Germany's Meat Industry at a Crossroads: Challenges and Strategies for Survival for Manufacturers

Germany's meat industry is undergoing significant changes and facing numerous challenges, such as declining meat consumption, rising operational costs, and increasing environmental pressures.

Manufacturers must adapt quickly to these shifts. This article explores the key challenges facing the German meat industry and outlines effective strategies for manufacturers to navigate these difficulties and thrive.

Key Challenges in Germany's Meat Industry

Declining Meat Production and Lower Consumer Demand

Over the past decade, Germany has experienced a notable decline in meat consumption. In 2023 the average meat consumption has dropped to 51.6 kg — this level is the lowest recorded since meat consumption calculations began in 1989. Health concerns, environmental awareness, and ethical considerations are driving this shift. As more consumers opt for vegan and vegetarian diets, traditional meat producers must adapt to changing market dynamics.

In addition to falling consumption, the industry is under immense pressure to consolidate. Meat production dropped by 4% in 2023 compared to the previous year, marking the seventh consecutive decline. Despite this, the production of meat and sausage products only fell by 2% to 6.8 million tonnes. Interestingly, while domestic consumption decreased slightly by 0.7%, imports rose by 4.6%, indicating that German producers are losing market share to foreign competitors.

Rising Operational Costs and Environmental Pressures

Simultaneously, the meat industry faces growing pressure to adopt more environmentally friendly and animal-friendly practices. These demands, driven by consumer expectations and regulatory requirements, significantly raise operational costs. Implementing sustainable practices involves expenses for waste disposal, animal care, and other eco-friendly measures.

Adding to the industry's financial burdens are the VAT increase and the animal welfare levy. Rising costs for energy, feed, and labour further compress profit margins in an already low-margin industry. These challenges require substantial capital expenditure for improving waste disposal systems, enhancing animal care practices, and adopting renewable energy sources. Rising energy prices, climate change-driven increases in animal feed costs, and higher labour costs make economic sustainability a formidable challenge for meat producers.

The German Meat Industry Association (VDF) and the Federal Association of German Sausage and Ham Producers (BVWS) view these trends as alarming. They stress the urgent need to strengthen domestic production at all stages—farming, slaughtering, and processing—to combat the loss of international competitiveness caused by high energy and raw material costs, rising wages, labour shortages, and export restrictions.

Effective Survival Strategies for Meat Manufacturers

Identifying Profit Margins and Areas for Improvement

To counteract declining margins, manufacturers must meticulously analyse their operations to identify areas where costs can be cut without compromising quality. This might include adopting energy-efficient technologies to lower utility costs and improving waste management practices to reduce disposal expenses, but most importantly, internal processes and supply chains must be streamlined and optimized to take out any non-value adding steps and avoid lost time and wasted resources.

Streamlining Manufacturing Processes with Lean Principles

Implementing lean manufacturing principles is essential for increasing efficiency and reducing waste. Lean strategies focus on streamlining operations by eliminating non-value-added activities, improving process flows, and enhancing overall productivity. Techniques such as value stream mapping and continuous improvement (Kaizen) can be used to identify bottlenecks and optimise workflows. By embracing lean principles, manufacturers can lower operational costs, improve product quality, and enhance customer satisfaction. This approach involves regular employee training on lean methodologies, fostering a culture of continuous improvement, and utilising data analytics to monitor performance and drive decision-making.

Optimising the End-to-End Supply Chain

Optimising the supply chain is critical for reducing costs and improving efficiency. This involves enhancing coordination with suppliers, improving logistics, and leveraging technology to manage inventory effectively. By adopting integrated supply chain management systems, manufacturers can gain better visibility into their operations, forecast demand more accurately, and reduce lead times. Building stronger relationships with suppliers can lead to better negotiation terms and more reliable sourcing of raw materials. Embracing technologies such as blockchain can further enhance transparency and traceability, ensuring compliance with regulatory requirements and meeting consumer demands for product safety and quality.

Addressing Labour Issues with Effective Leadership Solutions

Labour challenges, including rising wages and workforce shortages, require strategic interventions to maintain productivity and morale. Investing in employee engagement and training programmes is essential for retaining skilled workers and enhancing their capabilities. Leadership solutions should focus on creating a supportive work environment, offering opportunities for career development, and recognising employee contributions. Implementing flexible work arrangements and promoting work-life balance can improve job satisfaction and reduce turnover rates. By fostering a culture of inclusivity and open communication, companies can build a more committed and motivated workforce. Additionally, adopting automation and other labour-saving technologies can help offset rising labour costs while maintaining high standards of quality and efficiency.

Case Study: TBM Consulting Group Experience

Cured Meats Manufacturer Case Study

A cured meats manufacturer faced issues highly relevant to the broader German meat industry, such as low productivity, high machine downtime, and insufficient capacity to meet market demand. Frequent equipment stoppages for mandatory washing and sanitation exacerbated inefficiencies and drove up operational costs.

Solution Implemented by TBM Consulting Group:

• Optimised Washing Procedures: TBM established new washing procedures designed to reduce changeover times and minimise downtime.
• Lean Process Improvement: TBM introduced lean strategies to enhance operational efficiency, including reducing inventory levels and redistributing cooling chambers and shelves for better storage efficiency.

Results:

• 45% Increase in Productivity: The manufacturer saw a 45% boost in productivity on critical production lines.
• 40% Reduction in Equipment Downtime: Downtime was reduced by 40%, allowing for more continuous production.
• Reduction in Material Waste: Material waste decreased by approximately 1%, contributing to cost savings and environmental benefits.

By applying these targeted improvements, TBM Consulting Group helped the cured meats manufacturer overcome operational challenges, illustrating how strategic interventions can address broader industry pressures. This case study underscores the potential for significant gains in productivity, efficiency, and sustainability through focused process improvements and lean methodologies.

The German meat industry is at a critical juncture, facing significant challenges but also opportunities for transformation. By focusing on improving margins, streamlining operations, optimising supply chains, and addressing labour issues, manufacturers can navigate these challenges effectively. Embracing sustainable practices and leveraging technological advancements will be key to ensuring long-term success. With the right strategies in place, the meat industry can overcome current obstacles and secure a resilient and sustainable future.