renewables: • consumers pay for energy surcharge but • energy-intensive industry is exempt •  Over 235,000 people employed in the conventional energy sector /370,000 in the renewable energy sector.  Industry focus remains on sustainable development, energy efficiency, energy storage and clean tech(7% growth).  Major German sector players show increasing interest in foreign markets. Energy Sector Opportunities  Throughout the sector – especially innovative and niche products and services.  Due to increased cost pressure readiness to source internationally.  Due to complexity of the sector challenges there is interest in joint product development, joint project work and R&D co-operation  Nuclear exit (2011:immediate shutdown of 8 reactors and phase out of remaining 9 by 2022) offers opportunities in decommissioning as well as maintenance services.  Multiple opportunities due to ambitious energy roadmap (grid expansion, 3 major electricity highways planned)  Opportunities throughout renewable sector(offshore including wave and tidal, energy efficiency, energy storage, fuel cells, water power, geothermal and other green technologies) Mechanical Engineering Sector Overview Industry with the most companies (over 6,100). Over 970,000 people employed. Turnover of over € 200 billion Export-dominated (over 75% of the production are exported) Germany renowned for the big players such as Siemens, ThyssenKrupp, Bosch, Linde, Voith,GEA. But mechanical engineering sector is dominated by SME’s: 87% of the companies employ less than 250 people, only 2% more than 1,000. Strong clusters in Baden-Württemberg, Bavaria, NRW, Hesse “Hidden champions“ all over Germany. Very competitive market Opportunities for high-end and niche products Aerospace in Germany - Overview Germany has the third largest aerospace industry in Europe One of Germany’s most innovative and best performing industries In 2012 the number of employees exceeded 100,000 Aerospace Clusters  Hamburg/Bremen: Airbus, OHB, Premium Aerotec  Munich/Augsburg/Lake Constance: Airbus Defence & Space, MTU, Liebherr, MT Aerospace, Diehl, Premium Aerotec  Berlin/Brandenburg: RollsRoyce Deutschland ICT Overview  Germany is the fifth largest ICT market in the world (4,5% of global market share).  German ICT market volume is expected to amount to € 153 bn. in 2014.  Over 75,000 companies are active in the German IT sector, employing more than 927,000 individuals.  Germany is Europe’s second biggest B2B and B2C e-commerce market, with a turnover of € 33bn in 2013 (est. +17% in 2014).  Almost all major ICT manufacturers operate R&D laboratories in Germany. Market Segmentation Software Consultancy & Outsourcing System Infrastructure Information Technology Consumer Electronics Smartphones Telecommunications IT-Hardware Data- and Voiceservices 2014 Growth +5,3% +3,2% +3% +2,9% +1,2% +8 % +0,4% +0,2% -1,3% Revenu e € 19 bn € 36,5 bn € 6 bn € 76,3 bn € 11 bn € 10 bn € 66 bn € 21 bn € 50 bn ICT Opportunities  BITKOM survey among 1000 German IT experts Trends that will dominate 2014 Industry 4.0 (Computerisation of traditional manufacturing) 22% Enterprise Content Management 22% Bring your own device Enterprise 2.0 Social Media IT-Outsourcing Big Data Mobile Computing Cloud Computing IT-Security 23% 25% 28% 29% 44% 47% 49% 57% ICT Opportunities Close-Up IT-Security • Cyber security market in Germany proves to be a booming sector with the growing investments volume • Interesting sub-sectors: digital rights management and biometry • Of the 327 companies operating in this industry, 82% are SMEs with an average turnover of € 936m •The large average turnover is driven by large players Cloud Computing •40% of German corporations use cloud-services •SaaS and IaaS markets are enjoying growing popularity but PaaS is still slow to catch on •Large corporations and medium-sized companies have been quick to adopt but SMEs are still hesitant • According to a BITKOM survey, 77% of German corporations cited their main concern being the unauthorised access to sensitive data Mobile Computing •Market revenue of mobile data services is forecasted to grow to € 9.6bn (+5.5% from 2013) •41% of Germans use the internet on their mobile phones •Particularly strong growth in the mobile office sector •Corporations are struggling to make their online content available in app or mobile internet format Consumer Market  Germany is Europe’s largest consumer market.  Competitive and well supplied with domestic and imported products.  German consumers are demanding and quality conscious.  The German population is affluent and has spending power  Introducing a new product to the German market can take time and effort. Creative Sector Overview  247,000 businesses (94.4% of these are microenterprises) accounting for 7.6% of the German economy.  1.63 million people employed by the sector.  According to latest figures, the gross value added amounted to EUR 63 billion = 2.4% of German GDP.  The turnover of the German creative industries amounted to EUR 143 billion.  Expanding sector with: • 1% growth in the number of businesses • 1.3% turnover growth  The largest subsectors of the creative industries in Germany are: games, advertising, books & publishing and design. • fastest-growing subsectors: games, design, performing arts and music • highest-grossing subsectors: press, advertising, games Creative Sector Opportunities  Germany = number 3 worldwide for music.  ‘Crowdfunding‘ has become a viable financing model (e.g. for music, film or games).  E-Commerce has increased significantly. Over the last five years, legal downloads increased six fold: opportunities for UK artists looking for exposure in Germany.  19% of all microenterprises and freelancers in the creative industries use the www as their only sales channel.  Free to play browser games and social media games have become very popular in Germany. The amount of games sold for smartphones lately increased by 25%.  British architecture and design enjoy a high reputation in Germany. British architects have managed to win large projects (e.g. Phaeno in Wolfsburg, Neues Museum in Berlin).  Latest figures state an enterprise birth rate of 6.1% in the German creative industries (frontrunner: games industry with 9.9%). Fashion Sector Overview  Approximate Share of Retail Sales:  56% specialist stores and clothing retailers  19.1% non clothing retailers  13.8% home shopping/TV shopping  11.1% department store  Annual sales for textile and clothing around the €59 billion mark:  Womenswear: €28 billion  Menswear: €15 billion  Home/Household Textiles: €7 billion Fashion Sector Opportunities • Good prospects for “quirky” British companies in:  Young Fashion (including sportswear, footwear and accessories)  Streetwear/Clubwear • As well as:  Exclusive Menswear, top quality and classically tailored (especially in areas such as Hamburg, Munich);  Designer Fashion (including footwear and accessories) and  Children‘s wear – top end of the market/ ”mini me” /true and established Food & Drink –Size of the Market  Food and Drink is the one of the largest industry sectors in Germany  Around 6000 (SME) companies employing approximately 550,000 people.  Largest industry segment (production value) meat/sausage products.  Sales of organic products are the highest in Europe.  • • Discounters (such as Aldi & Lidl) have a very large share of the market (approximately 41%) putting pressure on mainstream supermarkets to keep their prices competitive.  Potential exporters need to be aware of regulations such as: - Labelling – lists of contents need to be in German; - Recycling – Green Dot - Compulsory deposits on PET bottles. Food & Drink – Opportunities  Sectors that offer opportunities for UK companies: - Chilled and convenience foods - Private label production - Organic foods  Routes to Market: - Via wholesalers/importers/distributors and/or commission agents - Cash & Carry - And, direct to some supermarket chains Financial and Professional Services Overview  Business services industry has been growing rapidly.  Germany is one of the biggest contact centre (CC), shared services centre (SSC) and business process outsourcing (BPO) industry growth markets in Europe.  Moderate wages, low labour fluctuations, meets high quality and data security requirements.  2 main options – Front Office or Back Office.  BPO is expected to grow while German global players like BASF and Bayer turn to use more SSC.  International BPO are also active in the German market e.g. ADP, HP, and TCS. Financial and Professional Services Opportunities demand for in-house contact centres. • Increase in • Large growth among external service providers. • Demand for quality and high value services. • Societal changes have increased the demand and changed existing models. • Germany’s market for business to business services rivals the largest in • • Europe. UK companies bring with them the long term experience.