Moccarias &amp; mountain magic

Alpine air, mountain water and an uncompromising commitment to all-natural ingredients have made Loacker's products renowned worldwide. Double-digit growth has prompted an €80-million investment during the past four years, melding technology with innovation and integrity.

By Bernard Pacyniak

It’s unclear whether American Modernist poet Ezra Pound, a frequent visitor to the Hotel Greif in Bolzano, Italy, actually sampled a Loacker wafer while sipping coffee at the cafe. But if Pound were alive today, he would have been hard-pressed to pass up these light and airy delights from Italy’s most famous wafer and chocolate specialities manufacturer while penning his poetry.

Today, right across from the Hotel Greif on the Piazza Walther Platz, sits a new Loacker moccaria, a place where locals and tourists alike can sample freshly made pastries as well as any one of the company’s broad range of wafer-based confectionery products.

The Locker moccaria, which is a uniquely Italian hybrid of a coffee shop, pasticceria (pastry shop) and retail outlet, embodies the latest strategic component of this third-generation, family-run manufacturer of all-natural delights.

The 210-seat café in Bolzano (70 inside and 120 outside) provides the company the ability to both distribute its products and well as connect with consumers, explains Ulrich Zuenelli, the 44-year-old chairman of the company.

Conceived five years ago, the Loacker moccaria represents one component of the company’s most recent strategic thrust, integration. Having built its success on two previous “I’s,” innovation and internationalization, the company’s managing board, which consists of co-managing directors Christine Zuenelli-Loacker and Armin Loacker (Ulrich’s mother and uncle, respectively), looks to address future challenges by adding vertical integration as part of its corporate vision.

“This most recent addition, the third I so to speak, stems from several needs,” Zuenelli explains. “First, we want to ensure our raw material supply. We want to make sure we have access to premium quality ingredients.”

Like many other confectionery manufacturers, Loacker has had to deal with rising commodity costs and accompanying increases in processing and packaging supplies. As Zuenelli points out, the weighed average cost of raw materials rose 25.6% during the past 9-12 months. And like so many other manufacturers, Loacker has had to pass along price increases accordingly, in the 12-13% range.

But as Zuenelli stresses, it’s not solely about cost anymore, it’s about supply.

“For example, in the past, our supplier of cardboard packaging needed eight weeks lead time to guarantee delivery,” he says. “Now, the lead time is four months. Today, we don’t have any wiggle room in managing short-term fluctuations regarding demand.”

As a result, the company is pursuing a more active role with regards to its sourcing partners.

“Prior to now, because of our size, it was difficult to get involved in sourcing,” Zuenelli says. “Today, we’re talking with other manufacturers, people we know, about guaranteeing a sustainable supply of critical ingredients, initiating contacts with farmers.”

The company is also investigating the possibility of operating its own hazelnut farm in Italy, he says.

But sourcing, Zuenelli adds, represents only one aspect of the company’s integration plan. The Loacker moccarias (there are five in all throughout the South and East Tyrolean region) cap the other end of the spectrum by exposing the brand directly to the consumer.

Martin Loacker, Armin’s youngest son, heads up the Loacker moccaria project. An established pastry chef, Martin oversees all pastry production at the company’s central headquarters in Auna di Sotto.

Using the same natural ingredients sourced for production of the company’s wafer-based products, Martin tempts café visitors with a broad range of handmade torts, muffins, croissants and other baked specialties.

The company also offers customers its own Loacker coffee, a proprietary blend of seven beans roasted to exacting specifications.

Zuenelli explains that the coffee, which consists of 92% Arabica and 8% robusta beans, delivers a smooth and rich coffee flavor with a chocolate note.

“We’ve been using coffee flavors for a long time in our creams,” he says. Hence, the company has some expertise in this cherished Italian drink and opted to develop its own brand of coffee as a result.

In addition to pastries, coffee and a limited café menu consisting of sandwiches and pasta, the Loacker moccarias provide consumers an opportunity to review and purchase the entire Loacker product line.

“No retail store would give us this much space on the shelf to show all 150 SKUs,” says Zuenelli.

The ability to showcase the entire product line provides ample sales opportunities for café visitors and shoppers alike. Foodservice and retail sales ratios vary depending upon the store. Even so, retail sales reached as high as 80% in some locations. Annual sales at the company’s newest location on Bolzano’s main square topped €2 million in the first year.

And while all the products sold by the company remain wafer-based, be it at Loacker moccarias or through other retailers in Italy and throughout the world, it’s clear there’s a growing shift toward chocolate items, says Zuenelli.

Currently, two-thirds of all items produced are traditional wafer products, Zuenelli says. An additional 10% are chocolate-enrobed wafer products. Specialty cookies account for 19% of the product volume while candy bars round out the remainder with 5%.

Within that grouping, more than one-third of all the products are chocolate-enrobed, he points out. Moreover, that’s where the growth is coming from, thanks to ongoing emphasis on the first I, innovation, Zuenelli stresses.

The company’s most recent introduction, a rose-shaped moulded chocolate item featuring a hazelnut cream filling with crunchy pieces of roasted hazelnuts on a base of crispy, light waffles covered in either milk or dark chocolate, represents Loacker’s first foray into the chocolate praline sector.

Dubbed Rose of the Dolomites because its shape reflects the same kind of wild roses found in the surrounding mountains, the product is “Armin’s masterpiece,” says Zuenelli. Seven years in development, the chocolate praline delivers a wonderful yet intensely flavored mix of chocolate and hazelnuts.

In fact, hazelnuts comprise 30% of the cream content. The dark chocolate has a 60% cocoa content while the milk chocolate has a 39% cocoa content. The thin wafer base not only connects the product to the Loacker wafer heritage, it actually helps creates a “lighter” treat, Zuenelli says.

Introduced into Italy last fall for the chocolate season, the Rose was presented to international customers this January at the International Sweets and Biscuits Fair (ISM).

“This represents a new venture, a new market for us,” Zuenelli says. “We are using an image transfer strategy to penetrate a niche specialty segment,” he adds. “We believe that we can make inroads into a highly competitive market. There aren’t any projections for humongous volume, but certainly some nice growth.”

Based on past experience - as well as on the product’s taste - the Rose’s debut should meet, if not exceed, expectations easily. Consider Loacker’s foray into the Italian candy bar market five years ago. The wafer-based bars, which come in milk and cereal, chocolate and coconut and chocolate and hazelnut varieties, debuted in 2006 and attained 25% distribution.

Last year, distribution penetration reached 56%. Sales grew by 110%. In Italy, Loacker now holds the No. 4 ranking in the candy bar segment, trailing only Ferrero, Kraft and Nestle.

“We expect growth for our candy bars to reach 30-40% this year,” Zuenelli says.

The chairman has even greater expectations for Loacker’s other major launch this year, chocolate-enrobed Quadratinis.

Long an “international shooting star” for the company, the square-shaped snacking wafers will be available in milk chocolate as well as dark chocolate-enrobed varieties this fall.

In development for several years, the stumbling block in launching chocolate-enrobed Quadratinis involved finding the right packaging solution.

Unlike the non-enrobed counterparts, the chocolate-enrobed Quadratinis couldn’t be scaled into a standup pouch without ruining the chocolate coating.

Hence, a gentler, more sophisticated packaging process was required. In developing a 12-piece tray, the company also committed to investing in several Schubert pick ‘n place robotic lines capable of gently and precisely placing the chocolate-covered wafer cubes in the tray.

As a result, the product enjoys the same protection as other Loacker brands while delivering convenience and freshness to the consumer, Zuenelli says.

The Schubert investment represents only one aspect of a €80-million outlay during the past four years to expand production capacity as well as improve efficiency and processing flexibility.

In addition to Schubert robotic systems and a carton-erecting filling unit, the company has added three more Haas wafer production lines, four enrobing lines (three Sollich and one MF Hamburg), a new automated Lorenz Pan palletizing line and several SIMAC packaging units.

This comes on top of physical plant expansions at both the Heinfels, Austria and the Auna di Sotto facilities. Considering that volume growth in Italy reached 8% last year while international growth reached 19% for a combined average of 13%, it’s clear the added capacity was needed.

Of course, all such capital expenditures are self-financed, says Zuenelli, part and parcel of the company’s “crawl, walk, run” philosophy.

Thus, no product or concept is launched before it’s truly ready, from both a research and development perspective as well as an operational point-of-view.

Such attention to detail takes on more importance as Loacker continues to expand globally, the key driver behind internalization, the second I of the vision. For example, four of the company’s Top 5 export markets are located in the Middle East. And despite the growing unrest as a result of the Arab spring this year, and specifically the conflict in Libya, which was the second largest export market for the company last year, sales continue to increase.

In the United States, which Loacker has been exporting to for nearly 30 years, sales also continue to grow. Even during the Great Recession, sales - while remaining flat - didn’t drop off. Last year sales grew by 17%.

“We’re seeing sales gains as a result of increased distribution and increased volume,” Zuenelli says “A general rule to success in the United States has been that you either have to be good enough or cheap enough.”

In Loacker’s case, the better-than-good-enough rule applies. Moreover, the company’s well-positioned to take advantage of changes within the retail landscape for its product line.

“In the early 1990s, supermarkets handled about 90% of all cookies sales,” he explains. “Today, according to our information, that number has dropped to 60%, with the Wal-Mart phenomenon, discount stores, super centers, convenience stores and natural/organic specialty retailers having an impact.”

For the last 10 years Loacker has grown nicely within the organic and all natural segments, having teamed with such retailers as Whole Foods and Trader Joe’s. This year, the company is poised to further expand its influence within the supermarket sector, having received distribution with the Ahold Group of supermarkets, which include Stop & Shop, Giant Landover and Giant Carlisle, as well as chains such as Shaw’s, Wegmans and others.

“The highest per capita consumption of cookies in the United States is in New England,” he says. “So we’re optimistic we can make some inroads, particularly as we’ll be launching our chocolate-enrobed Quadratini line and the Rose of the Dolomites products this fall.”

Current projections all point to another healthy year for Loacker.

“As of May, sales were up 6% in Italy and 19% internationally, and this is without any sales from Libya,” Zuenelli says. He expects final sales results for 2011 to top €220 million.

He sees growing interest in such emerging markets as China and India for Loacker products, both of which have the demographics - a growing middle class - to afford premium all-natural, confectionery items.

That, after all, ties in with another “I” affecting consumer trends throughout the world - indulgence. In today’s times, who doesn’t want a bit of magic from the mountains to enjoy?

At a Glance

Loacker AG-Spa

Headquarters: Auna di Sotto, Italy

2010 Sales: €192.8 million ($270 million)

Employees: 550

Plants: 2 (Auna di Sotto, Italy and

Heinfels, Austria)

Annual output: 24,400 metric tons (2010)

Products: Wafer-based confections (150 SKUs)

Product breakout: Wafer products – 66%; chocolate-covered wafer items – 10%; specialty cookies – 19%; candy bars – 5%.

Brands: Loacker, Gran Pasticceria, Tortina, Buon Giorno, Gardena, Rose of the Dolomites

Sales Breakout: 57% - export (90 countries);

Italy – 43%

Distribution centers: Milan and Verona, Italy

Management team: Ulrich Zuenelli, chairman; Christine Zuenelli-Loacker, managing director and head of administration/central services; Armin Loacker, managing director and head of operations/research & development; Andreas Loacker, deputy director – R&D; Martin Loacker, deputy director – moccarias; Michael Kompatscher, marketing - Loacker moccarias; Manfred Kunold, director of international business; Frank-Jurgen Hess, director of operations – Heinfels; Hans Peter Dejakum, marketing director.

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Doubling down

When sales grow by double-digit gains on an annual basis year after year, and growth is shaped by product diversification, the numbers usually predicate the need for expansion.

When Candy Industry last visited Loacker in 2003, total metric tons reached 16,000. Last year, output reached 24,400.

Recognizing the need to increase not only output, but also product diversification, the company committed to a €80-million capital expenditures program four years ago.

In doing so, the company doubled the size of its Heinfels, Austria and Auna di Sotto, Italy facilities, adding three more Haas wafer production lines in Heinfels as well as four enrobing lines and a second moulding line in Auna di Sotto.

And while expansion in Heinfels proved fairly straightforward - the original design factored in future growth for the greenfield site - the Auna di Sotto plant proved more challenging.

As Ulrich Zuenelli, chairman of Loacker, notes, the Auna di Sotto facility reflected signs of the company’s organic growth through the years as a result of add-ons. Consequently, “you see many more conveyor belts throughout the plant,” he explains.

The expansions, however, also enabled the company to switch up product focus. In this instance, Heinfels serves as the principal production facility for high-volume wafer production, the six high-speed wafer lines each capable of turning out 50 wafer sheets per minute.

In Auna di Sotto, the focus is on chocolate, with four new enrobers turning out Loacker’s new candy bar line as well as the latest launch of chocolate-enrobed Quadratinis. Here, too, a new moulding line will be installed to accommodate the continued growth of the Grand Pasticceria product line as well as the newest jewel in the crown, the Rose of the Dolomites chocolate praline.

Both of the facilities, however, remain firmly committed to the company’s clean air, clean water and environmentally friendly philosophy. Oil-free compressors ensure air filtration systems maintain pharmaceutical-grade standards throughout both plants.

Pure, soft water from underground springs eliminates pre-treatment. And a heat recovery system minimizes exhaust fumes while saving hundreds of thousands of euros in heating costs annually.

For Loacker, growth must go hand-in-hand with its motto of delivering “pure goodness.”

Moccarias & mountain magic

Alpine air, mountain water and an uncompromising commitment to all-natural ingredients have made Loacker’s products renowned worldwide. Double-digit growth has prompted an €80-million investment during the past four years, melding technology with innovation and integrity.