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Halal Food in Germany

Current relevance, trends and opportunities for investors

August 2020

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  • Today, it is impossible to imagine German city centers without ethnic supermarkets. But what is the relevance of halal products and where are potentials for the next years, especially for investors?
  • In this short analysis, S&B Strategy has examined the market segment ‘halal’ with regard to its current size and the expected growth until 2024. The focus was on identifying the underlying drivers and defining the channels with the greatest potential. Furthermore, relevant national and international competitors were segmented along the value chain and conclusions for investors were developed.
  • It becomes clear that the halal segment will play an increasing role in the German market, on the one hand due to a growing Muslim population, on the other hand due to trends like the demand for increasing transparency and sustainability as well as the development of halal as a lifestyle. In the classic food retail sector, halal products are currently leading a niche existence, while increasing sales are expected in wholesale and discount stores. In addition to the high market growth, the high degree of fragmentation of the competitive field is one of the main reasons for the segment’s attractiveness for investors, which in our opinion will lead to increasing takeovers in this area in the coming years.

New playing rules in the construction industry

Transformation Agenda 2030 for companies in the construction supply industry

June 2020

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  • The current COVID 19 crisis presents many companies with great challenges through no fault of their own, which are accompanied by enormous losses in turnover and profit. The global lockdown has brought the economy to a standstill around the globe, while at the same time the pandemic is leading to new patterns of behaviour among customers and Decision-maker level.
  • Even before the pandemic, the construction industry was already undergoing a fundamental change process, which was triggered by digitalisation, the lack of skilled workers and increasing requirements for energy efficiency. COVID-19 now further accelerates this transformation process.
  • In the next decade, the change the entire value chain of the construction and construction supply industry more than at any time in the past 70 years. Digital processes and the digital building envelopes are becoming the standard, consolidation is being massively accelerated, sales and logistics concepts are changing fundamentally and energy-efficient products, systems and solutions are being promoted significantly as customer needs continue to change.
  • This turns the requirements for successful business models in the construction supply industry upside down – the success factors of the 2020s will differ significantly from those of the past few years. That’s why we at S&B Strategy have formulated five theses for companies in the construction supply industry and transformed them into a Transformation Agenda 2030. In it, we discuss the central drivers that affect the market, customers and competitors and show success factors and fields of action for companies.

Comeback champions of the German construction industry

S&B Strategy Ranking 2020

June 2020

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  • The current COVID 19 crisis is presenting many companies with major challenges through no fault of their own, which are being met with enormous sales and losses in yield. What path must affected companies take to successfully overcome this crisis? In this study, S&B Strategy examined 3,287 companies in the German construction industry and identified those players, who, after a crisis, have managed to regain their position among the top performers in their industry in terms of sales and earnings.
  • The aim of the study was to identify the success factors for successfully repositioning the company’s own business model and achieving a “sales turnaround” while maintaining a stable earnings situation. The S&B Strategy team identified those patterns of action with which “comeback champions” in the German construction industry have made the “comeback” in terms of sales and earnings after negative external effects (e.g. slumps in sales markets, fluctuations in raw material prices, new customer requirements, etc.), by means of an adapted strategic objective and a skills architecture derived from this, have made the “comeback” in terms of sales and earnings.
  • It is clear that, in addition to their clear positioning and the market development derived from it, these companies have also been able to
    service offers show one thing above all: Data-based work, stringency of action and perseverance.

Deal Locator Construction industry

Assessment of the attractiveness of sub-segments in the German construction industry

May 2020

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  • The German construction industry is undergoing the greatest transformation process of the last 70 years. The European Union’s Climate Protection Plan 2050, which aims to reduce greenhouse gas emissions by 80 to 95% by 2050 compared to 1990, requires new concepts in the planning and expansion of buildings and infrastructure in the coming years. In addition, the digitization of the construction industry, by reducing the complexity of planning, processes and products, will allow increasingly faster and simpler construction projects, which will lead to a break-up of the classic three-stage sales process. The current COVID-19 crisis is acting as a turbocharger for these overarching trends: The increased consolidation associated with the crisis will lead to more harmonization, efficiency pressure and direct sales. Expected “green recovery” economic stimulus programs will favor companies that offer solutions for climate-neutral construction even more – especially in the area of building renovation.
  • The construction industry therefore offers an attractive playing field for strategic investments: Both for more passive strategies that exploit attractive market dynamics and for more active strategies that focus on buy & build, platforms or profitability increases.
    Nevertheless, there are risks – traditionally strong sub-segments in the construction industry will become less important in the future, as their business models do not meet market trends, or the potential offered by digitization and climate-neutral construction is comparatively low.
  • The S&B Strategy Team has therefore divided the German construction industry into the relevant sub-segments and examined them for their attractiveness, in order to then analyze them for the applicability of three different investment strategies. The result shows that there are exciting growth and profitability opportunities for investors on the manufacturer, retail and construction side, which cannot be exploited by acquiring pure “technology players” alone.
  • The construction industry is therefore an attractive breeding ground for genuine value creation. Each individual sub-segment has different dynamics and must naturally be segmented and analyzed in more detail in the next step. The following study should therefore be seen as an approach for the investment driven analysis of the construction industry.

Lock down or fast recovery?

Effects of the COVID-19 virus on the construction supply and food industries

March 2020

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  • S&B Strategy surveyed companies along the value chain from their own target industries as well as health experts on the current drivers and effects of the COVID-19 crisis. Based on this, the team of S&B Strategy examined and summarized the three most likely scenarios, their drivers and effects on the economy. Within the respective scenarios, challenges and recommendations for action for the food and construction supply industry were derived
  • The COVID-19 disease represents a significant risk for social life and therefore affects the business activities of companies.
  • The global spread of the virus can be divided into 5 phases and varies from country to country. Germany and Europe are currently in the most critical phase of development.
  • Depending on the characteristics of the virus itself and the measures taken by the authorities to contain it, a V, U or L scenario can be assumed. While the V scenario allows a “return to normality” in just a few weeks, the L scenario leads to a global recession with significant effects on German manufacturers.
  • For manufacturers, depending on the scenario, there are low to high effects on the availability of raw materials and components, the demand side and internal business processes. In addition, customers’ purchasing behavior is changing.
  • Manufacturers can protect themselves by adapting to the various scenarios, detailing a turnaround case, implementing COVID-19 containment plans and using free resources for the elaboration and implementation of “leftover issues” – both internally and in market development.

Challenges in building services engineering

Challenges and solution approaches in market development for manufacturers of building technology

February 2020

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  • The market for building services engineering is in a state of upheaval, driven by the broad digitalisation of the building envelope and increasing demands on products and services
  • In the field of building preparation and execution, installation companies are suffering above all from increasing bureaucracy, staff shortages and increasingly complex products
  • Due to the complexity and lack of personnel, consolidation will increase considerably and further strengthen the importance of large installers as customers
  • Manufacturers who segment their customer groups in greater detail and align their service portfolio more closely to their needs will achieve superior competitive advantages in the future

Growth Drivers Convenience Food

Opportunities and challenges for manufacturers

January 2020

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  • Convenience Food Sales have been rising since 2010 due to changes in consumer behaviour – higher quality and traceability of ingredients offer future growth potential
  • Companies with clear positioning and active backing of “healthy claims” show above-average sales and EBITDA growth
  • The requirements regarding transparency in the value chain are increasing – manufacturers who can map this internally and at the customer’s premises create consumer confidence
  • Differentiation is mandatory to escape price competition – “healthy claims” and brand development with retailers are essential levers

Opportunities through the digitalisation of the building envelope

Differentiation potentials of the construction supply manufacturers by using the current user trends

December 2019

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  • S&B Strategy has surveyed over 300 users in Germany along all construction trades about their current challenges. In particular, the requirements for the installation through Building Information Modeling (BIM), Drop Shipment and lack of personnel were highlighted. The aim of the survey was to work out derivations for the manufacturers of the construction supply industry in the segments of construction materials/construction chemistry, construction elements, technical building equipment (TGA) and service/planning and to formulate solution approaches based on these.
  • While the digitalisation of the building envelope is progressing at a slower pace in the north, users in southern Germany are less trade-oriented. TGA users are most affected by the growing complexity, all players would like more comprehensive support from the manufacturers..
  • For manufacturers in the building supply industry, there is new sales and margin potential, which can be exploited by more active market development. Understanding the relevant customer groups and their needs in purchasing and, above all, in application are central to this.
  • Manufacturers must pursue a pull approach with clearly defined omni-channel sales instead of a pure trade push logic. Concepts for direct on-time delivery to construction sites as well as extensive additional services and tools for planners and tradespeople will be central to the market success of manufacturers in the construction supply industry in the coming years.

Window industry Germany 2025

Opportunities and recommendations for action in the window industry

October 2019

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  • Demand for windows remains high in Europe, with growth driven primarily by larger and more demanding geometries and PVC volumes from Poland
  • Price pressure from Eastern Europe and additional demands on logistics and the design of the product portfolio will further increase the pressure on the value chain
  • Eating or being eaten – players who have sluggish processes and do not actively work the market are eliminated from the competition in the medium term
  • The pressure to consolidate along the value chain is increasing, profile manufacturers have the best position due to their concentration and cf. strong bargaining power vis-à-vis suppliers and customers
  • In order to survive in the future competitive arena, large players must grow and consolidate internationally – smaller players can take advantage of this through specialization and focus

Powder keg Technical Building Equipment

How German manufacturers can withstand price and innovation pressure

October 2019

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  • The market for explosive ordnance clearance is experiencing above-average and sustained growth , driven by public awareness, positive construction activity and a continued rise in prices
  • The national harmonization of standards on the one hand and the shortage of personnel as well as an increasing price war on the other hand will lead to a consolidation of the market in the future
  • The entry of financial investors and civil engineering companies into the segment will further strengthen the consolidation tendencies
  • Players without a clear regional, skill or application-based positioning will leave the competition in the medium term
  • Smaller players can position themselves as regional specialists, medium and large providers must grow aggressively to ensure full coverage and service excellence

New margin world in the food industry

Effects of consumer trends on the growth and margin potential of food producers

October 2019

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  • S&B Strategy has examined more than 6,000 companies in the food industry in a total of six sub-segments with regard to their profitability, sales and earnings development. A distinction was made between manufacturers without a specific focus on e.g. organic and “healthy” suppliers, who are clearly positioned and have specialised in e.g. organic, vegan and GMO-free productshat
  • Traditional manufacturers show only low average growth rates of 3.0% p.a. in turnover and 2.8% p.a. in EBITDA in the period 2011-17, specialty suppliers grow by 10% p.a. each
  • Depending on the sub-segments considered, the average EBITDA margin achieved by specialty providers is significantly higher than that of commodity manufacturers. Particularly in the segments milk , fruit and vegetable, and meat processing, specialty suppliers are already achieving sustainably higher margins
  • The key differentiator is the position in the value chain and the focus of consumers. The further away the consumer is from the actual “raw product”, the lower the interest in “healthy” claims
  • A “healthy” positioning of the specialists enables them to largely evade price competition in the retail sector and thus achieve sustainably higher margins. The central criterion for success is clearly positioned brands with which consumer needs can be met in a sustainable and credible manner – organically built or purchased inorganically
  • The food industry is back on the investment map for financial investors. Trends such as the food traffic light will further increase consumer demand for transparency and traceability of raw materials and ingredients. Specialty suppliers meet these requirements and thus offer attractive growth potential.

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