Europe's thriftiest consumers are urged to open up their wallets

Europe's thriftiest shoppers are under attack. The German consumer, whose love of own-brand items and reluctance to use a credit card have helped push the economy to the verge of recession, is being targeted by an unprecedented campaign to get them to spend more.

Unlike the British, only a third of Germans have credit cards, and most are only granted on the condition the card balance is paid off in full each month. Sales of "no-name" products - the term, borrowed from North America, has gone into the German language - have also skyrocketed over the past two years. Two-thirds of German households now put more low-cost no-name food and household goods into their baskets than ever before.

Latest figures show sales of various unbranded foodstuffs are on the up. No-name butter, milk and yogurt have increased 6 per cent since 2001. Sales of no-name alcohol-free drinks and unbranded cheeses followed suit, up by 17 and 16 per cent respectively.

No-name cigarettes have also been flying off the shelves: sales are up 21 per cent since 2001. And business at German no-frills supermarkets such as Aldi and Lidl is booming. The "pile 'em high, sell 'em cheap" supermarkets championed no-names in Germany and control 36 per cent of the market. Lidl alone racked up total sales of €7.8bn in 2002.

But German brands, angry at falling sales, have hit back this summer, sinking €25m into a major new advertising campaign aimed at coaxing back economy-conscious Germans. The three-month nationwide marketing drive by Germany's Brand Association features television, radio and billboard ads with the slogan: "The Brand: Nothing Else Gets Into My Shopping Bag", alongside images of smiling Germans chomping on branded foodstuffs.

The Brand Association maintains German consumers have been "lied to" by no-name products pretending to be of the same quality as branded products, and says anything other than a brand is second-rate. It says it is too early to tell whether the media onslaught has had much effect, though it points out a similar campaign in Austria improved unprompted brand awareness, at least, by up to 60 percent. But Germany's thrifty consumers appear not to be so easily lured into shelling out extra euros for what they regard as the same product in posher packaging.

Indeed, even the Brand Association freely admits half the producers it represents also make products for no-name competitors.

"I know that it's all basically the same," Berlin audio technician Milan Tilich said. "I know most of the brand names produce for the no-name products.

"I compared a branded yogurt and no-name yogurt at Aldi. If you look carefully you could see both were made in the same dairy. So why not buy the cheaper one?" Mr Tilich, a self-confessed Aldi devotee, said.

People like him, dubbed "smart shoppers", are bad news for the Brand Association and for German Chancellor Gerhard Schröder, who is desperate to put Germany back in the black by getting Germans spending again. Plans for €5.6bn in tax breaks, which will put an average 10 per cent back into every German pocket from 2004, have already been approved and the government has also been at pains to make it easier for Germans to go out and spend this extra cash.

Reforms allowing extended weekend shop-opening hours were rushed through parliament earlier this year and plans are afoot to reform the country's antiquated sales laws, which currently permit stores to reduce prices only twice a year over a fixed two-week period.

However, analysts say German consumer spending levels - which have fallen by 3 per cent over the past three years - are unlikely to recover in the immediate future. With most painfully aware that current reforms to Germany's pension and health insurance systems will almost certainly require them to make increased monthly contributions, many Germans are likely to put any extra money aside.

"The Germans know they will have to pay more in health insurance and pension contributions in the future, so they don't take seriously the message that tax breaks mean extra money," Werner Hess, an economist for Dresdner Bank, said.

"Until the government succeeds in convincing German consumers that this is extra money they can spend as they wish, consumer confidence is not going to recover properly," Mr Hess said.

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