Special Report: 10th Annual European Suppliers Roundtable
May 30, 2008
Despite concerns about a global recession, executives from European-based ingredient and equipment suppliers remained upbeat about the confectionery industry this year. Noting that market demand varies, participants at this year's European Suppliers Roundtable, which was held in London at the Radisson Edwardian Heathrow Hotel on February 21, acknowledged they faced a slew of challenges. Nevertheless, in dealing with price pressures, rising costs, calls for standardization and increased service, these companies are committed to innovative solutions, solutions many will showcase at Interpack 2008 this month.
CANDY INDUSTRY: Last year proved to be a challenging period in the confectionery industry as a result of rising commodity costs, continued industry consolidation and nagging concerns about an impending recession affecting candy and chocolate companies. Did any of these factors affect your business last year and are you apprehensive about what 2008 will bring with all this talk about a global recession?
MONTSE CIRERA: Well, I can certainly give you the perspective from the ingredient side. Yes, 2007 was quite a tough year regarding our raw material costs. The main part of our raw materials, the materials that we use for the gum base, is related to the price of oil. You can imagine how we’ve suffered in the last year. We’ve been obliged also to increase prices to balance these increases and we expect to increase them this year also.
MONTSE CIRERA: Well, I can certainly give you the perspective from the ingredient side. Yes, 2007 was quite a tough year regarding our raw material costs. The main part of our raw materials, the materials that we use for the gum base, is related to the price of oil. You can imagine how we’ve suffered in the last year. We’ve been obliged also to increase prices to balance these increases and we expect to increase them this year also.
CHRISTOPH ZIEGLER: We have seen something similar, and I guess my colleagues in the manufacturing industry have also been hit quite heavily by the prices of steel, aluminum and all of the raw materials that we use. Unfortunately, we have not been able to put price increases forward that much and have also had to absorb most of the additional costs. We can see now that it’s tapered off somewhere in the pricing of raw materials, but it’s still very difficult. I understand that chocolate manufacturers have increased their prices.
JORDI TORRES: I agree with Christoph. It’s difficult to pass price increases in raw materials to the customer. All the signs for 2008 are that there will be some kind of recession. Even worse, this is an Interpack year, so people are very conscious about making an investment before Interpack.
PETER BÄUMLIN: As a mould manufacturer, our raw material, polycarbonate, is very highly related to the price of oil, so we also suffered from a purchasing crisis last year. We’ve tried to initiate some price discussions, but it’s hard, very hard to realize.
ULRICH KREIMEYER: From our point of view, we see that companies, even the larger ones, are asking or demanding companies like us to be more cost-effective and to do more aggressive pricing. There is a certain tendency to look on projects not just on the technical side but more and more on the commercial side. That’s what we definitely can see and what we suppose will happen more and more during this year and next year.
CANDY INDUSTRY: When you say “commercial side,” are you saying that they are focused primarily on the cost of the equipment?
ULRICH KREIMEYER: Not only on cost, but terms and conditions, standardization of components inside the machines, the way of designing, so on and so forth.
CANDY INDUSTRY: Do you believe there will be a global recession this year?
PETER MEYER: Not really. I hope not. During the past three or four years there has always been some activity, somewhere. The East European markets are strong, and I don’t believe a recession will crop up there.
MARK BEAVER: Even if there are signs suggesting a global recession, there are still pockets and markets that are doing extremely well and growing very, very quickly.
CHRISTOPH ZIEGLER: Different markets behave differently, really. You can see certain places where there is a bit of apprehension about investment, but otherwise they are going ahead as if nothing has happened. We have been very fortunate; we haven’t really seen that kind of dip.
TOMMY AAS: There might be a big difference between raw materials and equipment. When I look back on 2007, we have seen an increase volume-wise but, of course, we have to admit our margins have been under a lot of pressure. This might impact on the rest of us long-term, but on the day-to-day business, we’re still seeing an increase.
GRANT DONDAIN: As far as we’re concerned in the ingredient business, we have been lucky so, to your question, yes, we are suffering from the general inflation and the increase of costs but, no, we have been very lucky, because our competitors, which are basically substitutes based on cereals, wheat and corn, have increased so much that now we are cheaper than the substitute. The natural product, the native product, which we produce -- gum acacia – almost became a dinosaur some years ago because lower-cost substitutes made from wheat or corn starch were available. Today, because these same base ingredients are being used for fuel, they are now more expensive.
CANDY INDUSTRY: It’s amazing how all of a sudden it’s reversed itself just because of the cost of processing.
GRANT DONDAIN: It’s the revenge of the natural.
MASSIMO PIETRA: I just want to say that, of course, Carle & Montanari also suffers from this high materials pricing situation, as we suffered from the previous strong euro situation. I would say that we did quite well because most of the projects we had on the books were long-term projects from multinational companies. They were going to go ahead with these anyway in some areas of the world, so it helped us better plan and maintain a balance against rising costs.
CANDY INDUSTRY: Your prospects for 2008?
MASSIMO PIETRA: To be honest, we still see some increases in sales, not necessarily from the very larger confectionery companies, but from the smaller and medium-sized companies. They view Interpack as a chance to be kept well-informed about developments and also to compare different processing solutions among suppliers. We have always done well there and, to be honest, we hope that this gives us a boost.
PETER MEYER: If you think about the multinationals and track the data over the years, you discover that they make periodic large investments. If you look around the market, they have been doing that now for one or two years. One has already finished just as another one has started. Though I wonder what will happen when they all finish their major projects at the same time. CANDY INDUSTRY: Do you think that there will be a lull?
PETER MEYER: Yes.
OLAF SCHEPEL: What Caotech sees at the moment is that, mainly in the former Soviet sector, like Ukraine and Russia itself, we are experiencing significant sales, thanks in part to the availability of oil. We are also seeing many companies replacing old Soviet-made equipment with more efficient machines. For 2008, we see mainly strong sales in this area and, for 2009, we still think there is a big chance to put a large part of our turnover in that direction. Emerging markets are also quite strong, but that mainly involves replacing old equipment with new equipment. There, sales are contingent on what’s happening in the marketplace, what’s happening with the euro and the general economy.
CANDY INDUSTRY: Given that Interpack 2008 is just around the corner, we’re interested in finding out what was the main thrust of the innovations and improvements that you’ve prepared for the show? To those representing ingredient companies, what’s been the main focus behind your R&D efforts during the past year?
ULRICH KREIMEYER: Regarding innovations and improvements for Interpack, it’s about cost-effectiveness; it’s about standardization; it’s about having a practical solution for all these things. That was true in the past and is even truer now for the upcoming Interpack.
MARK BEAVER: We’re seeing a lot of customers are asking for inherent flexibility in the technology, so if they make one product and that’s not successful, they can reconfigure the machine very easily and do something else with it. They know that they can make the most out of that investment. A key point is our customers’ markets are moving very, very quickly as well. The product is changing on the shelves extremely quickly, so they have to respond to that changing need of the consumer.
MIKE DALBY: Everybody’s always bullish in an Interpack year and we’d all be in a bad way if we weren’t. Probably the biggest thing that’s going to be impacting in Interpack is the amount of Chinese exhibitors that will be there, albeit with copies of existing machines. There’s been technology leakage. I think that’s going to be a serious problem. A lot of business is going to be lost that way, because people are tightening their belts; they are looking at ways of saving money. There is almost an attitude of, “It might not be as well-built as a Western machine but, if we have to throw it away after five years and buy another one, then so what? We can buy three for the price of one, so we might as well go that route for the time being, while money is tight.”
PETER MEYER: In addition to increased Chinese participation in Interpack, there will also be Indians exhibiting at the show. You said that the machines may look a little cheaper or not as sophisticated. I do not agree so far; they are also building very nice machines. Our only hope for the future is that we need to be several years in front of them with processing technology. That’s something they don’t have yet. Our only choice, which is just what we are trying to do, is show new innovations with new technology and new machines.
CANDY INDUSTRY: The onus then is on the manufacturer to create technology that’s very difficult to duplicate and to have something that is a breakthrough type of process.
JAN PIETER MEYBOOM: It doesn’t even always need to be a “breakthrough.” It’s just the know-how, the backup and the changes that we need to have a decent product out. I just had an experience where I offered a line; the manufacturer bought Chinese, but came back to me eight months later and said, ‘Can you please come and get those lines going?’ This was a very experienced company. They could not get it going themselves, nor with the help of the Chinese. The only thing they could do is “return to sender.” They lost a year.
OLAF SCHEPEL: I see Chinese companies acting mainly in the Middle East at the moment, where there is a learning curve involving trial and error. Customers there are not as critical as we are, so they are learning how to improve their machines and learning how to improve the technology process of making chocolate, compounds or any other product you make on your machines. Nevertheless, they are growing slowly in the direction of Europe and the United States. With labor and technology, they have improved. It might not be next year, but it might be in the next five years that I see some threat from this corner of the world.
PETER TANIS: One should also not forget that our big international customers used to buy from Europe or the United States as a standard rule. Now, however, they are located in the Far East, they also have to investigate purchasing equipment from India and China. They do so on instructions from the head office. In the past, many would still buy from European suppliers. Today, if the plant is already equipped with European machines, say 30% to 40%, chances are they won’t buy from yet another European supplier.
CANDY INDUSTRY: They’re getting a directive from corporate saying, “Because you reside in the country, you should also take advantage of local suppliers.”
MARK BEAVER: They would put their technical input into the local supplier to help them develop.
AUGUST HEINZER: Sometimes it’s also true that if a confectionery manufacturer has an established product and wants to have it wrapped in high quality, it would probably be prepared to pay a little bit more for a good quality machine. Whereas, if you start from a new product and don’t know if it is going to sell or which direction it’s going to go, you may at least want to start with a lower cost machine. I’ve seen that many times now, even recently with European equipment. In some cases people are very strict on quality and on how long they can use that machine. There are different aspects depending on the product.
CANDY INDUSTRY: Are you seeing competition across all sectors and processes, say moulding lines and packaging? Are you seeing copycats of your equipment throughout the industry?
PETER TANIS: Yes. Most of the companies on the processing side don’t sell a piece of stainless steel; they are selling a process. Naturally it takes machines to execute the process, but it is the processing knowledge and the solution that make that piece of candy or confection. That’s what we are selling: it’s not the machines; machines are only a small part of the solution.
MASSIMO PIETRA: At Carle & Montanari, we are active in different machines. We manufacture different machines, from wrapping to moulding lines to processing machinery. We see a huge difference between the copies in wrapping, for example, which are easier to engineer even if they have nothing to do with European machines, and moulding, or processing, where the partnership with the manufacturer is so important. That’s something one can’t buy or copy. As a leader in technology, you need to talk to the manufacturer once a week, once a month, to develop new products, to upgrade the line to handle different productions. It’s a partnership.
ULRICH KREIMEYER: Coming back to your question about Interpack, as I mentioned earlier, customers are looking for economic solutions. The other emphasis involves time to market. What we see is, once a decision has finally been made, there actually is no time to produce the machine. No longer are six, seven, eight or nine months acceptable. “In five months please?” If you have to do some innovation, what about five months? It’s extremely difficult. You are forced to say, “we’ll find a way.”
JORDI TORRES: In the cocoa processing area, it’s a bit longer term. Companies make plans in advance. In chocolate and compounds, if they have established their aim for a new brand or a new product, they want to run it next week.
CANDY INDUSTRY: How do you explain that to your customers? If you’re looking at something such as cocoa processing, which is a heavy infrastructure investment, it takes time to put it together, to design it, etc. What do you tell them in five months or whatever time period they want? Are they willing to listen?
JORDI TORRES: No, they are not willing to listen, but they have to accept that because all the other suppliers give them the same answer, or a different answer, but then they don’t stick to it.
ULRICH KREIMEYER: The other point is, if you’re in a very competitive situation, you might find a situation in which someone says, ‘Okay I can do it in five months,’ but what the result is at the end is questionable.
MADS HEDSTROM: We do agree to such demands, to be honest with you – all of us. If somebody comes and says, ‘I can’t get this from the competition before seven months, but I really need it in five,’ then you have to make a decision.
CANDY INDUSTRY: How does that affect your internal operation?
MADS HEDSTROM: You just do it; you have to. That is why we are here. If you want to be in competition, if you want to survive, if you want to sell machines, you have to listen to the customers and listen to their needs. Most of us do.
ANDREW FELLOWES: The main focus has been, moving on from what you’ve already discussed, improving the level of service that keeps you apart from the opposition, working hand in hand with companies’ marketing departments, following trends and looking at new renewable sources, so that you can take out all the peaks and troughs of pricing when markets become volatile as they constantly do for natural raw materials. We’re working much closer, turning things around quickly, understanding the client’s brief fully and making sure you get a really competent brief out of them so that you can react quicker. When you send something back, it’s what they expect as opposed to some speculative submission.
CANDY INDUSTRY: The emphasis is on service to the customer.
ANDREW FELLOWES: Yes, very much so. That is something that we’ve benefited from in the United States, in particular. Coals to Newcastle to a certain extent but, over in the United States, as a relatively small ingredient company, we’re going over and winning bids against traditional mint companies and multinational flavor companies because we are actually listening and turning things around so much quicker. We can develop things and knock out application samples in a matter of days when so-called top-five multinational flavor companies might take two months to do it.
CANDY INDUSTRY: I assume that the level of service is also a factor in equipment companies. You’ve had to put more resources into parts, information, service, engineers or whatever. Is that the case?
JORG SOMMER: We are talking about price and about service. We at Lehmann are dedicated to further developing our products to be extremely flexible, innovative, very efficient and to increase the quality of our products, if needed. We find that if efficiency is higher, the quality of the product is higher. Regarding cocoa processing, we bring out new generations of winnowers to be more efficient and create a higher quality of the masses. As concerns chocolate processing, we have made new developments for five-roll refiners. As concerns ball mills, we have made new developments in processing. Our target is to proceed in these areas and to take away the existing price pressures and to compete against cheaper copycats, especially in markets like India and China. That is the right way to go. As long as you are innovative, you can also be more flexible with the delivery period so that if you have a customer who is interested in your products, it is more likely that you can also discuss delivery terms in a reasonable way.
CANDY INDUSTRY: It sounds more and more as though part of the negotiations involves the delivery time. You are now saying, ‘In addition to the price, I can also deliver it to you faster than you expected.’
JORG SOMMER: That’s right. Service is also very important. For example, it’s important that you don’t only talk about machinery, but assist the customer as concerns the product – product development and product tests – so you can give a higher level of safety for the customer. Safety is very important as is good service, and very important in combination with safe production, because our customers are not hobby producers. They want really reliable production, otherwise their business will be affected. That is very important to stress from our side. Experienced manufacturers can deliver much higher volume. Manufactur-ers from China and India simply don’t have the experience.
CANDY INDUSTRY: I guess many of you have already invested into a pilot facility, an innovation center or a testing facility. Are customers coming in working with you hand in hand so you can solidify your relationship with them that way?
MONTSE CIRERA: Definitely. It’s not just working hand in hand with the customer, but working hand in hand with other suppliers to the customer, which is almost as important as working with the customer. If I want to develop a new product and if I believe that this product is really a step forward in the market, I cannot go and say, “Hey, here have one kilo of gum base. It’s wonderful.” I need to give the customer the final solution, with flavors and appropriate sweeteners, thereby guaranteeing the customer that it will run perfectly. Everything has to be thought through to the last detail. You no longer do it yourself in your lab. It’s a question of joining efforts.
CANDY INDUSTRY: You almost have to have a consumer-ready product. MONTSE CIRERA: Yes, almost.
GRANT DONDAIN: As for ingredients in our company, service is becoming a major aspect, just as it was said for essential oils; so, too for gums. It’s the same thing. In the past, service was brought from Europe to abroad. Now we have service locally. We have eight branches and all our service people are no longer sales people; they are technicians, local technicians. We have stopped doing the Zorro type of things, whereby Zorro comes from France to tell you the good news and help you. Now Zorro is Chinese.
CANDY INDUSTRY: He writes his ‘Z’ a little differently.
PETER BÄUMLIN: We are specialists with moulds, which is a small but a very important part of the chocolate industry because, if this doesn’t work, you have a bad product. From our point of view regarding service, we have two focuses: one is the market side, which helps and advises us to make new products and new shapes. The other is the processing side, where we are faced with the need to have more and more common projects with other companies, like moulding lines suppliers. The other critical issues we face are delivery time and price. Delivery time is flexibility. That’s one. The other is capacity. We made a sizeable investment this year in a new production mould and some additional production machines. The customer is also concerned about the food safety, which is becoming more and more critical. If you find a small piece of plastic in the chocolate, and then someone eats it, that’s a major problem. Normally, one cannot detect such a small piece. Food safety is a big issue – the traceability of the moulds. Radio frequency identification (RFID) is one of the big things we will show at Interpack. You can place a chip inside the mould. That is the solution. We believe that the food safety arena will play a major role in the future for us.
FRANCOIS ADELE: In terms of innovation, we are also working in much closer participation with other processing equipment and ingredient companies together to present a solution to customers. I agree that part of the innovation that will be seen at Interpack involves collaboration with suppliers in other industries. We will present integrated equipment, which demonstrates the innovation gleaned from such collaboration.
CANDY INDUSTRY: Can you share some of that with us now?
FRANCOIS ADELE: This is mainly a process where we work with some ingredient companies to develop some specific processes – making them more cost effective. On the equipment side, there are many companies that are making new sensors and introducing new technology to have complete control over a product. So we are integrating those tools into our equipment. We can close some regulatory loops and have complete control of our equipment. That’s where we focused on innovative efforts.
FRANCOIS ADELE: On the ingredient side, we are focused on the same products as they are, and we are working very close together. It is not on specific projects, but could be on a very wide range of projects. We learn something from them; they will learn something from us; and we can present something specific from this project together. It could be a big advantage. We don’t have specific links or contracts in between. This is more a friendly partnership, and we will develop and respect each other in this way.
CANDY INDUSTRY: Are some of you looking outside the confectionery industry for partners or innovation? Are you finding out that what works very well in a particular industry can help you?
MONTSE CIRERA: In our case, as chewing gum is becoming more of a functional health product, we’ve been working over the last years with pharmaceutical and nutraceutical companies. We realize there’s plenty of room for development, creating new products that better address pharmaceutical and nutraceutical needs. You have to completely change the way you do things, the way you speak, the way you communicate and, of course, the way you certify the quality of your products, but it’s a very interesting market.
ALLAN AASTED: For the machinery part, it’s nice to sit here and benchmark a little bit with each other, but we are competitors daily and there are certain things we cannot speak about. We, as machine builders, benchmark with other branches.
CANDY INDUSTRY: We’re all friends here.
ALLAN AASTED: Of course we are and we’re all doing marvelously. It’s very important, if you want to stay where we all are in this industry, and stay on a level with the threats or the challenges from India and China, that we benchmark with other similar industries in Europe that have the same challenges. There we can speak openly about our technologies and processes without any risk of leaking out information. That is what we do and we have found that very beneficial.
CANDY INDUSTRY: Before we leave the Interpack question, I want to get a sense from all of you about your expectations for Interpack.
PETER MEYER: One thing I have seen in the last five or six years is there are so many shows, too many, I think. You have ProSweets, the American shows, the Chinese shows, the Asian shows and the Russian shows. We see from visiting these kinds of shows that the quality of attendees is going down. I hope that Interpack will pull more people with this big celebration.
ULRICH KREIMEYER: I have the feeling that -- because of the high number of shows worldwide -- there’s a bit of disappointment because there are no real innovations from these shows. The expectation from Interpack is that a company will open the door, put in front what is new and exciting and, even more, present the whole company and its people for review. Interpack is still the benchmark. My expectation is that Interpack will be a very interesting show.
GRANT DONDAIN: For us, Interpack is not our main show. For ingredient companies, it’s definitely FIE. There has been a big move in FIE. I don’t know if you’ve seen it, but it’s no longer FIE one year after two; it’s HIE – Health Ingredients Europe. That means that health concerns within the ingredients sector are very important. We have had more developments in the past two years and especially last year in healthy products, much of it directed at reducing sugar and fat. This is where most of our reformulation efforts have been focused on.
MIKE DALBY: Traditionally, if you look at the processing, packaging and machinery cycle, it’s always fitted well with Interpack in the three-year cycle of Interpack. The industry that we’re all engaged in tends to be based in Europe, therefore Interpack has historically been the showplace of the industry. I’d like to think that that will continue and that, while you have major exhibitions elsewhere in the world, they are more or less regional. I don’t think people specifically develop a new machine for a regional exhibition, whether it be in Shanghai, Moscow or wherever.
JAN PIETER MEYBOOM: The big advantage of Interpack is that all our customers are into packaging, always. They are not always looking for processing equipment, but they’re always interested in packaging. At Interpack, they have everything in one place.
CANDY INDUSTRY: While attending the International Sweets and Biscuits Fair (ISM) this year, a host of confectionery manufacturers announced price increases for their products as a result of unprecedented and sustained jumps in ingredients, fuel and labor costs. Do you sense that approvals for projects will be easier now that confectionery companies have restored margins to a healthier level?
PETER TANIS: I have not seen any change, not at all. It has been healthy for two years.
ULRICH KREIMEYER: I heard over the last weeks from one manufacturer that, due to rising fuel and transportation costs, they were thinking again whether it would make sense to shift production back to the original location where the product was being made, and not to go farther and farther east, first of all to Eastern Europe and beyond. It’s gone full circle, back to regional selling. There is in effect a certain demand on suppliers for ingredients, machinery and whatever to keep their costs down. It’s also affecting their thinking more about where they’re going to produce.
ALLAN AASTED: One thing that I think will matter in the future in terms of costs will be the environment we produce in and what we pollute when we produce. Not too far in the future in Denmark, we will probably pay tax based on how much CO2 we put in the air. It can end up that, if today’s production goes to China, it will eventually return back to you, because we will have to put on our labels how much pollution this product is giving the earth. That will change the whole situation and is going to affect all of us, like it or not.
MARK BEAVER: I heard from one of the multinationals that the senior executives of that company have to record their carbon footprint in terms of the miles they do. That’s part of the marketability of that particular company, which wants to portray themselves as a green company. They see that as a differential in the marketplace when they are presenting themselves to the consumer.
CANDY INDUSTRY: Do you officially have energy conversation procedures and policies so that when you go to one of your customers, you can say, “Well, this is what we’re doing in terms of trying to cut our energy costs.”?
MARK BEAVER: The angle for us is designing into our technology more energy-efficient solutions to allow them to achieve their final goal.
JAN PIETER MEYBOOM: It’s plain physics. You need so many joules [international unit of measurement for heat, electricity and mechanical work] to dissolve that sugar. You can’t do it any other way. The physics are just like that. Still you can do it a bit more efficiently, put the same amount of energy into producing a product, but wasting less.
JORG SOMMER: In the cocoa industry, it’s a bit different. There you are acting with higher temperatures; you roast beans and there are different methods possible with different energy consumptions. That’s really not the same. There are quite significant differences in the machinery. Our drive is clearly to further reduce the energy that you need to produce. It also correlates with good quality. Why? If you heat up the product in a moderate way, you also preserve good taste. That’s very important for the customers in this respect, since we are machinery producers, so they can also put this as a benefit in carbon dioxide terms.
AUGUST HEINZER: There are two areas where you can save energy: First, improved efficiency, so you run the machine for a shorter time. And secondly, reduced waste. By reducing the amount of waste in packaging materials, you save on costs as well as improve the environment.
CANDY INDUSTRY: With all the negative publicity involving pet food contamination as well as lead in toys, has China’s draw as an inexpensive manufacturing haven been tarnished? For those already doing business in China, do you see a gradual shift occurring toward more domestic confectionery consumption?
MATT COTTAM: I would say China still has a long way to go but, as we all know, costs are rising rapidly in China. At the start of this year, new labor rules were introduced into China, so workers have a lot more protection now than they used to have. There are certainly things about employment contracts that have also affected the workplace in China. Without a doubt, costs are rising in China, but they still have a long way to go. I do see that China’s domestic market rather than its international market will drive our sales there. It is a population that is getting richer quite rapidly, certainly around the coastal area. They want all the trappings of the Western market. I think the domestic market is going to be the biggest driver and, therefore, China has a long way to go in terms of market potential for new machinery. The international market still has further to go, but the rapid increase we have seen in the last 10 years will slow down.
CANDY INDUSTRY: It’s difficult to come across any company’s mission statement today without the word ‘innovation’ in it. What’s the greatest stumbling block today that companies face in coming up with true innovation?
CHRISTOPH ZIEGLER: The question is: what do you understand under innovation? In the industry we are in, real innovation, say a breakthrough, is really difficult to achieve. There are certain things you can improve; you can get more efficient. A real breakthrough, something that nobody has ever thought about, is relatively difficult. How do you really determine or define the term ‘innovation’? Yes, to keep you abreast, all of us benchmark each other. You have to think at least progressively.
MARK BEAVER: It’s evolution, rather than revolution in the industry we’re in. One of the issues we probably have is that we don’t have an innovation department. We tend to use the same resource that we use for doing the day job, as well. One of the downsides of being busy is that you are very much focused on executing contracts and getting stuff out of the door, which tends to draw resources away from R&D, even though the budget’s there to be spent. Sometimes you need to actually push forward on programs and progress them in the way that you’d like to see them progressed.
FRANCOIS ADELE: What we call ‘innovation’ may involve developing more cost-effective equipment or a process-effective solution without making any radical innovation.
OLAF SCHEPEL: There is also an important point on the material that we are using. We are trying to improve the materials we are using, because ball mills have a lot of wear normally. We are trying to develop something for the same price so the customer can use the machine or the parts, not for one year or two years, but for four years. The main issue is to cooperate with your suppliers to find improvements in materials, which have a longer lifetime so you remain ahead of your competitors.
MADS HEDSTROM: Reducing down time is important. We are forced to come up with solutions because our customer continually asks us to help solve their problems. In a way, our customers are helping us to innovate. Often, they are the ones who start the process by saying, “We would like to have... Then we start going.” Innova-tion is most often market-driven.
MATT COTTAM: There’s always a way of describing it. People say you have to be proactive. I think that’s what we’re saying. We’re not being proactive; we’re actually reactive. We listen to what our customers want and we have to react. You have to be proactive about reacting; you don’t hang back. You react immediately to what they’re saying, otherwise you miss the opportunity of a sale.
MARK BEAVER: Breakthrough innovation can be tricky. For example, we’ve developed a technology for starchless moulding that we consider revolutionary. The risk for us is market acceptance. It’s something that is so very new that it’s difficult for people to move from what they know to something totally different. It’s a very hard sell. I think that’s why much of what we do is evolutionary. We do so because it’s actually the low-risk option for us; we know there’s going to be a market for it. When you’re being revolutionary, you need a lot of money and market research to understand whether there’s going to be a market for that technology.
ULRICH KREIMEYER: What you say is absolutely true. There is always a tendency to say, “Can we please see some true innovations, but we don’t want to be the first using them.” One shouldn’t mix up innovation with an invention. There is always room for improvement, adding new things, making them better running and more efficient.
CANDY INDUSTRY: Have any of you become involved in a partnership that’s produced an innovation for you?
MARK BEAVER: Yes, we’ve been doing some work on depositing very high-percentage fruit pastes using this new technology that we’ve developed. We’ve worked with a supplier of fruit pastes and we’ve developed a formulation to allow us to deposit through our starchless process. We believe we’ve got something there that hits the health and well-being arena, and at the same time the desire to remove starch from the process.
CANDY INDUSTRY: Would you call this revolutionary?
MARK BEAVER: Everything’s based on a common platform. It’s based on syrup preparation and depositing that syrup into a mould of some sort so, from that point of view, no, but it is delivering what we consider a new type of end product, so I’ll let you draw your own conclusions.
PETER TANIS: It’s difficult to put an innovation in the market if there’s no demand from the market. Mike and I worked on a project that looked very interesting six or seven years ago and made a beautiful product, but there was no acceptance of the product. They put a lot of money into the whole project and it never really went big. Innovation has to be driven by customer demand, otherwise you are just spending a lot of money.
JORG SOMMER: It’s important to work closely together with customers. From our point of view, when I review the last innovations that we have done, it’s clear we have developed them together with the customer. The initiative came from the customer side. It’s our richest and largest source for innovation.
JORDI TORRES: We have to see ‘innovation’ as an all-encompassing word, as we said before, not only in the machines but in many aspects within the company. In some respects, “innovation essentially translates into improved flexibility, increased modularity and better service. This is innovation on a day-to-day basis.
CANDY INDUSTRY: It has to be part of your operating philosophy.
JORDI TORRES: Yes, which is why it appears in every company’s mission statement. It’s not because it’s fashionable; it’s our “to be or not to be.”
CANDY INDUSTRY: The most recent confectionery market analyses suggest that India and Brazil offer increased potential for confectionery development, particularly as their economies continue to grow. Do you foresee continued growth for those emerging markets? What other markets have proved fertile for confectionery investments?
MASSIMO PIETRA: I’m responsible for the South American market. We talk about Brazil. We believe Brazil will continue to grow. First, because of its size – 180 million people, that’s a massive market. They are the largest nation on the continent, so we believe we cannot ignore them. Naturally, you’ll see ups and downs. But we’ve all seen that trend in India, as in China and Russia. Actually, Brazil for us has been one of the best performers in the last year and we expect it to be in the near future.
CANDY INDUSTRY: What about India? Do any of you have operations in India?
MARK BEAVER: India has probably been the biggest single market for us over the last five years, because we supply equipment for hard candy processing. Because of distribution issues in India, there’s still a better market for hard candy than certainly for chocolate products. The other area I would just mention is Africa. We’re starting to see a lot of investment in Africa. There are pockets like Nigeria, of course, where – officially – the importation of confectionery products is banned. For the domestic producers, it’s a very good time for them, so there’s a lot of investment in markets like that and countries in North Africa as well.
CANDY INDUSTRY: Are you saying the same for North and South Africa?
MARK BEAVER: Not so much South Africa, no, but certainly for North Africa, companies are looking to export into Europe. There’s also East Africa as well.
CANDY INDUSTRY: Is anybody else working in Africa or dealing with companies in Africa?
RENE DEVRIES: For cocoa processing developments, Africa is really booming. We’ve been involved with many new plants in Ghana, the Ivory Coast and Nigeria. In Nigeria, there are several old plants that are being refurbished and have started up again. There are also plants that we have supplied 10 or 15 years ago, which have now finally started up again. In Ghana, there are about four to five new factories starting up. A lot of our people are stationed over there. It is the same in the Ivory Coast. In the Ivory Coast they are shifting more to the San Pedro area. Abidjan is full, I think, with factories. They are moving more to the harbor side.
CANDY INDUSTRY: On the confectionery processing side, it appears that ‘modularity’ is the new buzzword when it comes to offering operational solutions. How difficult is it to design equipment that is modular in nature? Are your customers enjoying increased flexibility in handling changeovers and/or producing a greater range of products?
MATT COTTAM: The word ‘modular’ is the compromise between standard machinery and specialized machinery. We all need to be in standard machinery to reduce costs but we all need to sell specialized machinery to satisfy exacting customer requirements. Modular is the new compromise.
CANDY INDUSTRY: Is this compromise more expensive for you to design?
MATT COTTAM: No. It’s no different, I don’t think. We have to work out a way of solving the world market, and the only approach is as modular as possible. You have some standard components and you have to mix and match them in different ways to minimize your costs. In a way it goes back to our earlier questions; there was a huge pressure to reduce prices. We have to keep looking at ways of achieving that.
PETER BÄUMLIN: In our business, we have about 680 different sizes of moulds. What we’re looking to do is modularize the tooling that produces the moulds, because we cannot build a new tooling for every mould. It’s too expensive. To manage this number of different sizes is incredible.
JORDI TORRES: All of this is related to innovation again. We have the same point. To innovate in manufacturing, to provide modularity, it means innovation, which needs research and needs development.
CANDY INDUSTRY: In your designs have you been able to satisfy your customers’ demands for easy changeovers and more product flexibility?
AUGUST HEINZER: A problem on the packaging side is that you can have modularity and a quick changeover process to make it look easy. But, at the moment you change over in order to be back in production very quickly, you are actually exchanging more components rather than trying to make adjustments. The moment you have a machine and need to fix something here and there, it takes a long time to start up the machine again and be back at a reasonable efficiency. If, on the contrary, if you can change components with the minimum of adjustments, so that you’re quickly back in production, that quick changeover design costs more money, because you’re changing out more parts. It’s the customer who has to choose whether he prefers a machine that is modular, flexible and costs more money or if he wants a unit that’s simpler but costs less.
MASSIMO PIETRA: That’s why I fully agree. Many customers think of modularity as a kind of guarantee that they can change the production point in the future, because they are not able to forecast what the market will require in a few years’ time. What they ask Carle & Montanari, for example, is not to have a full optional line doing everything, otherwise it would cost them a lot of money, but to be able in two years’ time, maybe, to have a different extension doing something else, if their forecasts were wrong on the previous program. Modularity is being able to add new things not from the very beginning, but step by step.
CANDY INDUSTRY: Last year at this roundtable, concerns were raised about the sourcing of not only organic ingredients, but even non-certified essentials such as cacao, milk powders and milk. Are concerns about sourcing still relevant today?
TOMMY AAS: I just want to add that our experience shows clearly we might have a temporary shortage of some raw materials but, if you want to pay the price, you can always find some raw materials. In the short term we might have a shortage, but then you’ll see an increase in plantings.
OLAF SCHEPEL: I was in Ecuador recently, and you see a lot of local producers starting with single origin, and trying to export their chocolate into the market. In that respect, there’s a shortage in Ecuador and Peru in cocoa beans. Investment in new cocoa processing in that area is not continuing because nobody knows if they have enough beans for processing cocoa liquor, cocoa plant and cocoa powder. There is, indeed, a shortage, an artificial shortage maybe, on cocoa, which increases the price, also for organic.
CANDY INDUSTRY: We brought this up last year in terms of dumbing down technology. Are you making machines that are as simple and foolproof as possible for the operator?
MATT COTTAM: That’s the difference between a multinational and many of our customers, which are often family-owned businesses. Multinationals can cope very easily with IT. The family-owned and smaller businesses struggle sometimes. While they wish to have a fully automated plant, they struggle to maintain it, and that’s where it falls down. That’s where simpler controls can often end up having more longevity in them. In addition, these worldwide organizations pay for the IT infrastructure and the training infrastructure to support this. When you get down to the smaller scale of many confectionery companies, they don’t have the infrastructure to support it.
CANDY INDUSTRY: Matthew, are you actually simplifying your equipment as a result?
MATT COTTAM: Yes. We believe it’s a marketing strength to simplify things as opposed to saying, ‘This is a fully automated plant.’ For the big multinationals you always offer a fully automated plant but, for the privately owned company, you start off with a simpler plant and discuss with them whether you need to automate it or not, as you proceed with negotiation.
CANDY INDUSTRY: Better-for-you confections continue to grab headlines by combining exotic fruits and botanicals with traditional confectionery treats. It’s still a relatively small niche poised to take off. Are your customers asking you to work with them in introducing such products?
MONTSE CIRERA: In our case, there’s been a slow adoption of these better-for-you products, specifically with chewing gum. For example, our reference is Japan. In Japan, we have had success with new concepts like compressed chewing gum that is specifically designed to add active principles to it. Haribo has just launched a product containing lactobacillus inside that helps you with your mouth care. We start seeing these trends there, and they are also starting to move to Europe and the States. There is a lot of room for improvement there.
CANDY INDUSTRY: Genetically-modified ingredients have been mentioned a couple of times here. I’m wondering whether Europe is changing its view toward them or not.
MATT COTTAM: People are searching for what they call a “clean label,” as opposed to a label that contains value-added ingredients. The United States potentially is slightly different than Europe, because there they search out fortification, the energy, the vitamins or the minerals that potentially fortify your body. In Europe I would argue they’re looking for the clean label; they’re looking for no hydrogenated fats, no genetically-modified ingredients.
CANDY INDUSTRY: Premiumization appears to be another trend having an impact on confectionery products. Are you working with your customers to help launch confections that have better ingredients and/or more upscale packaging?
CANDY INDUSTRY: How important is upscale packaging?
AUGUST HEINZER: To differentiate yourself from the competition, it’s getting more important. We have had a number of projects and still have quite a few projects, actually, where we work with companies to bring out something totally different from what is on the market today. We have some projects right now I can’t talk about because they’re not yet on the market, but it’s clear there is a demand from the market for special chocolate confectionery items.
PETER BÄUMLIN: It’s presentation. It’s part of finer foods.
CANDY INDUSTRY: Thank you everyone for participating.