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Comeback of cheap groceries - the big losers of supermarket inflation

The lawsuit is not old.

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Comeback of cheap groceries - the big losers of supermarket inflation

The lawsuit is not old. In Germany, it was said for years, groceries were far too cheap. The thesis of many critics was that quality must cost more. But with rapid inflation, household budgets are shifting. According to the Federal Statistical Office, food prices rose by 21 percent in November compared to the previous year.

As a result, inflation in this area – unlike the overall situation – increased again. Food has become significantly more expensive, especially compared to services and housing costs.

Ironically, the business models that assumed in the past boom years that Germans would pay more for better food or more service are not winning new customers. Instead, those channels are growing in which quality and price go together – or at least that is what is promised.

Aldi Süd, for example, reports that it sold a quarter of its fresh meat from husbandry classes three and four for the first time in November - i.e. from stables with outdoor access or from organic farming. With fresh milk it was 40 percent. The entire range should be converted by 2030. Aldi thanks its customers for asking about animal welfare meat.

However, the high demand at the discounter has a downside: More expensive organic stores have been reporting significant sales declines for months. New concepts such as zero-package stores, which charge higher prices for no packaging, are also struggling to survive.

Butchers reported having to sell organic meat at conventional prices in order to find buyers. Because the customers often do not do without organic quality, but look for it in the cheaper discount.

The new frugality in food also affects a start-up founded in Berlin, which has aroused high expectations among venture capitalists in recent years and has thus collected around 600 million euros in venture capital. Infarm, launched in 2013, grows herbs and lettuce in its own indoor farms and also sets up mini greenhouses in supermarkets.

Controlled hydroponic rearing is said to improve taste, claims Infarm. In any case, the automatic cultivators are effective in advertising in the supermarkets - after all, they demonstrate exactly that competence in freshness that expensive supermarkets are so keen to convey to their customers. Infarm sets up the boxes in the shops and sells the herbs to the supermarket operators.

But apparently fewer and fewer customers are willing to pay a surcharge for the vegetables grown in the shop - and at the same time energy costs are rising. This hits a weak point of the concept: while indoor farms save water, land and pesticides, they need a lot of energy for air conditioning and lighting.

Infarm had already trimmed its growth plans in the current year and cut jobs. But it wasn't until this week that the real savings hammer fell. 500 people, more than half of the remaining employees, would have to leave the company, which is now based in Amsterdam, the management said in an e-mail.

"We must embark on an even more rigorous path to profitability to achieve financial self-sufficiency and long-term business stability over the next 18 months," the letter reads. Major global growth plans have thus been cancelled.

Infarm wants to focus on just four core locations for its own larger rearing facilities - where the company already has many customers among retailers and restaurateurs: Frankfurt, Copenhagen, Toronto and Baltimore. Infarm will reduce its activities in France, the Netherlands and Great Britain, and possibly give it up entirely in Japan.

Infarm isn't the only previously financially highly valued company that has had to cut back heavily. The fast-delivery supermarket Gorillas, whose customers have to dig deeper into their pockets due to delivery fees and generally high prices, could be taken over by Turkish competitor Getir this year, according to those close to those involved.

According to a report by "Business Insider", the two companies must expect that the deal will mean that investors will value them significantly lower on paper than before. The sales value of gorillas could even slip below the symbolic billion euro mark.

The "Handelsblatt" reports that the contract can be signed on Friday and value the new, combined company at seven billion euros. That would be a significant drop in value.

In turn, beneficiaries of this development could be slower but cheaper delivery services. The Czech supplier Rohlik with its German delivery service brand Knuspr and the Edeka partner Picnic are both about to launch in Hamburg after they already serve Munich and Frankfurt and North Rhine-Westphalia.

Despite the crisis, the expansion is to take place on a large scale: Knuspr is currently building an automated central warehouse in the Hanseatic city. Picnic has announced 1200 jobs for northern Germany. Both providers work with longer pre-order times and want to get the costs under control through bundled deliveries - and thus be competitive even in times of inflation.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 5 a.m. with the financial journalists from WELT. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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