Gerhard’s blog: the Germans are coming

24 September, 2014

Gerhard receives a visit from a German bakers’ delegation and hears about the challenges they face to keep their businesses vibrant. 

The Germans are coming was the headline news at Konditor & Cook last week. It was actually a delegation of 15 owners of pastry shops (Konditoreien), from large cities and small towns, from Munich in Bavaria to Bremen in the north west and smaller places in between.

As I found out from the accompanying consultant, this group meets twice a year to share knowledge and information and to gain insight into the latest developments and trends. The Federation of German Pastry Chefs, or if you fancy a bit of tongue twister, the ‘Bundesinnungsverband des Konditorenhandwerks’, connects two further circles of similarly sized businesses.

The members consider them a really helpful platform as they face today’s business challenges. One meeting is usually abroad – Barcelona was on last year’s itinerary, for example – and the meeting is designed to chew over their finances.

Rents in Germany are considered high and should not exceed 12% to make a business work. What I noticed was that all of these owners actually owned their premises and that most of them were at least second-generation owners. Owning the premises and thus being in control of property overheads seemed fundamental to their continued existence.

They battle with higher wages than the UK, as employers’ contribution to health and pensions is much higher, staff costs are pushed up further since everyone is guaranteed a five-week holiday entitlement in addition to a minimum of eight bank holidays. Full sick pay is guaranteed for six weeks and it appears that most employees sign up to the unwritten rule of claiming at least two weeks of their entitlement.

Many owners keep their wage costs low by offering three-year apprenticeship schemes. Trainees get a reduced hourly rate that goes up each year and is considered as a source of cheap labour. On the other hand, they get a good and well-structured qualification. Only the very best are usually offered full-time employment in the same workplace following their exams.

Raw materials are relatively cheap in Germany and all of them seemed to work to a gross margin of 75%. Achieving an EBITDA of 10% is considered the icing on the cake by the Germans.

By coincidence I found myself in the ‘Heimat’ last weekend and was able to visit one of the delegates’ businesses. They had hardly digested their fish ’n’ chips as I turned up at Café Decker in Staufen in the Black Forest (http://www.cafe-decker.de/). Run by a husband and wife team, Café Decker enjoys an excellent reputation and is frequented by the town’s locals (7500) and tourists. In particular, Swiss people come over the nearby border to benefit from the advantageous exchange rate as well as the enormous and delicious slices of Black Forest gateau served up!

What struck me was the wide range offered and, within each of them, an enormous choice. The chocolate department has a proud repertoire of more than 70 lines, but there were also bread, rolls, Viennoiserie, cakes, torten, petit fours and ice cream, plus a 200 seater café to run too.

No wonder they are amazed when they come to the UK and visit specialist producers such as chocolatiers William Curley, Paul Young or Rococo Chocolates or specialist cake-makers like Peggy Porschen or Konditor & Cook.

That someone like Peggy, who originally trained as a flight attendant and thus ‘not from the industry’, managed to build up such a successful brand and business was much admired and seen as a challenger brand.

I think some were worried that, one day, the headline might well read “The Brits are coming!”

www.konditorandcook.com





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