15th Annual European Supplier Roundtable shows a bright future ahead
Emerging markets bolster confidence amongst participants of Candy Industry's 15th European Suppliers Roundtable
[Editor’s Note: The following content was compiled and edited from participants responding to a series of questions e-mailed to them during the first week of March. The responses were edited for content, clarity and length.]
CI: With 2012 put to bed, how would you describe the operating environment your company faced last year? Also, given that environment, how would you rate your company’s performance? What are your expectations for this year? Where will your greatest growth come from?
Wolfgang Pförsich: The operating environment was somewhat volatile in 2012. For us, it seemed like there was a lot of movement and activity on the market. However, every project takes a different course until it is finalized; some decisions are made extremely fast, others take a long time. Considering these conditions, we were satisfied with our performance. For 2013, our expectations are on the same level as in 2012. We expect the largest sales growth increase to come from Asian and South American markets as well as from newly- industrialized countries.
Moreno Roncato: Despite a prolonged economic crisis, the company’s performance met budgeted expectations. And actually, considering that we were also still dealing with the finalization of our merged operations, 2012 was quite a good year for Carle & Montanari-OPM.
In 2013 we will realize all the benefits from this merger. Moreover, we are firmly convinced that our greatest growth will come from our ability to offer reliable turnkey solutions, from cocoa and chocolate processing to end-of-line packaging.
Regarding territorial trends, we think that a significant growth will come from both the BRIC (Brazil, Russia, India and China) and MIST (Mexico, Indonesia, South Africa and Turkey) countries, but we’re noticing that Europe and the United States are also awakening.
Jan Hammink: In our business, the operating environment was stable last year. Our market share has improved considerably, not only in the up and coming markets, but also in the mature markets, such as Europe. Our overall growth reached nearly 60 percent in 2012, so we are very proud of accomplishing this goal.
Looking at the requests and order intakes we are receiving at this moment, we are expecting moderate growth in 2013, which makes us still positive about the near future.
Olaf Heide: As a market leader and manufacturer of synthetic processing and conveyor belts, the food industry and all sub-segments are important for us. We were – and are – facing a dynamic environment. We saw the consolidation of small- and medium-sized companies in some regions as well as change of ownership or restructuring of big international players, such as the reorganization of Kraft Foods into Kraft Foods North America and Mondelez International. Thanks to our close cooperation with individual production sites, the business remained steady in highly industrialized regions and continues to grow in emerging markets.
Markus Rustler: Last year was an extremely busy year for Theegarten-Pactec, resulting in another record year regarding sales. Interestingly enough, this growth cannot be pinned down to a certain market area, since we saw growth in many different parts of the world, but especially in Eastern Europe, Asia, Africa and South America.
For 2013 we feel quite confident, given today’s existing sale orders for this year and the projects in our pipeline. Again, it is difficult to pinpoint any single market where our growth is coming from because order intakes as well as the project pipeline shows activities from all around the world.
Miriam van Dijk: The year 2012 has been one of the best years in the 127-year history of Royal Duyvis Wiener. The order intake is record high, meaning we can already predict that 2013 will be the best year ever in terms of sales, results and innovations. It is worth mentioning that, for example, 60 percent of F.B. Lehmann’s sales were generated with machinery that was newly developed in the past year. Innovations that answer customers’ demand are the key to continue this successful growth strategy.
Mads Hedstrom: For us,2012 had a positive effect on Aasted, which resulted in financial prosperity. This came about as a result of our many initiatives, such as the still positive effects resulting from the merger between Aasted-Mikroverk and A.E. Nielsen back in 2010, as well as the recent development of our new Energy line, which comprises patented tempering and enrobing machines.
Ralf Schäffer: The year 2012 proved very busy year for Sollich and we had many projects all over the world. Nonetheless, it was still difficult to procure all the materials and bought-in items we needed on time. Hiring skilled staff was also challenging. However, 2012 was the best year in the history of the company. For the year 2013, the order book is nearly fully booked and there are many serious projects.
In order to cope with this increasing demand, Sollich decided to expand its manufacturing facility to increase its capacity and to be more effective. The addition will be completed this year. Our growth has come from the expansion of our existing customers because of globalization and also from new customers, which now need more efficient and better production lines.
Christian Werner: The last three years were generally good years for Hebenstreit and we were able to strengthen our position in the market. Since we are known as a manufacturer of state-of-the-art wafer production lines for flat and hollow wafers, we supply mainly high capacity lines to growing markets. However, because of our company size and flexibility, we are able to provide a little extra support for our customers. We would rather build up long-term relationships than have one-time projects only. Our expectation for this year is, once again, good. We supply our equipment more or less around the world rather than just concentrating on one region.
Lorenzo Maldarelli: Last year proved to be a dynamic market for us, driven by a strong need to develop innovative solutions within a very short time. As far as 2013 is concerned, our focus remains primarily on emerging economies in the Far East. From an operating point of view, IMA performed well, but margins were reduced because of the high level of investments in research and development. We expect 2013 will deliver the same results as last year, although I’m a bit more nervous. Most of that growth will come from central South America and Asia.
Thomas Bischof: The operating environment in 2012 was a stable one for us, although we still sensed some reluctance for larger investments. Considering this environment, we rate our performance as good. For this year we are expecting some significant projects again. Multinationals are investing in emerging markets and this will also grow our business.
CI: Have recent concerns about “currency wars” affected the way you’re doing business? Are you fairly confident that the European and the U.S. economies will somehow “muddle” through? Given that many confectionery suppliers do an extensive business outside of both markets, how does the economic health of either factor into your business?
Marcus Rustler: Currency wars and related exchange rates – especially between the U.S. dollar and the euro – are an effect that can always appear in unstable economic times. However, as far as Theegarten-Pactec and most of our friendly competitors are concerned, the world’s financial and economic crises have had a minor effect on the confectionery industry. One reason is that confectionery — as the easiest affordable luxury good — is usually the last to be substituted by consumers.
On the other hand, a growing gap in the exchange rate between the euro and the U.S. dollar, definitely, will have an effect on our industry since most of the suppliers in our industry – especially those from Western Europe – still invoice in euros. Commodities like sugar and chocolate are usually billed in U.S. dollars. This will have an effect on the margins our customers can achieve selling their products.
Shrinking margins on our customers’ side usually have two effects: First, investments will be reduced, which will certainly affect us; or the opposite, more investments, driven by the need for more efficient production facilities and increased automation. The future will tell the outcome.
Thomas Bischof: As a Swiss-based company, the currency issue definitely has an impact, particularly for products being produced in Switzerland. However, being a part of an international group, our confectionery business unit benefits from the extensive manufacturing network of the Buhler Group, such as the shifting of parts sourcing or components or even whole machine assembly into the Euro region.
Looking into consumer behaviors in the United States or Europe (for chocolate confectionery) we still see a stable demand in terms of volume — which is the most important factor for machine suppliers. Moreover, given that these two regions have the largest installed base of equipment — which needs to be replaced after a certain life time (30 years) — that also underscores the importance of these two markets. For Buhler it is important to be “in the market for the market,” which means simply close to its customers. However, as many companies focus on sales, local for Buhler means having the capability to realize sales, customer service, engineering, manufacturing and even R&D in the area in order to ensure that our products and services meet local requirements.
Miriam van Dijk: Not significantly. Customers still favor high quality, high output at the lowest operation cost. As long as we are able to fulfill those needs, the currency impact is of less importance. But it is here to stay.
Ralf Schäffer: For international companies, currency fluctuations have only a small influence on a project. However, small and private companies will look to the exchange rate and probably move projects accordingly. In our case, this has only an influence if a project is realized or delayed and has no influence on the market share of Sollich, as our primary competitors are also selling in euros.
Lorenzo Maldarelli: No, because since our main competitors are based in Europe as well, this neutralizes any currency positioning. Residual market shares are in hands of small machine manufacturers. The cost of developing technology is much higher than any currency gap.
As for the European and the U.S. economies, I don’t expect any relevant growth even after the recovery.
Christian Werner: We believe that our economies will somehow “muddle through” the difficult times that we are all having. During the last few years we can also see that growing markets are still continuing to invest and the need for new lines is there. Of course, the currency war does not make our life easier, but the future still looks promising to us.
Wolfgang Pförsich: A stable balance of the currencies is very important for our business. Large fluctuations in the currencies are disadvantageous for us. Any shift in this balance slightly affects the level of inquiries. Unilateral currency changes lead to budget cuts, shifting of projects and even project terminations. Only in very rare cases can a budget be brought forward. If it comes down to investment decisions outside of the euro or U.S. dollar, an inflation of the euro currency is to be evaluated positively.
Jan Hammink: Most of our competitors are in the Euro Zone and because of that, currency wars do not affect our competitiveness. The slower European and U.S. economies will not influence our business too much in 2013, as we see a positive sales development in other markets.
CI: In past roundtables, we’ve discussed the growing importance of food safety, hygiene and overall sanitation within the food processing segment. With regards to equipment suppliers, are your customers demanding such improvements? What’s the relative increase in costs?
Olaf Heide: I can agree to that entirely! It is still a fact that food processors strongly aim for increased yield, reduction of operational costs and hygiene upgrades. Equipment and component suppliers that provide innovative answers to those demands enjoy a competitive advantage. We have some solutions in our portfolio that enable tremendous waste reductions when conveying sticky or fragile foodstuff. This applies to less food residues that may be sticking to conveyor belt surfaces and the gentle handling and transfer of related goods, which reduces product damage. Direct- food contact surfaces that have easy-release features and foster less product build up, contribute to easier, quicker and more efficient cleaning, and therefore improve overall line sanitation.
Wolfgang Pförsich: Our customers increasingly ask for solutions involving hygiene, safety and overall cleanability. However, most are not willing to pay for it. So, we discuss with our customers their needs in detail and show them the possible solutions. In the end, it is the customer who chooses the solution, based on his/her own priorities. Since we have developed various hygienic solutions within recent years, some of the features have — in the meantime —been integrated into the standard equipment. In any case we always offer our customers the perfect solution to their needs, though this necessitates higher internal investments.
Miriam van Dijk: Over the past years, food safety, hygiene and overall sanitation have become key factors in the cocoa and chocolate processing industry. Royal Duyvis Wiener is, together with our main customers, constantly innovating its equipment in order to fulfill the highest standards in the global market, as we recognize the importance of these factors. Therefore, all designed equipment is developed accordingly and thoroughly tested before releasing it to our customers. Since these standards already are taken into account during the design phase, there is no significant increase in costs. What’s delivered, however, is a significant decrease in operational costs.
There are several new innovations on the traceability of products, both on the ingredient side as well as on the sourcing side. We noticed that the demand for these innovations is rapidly increasing.
Marcus Rustler: For us — as a supplier of wrapping technology— food safety, hygienic design and overall sanitation within the food processing segment remain one of our daily tasks at our desks.
Over the past years, Theegarten-Pactec has been dedicating serious research and development time as well as engineering resources into this matter. Modern wrapping machines out of our production range cope with today’s market needs regarding accessibility, easy-to-clean designs and materials for the product to be wrapped.
Ralf Schäffer: The demand and expectation from our customers as far as food safety, hygiene and sanitation are concerned is, of course, increasing. It is our job to design the machines and production lines according to the request from our customer and to find a solution to produce these machines without any real price increase which, unfortunately, is not always possible.
Christian Werner: Yes, food safety and hygiene is getting more and more important nowadays. Many of our customers are requesting improved designs and solutions for their problems. Our concept is to form a team with our customers and to learn from each other. This way we combine our ideas and experience so that the improvements can be incorporated into our machines at a very early stage in the process.
Thomas Bischof: For Buhler “food safety” has been a focus topic for the last four to five years. For example, Buhler initiated the first food safety roundtables in the United States three years ago. For chocolate confectionery equipment, hygienic design remains a very important issue. This has also been incorporated in the R&D process, which means that every new machine needs to fulfill higher standards with regards to hygienic design than its predecessor. These are general standards and it is our objective to offer at no additional costs.
Mads Hedstrom: For the past 10 years, the hygiene and sanitation within food processing equipment has been a vital point of our “to do list”. If you take a look on our machines today, you will see that we have taken the market’s expectations of sanitary and hygienic design seriously, since a significant range of our machines meet these requirements.
Moreno Roncato: Our customers are getting more and more involved in food safety, hygiene and sanitation themes and keep on investing in HACCP and GMP projects. Carle & Montanari-OPM helps them to achieve these goals by developing and manufacturing reliable machines.
CI: Energy consumption remains a concern amongst multinationals. Has this concern manifested itself amongst midsized and smaller operators? Provide some examples of how you addressed this issue with your equipment or operations.
Mads Hedstrom: Since 2009, energy consumption has played a major role in our development department, and today the Aasted Energy product range comprises tempering machines, enrobing machines and cooling tunnels. When buying an Energy machine from Aasted, the customers automatically benefits from the reduced size of such components as motors and compressors. But more importantly, this new generation of machines introduces completely new methods, thus saving the customers up to 80% of their energy consumption.
Christian Werner: Our baking machines are generally heated by means of gas and the consumption is part of the product cost. In order to reduce this cost factor we have designed a unique “green burner” technology that bakes the wafers with a minimum of energy consumption. Only Hebenstreit customers can benefit from such an efficient burner technology, which also produces about two-thirds less CO emissions. This is not only important for the multinationals, but also for the smaller wafer producers.
Wolfgang Pförsich: The interest in energy efficiency has increased throughout, including midsized operations. We define the highest energy efficiency as energy contribution in relation to the output of the desired end-product. Our designs have been accordingly optimized for years and this is being valued as a unique feature by our customers. We always define a stable process as operating on reliable equipment, which has a long life line and minimal interruptions. The manufacturing lines are designed and constructed for 24-hour operations with minimal downtime. We set a high value on exact- product assembly and extensive avoidance of rework. (Low material input reduces energy during production and minimal rework saves processing time).
Ralf Schäffer: The issue of energy consumption is a high priority at Sollich and we are looking always at the whole process whereby a line can produce a certain amount of products with the lowest energy consumption possible. It is not our style to look only at small sections, to compare it with old techniques and systems and to use this as a marketing tool. Sollich will always deliver the most effective process as far as the overall efficiency is concerned which includes, of course, low energy consumption for the complete line. For this we look at a longer production period and not only on energy consumption per hour.
Moreno Roncato: Yes, small and mid-sized companies also are concerned with this issue. With them especially in mind, Carle & Montanari-OPM has recently launched a new chocolate temperer, the BETA X, which can be used from 10% to 100% of its nominal flow rate. This feature will bring more flexibility in the traditional tempering process, delivering huge energy saving, especially when teamed with Fast-Shell or similar cold-punch processing technology.
Thomas Bischof: Energy consumption is another area under the spotlight as concerns Buhler’s innovation activities. We have, for example, developed a process – based on the pinch method – whereby existing plants can be analyzed and finally improvements can be implemented for increasing the energy efficiency. Since 2010 we have a set of measures and activities that can be implemented in a production plant. In general, we can see that — at least in Europe — energy consumption is also an important topic amongst midsize and smaller operators. Some of them have even developed their own differentiation based on green energy or carbon neutral labels.
Jan Hammink: Energy consumption is a very important factor amongst multinationals as well as medium-sized companies. For many years we have solutions whereby we can considerably reduce the energy costs in the grinding process. These solutions will become even more important in the upcoming years.
Olaf Heide: We recently implemented the Habasit Green Concept as an integrated approach to respect the Earth's limited resources and aim for continuous improvement. This applies to the set up and improvements of our various manufacturing sites, but also to dedicated solutions that we develop for specific industries and applications. Two examples for food processing include our HabasitLINK plastic modular spiral belts and the Habasit HyCLEAN CIP System.
In the case of our plastic modular spiral belts, they can replace old-fashioned metal belts in many systems. Cooling or elevating systems using plastic belts can be designed much lighter and also the individual belt weight is lower than with metal spiral belts. This contributes to reduced energy consumption to operate the systems. On top of that, there are efficiency and safety advantages due to better product release, less damages and elimination of lubricants, which can be a source of contamination.
As for the Habasit HyClean CIP system, which was developed to ensure efficient and reliable cleaning of plastic modular and other belts, the EHEDG-certified and Innovation-awarded system works with low water pressure. As such, it reduces the overall water consumption tremendously compared to regular high-pressure cleaning of conveyor belts.
Marcus Rustler: In today’s world, energy efficiency is one of the main tasks every equipment supplier has to cope with. Again – over the past years –Theegarten-Pactec has escalated its efforts in research and development as well as engineering into this matter.
As a result we were able to significantly reduce the amount of energy consumed by our equipment as well as the use of other common goods, such as compressed air and cooled water.
Lorenzo Maldarelli: We find that our medium-sized customers zero in on the lowest investment cost, the package that delivers the most output at the lowest price. They’re not that interested in more advanced technology that decreases energy consumption. We are, however, currently working on energy-saving developments since our larger customers are interested.
CI: Health and wellness, value, nostalgia and exclusivity were some of the themes swirling about ISM this year. What have your customers been focusing on regarding product development? What’s your involvement?
Moreno Roncato: Because we are involved in every aspect of processing, from production to the packaging, we are really in touch with all the trends and new products requested by the market. Our customers seem to be mostly focused on health and wellness themes as well as on developing new exclusive premium products (as in new recipes, shapes, packages) that can surprise consumers.
Lorenzo Maldarelli: Exclusivity remains the most common request from our customers regarding new product development and support. It’s all about coming up with a proprietary concept so the development don’t benefit a competitor and provide them with a solution. That, of course, means being involved with our customer from the very beginning.
Jan Hammink: Recently we have opened a test facility at our premises in Wormerveer, Netherlands, for our customers and prospects. During the last months, we had several customers conducting trials to improve their recipes, changing to healthier ingredients. In addition, we see a trend using Fair Trade- and organic-certified ingredients.
Wolfgang Pförsich: With these themes, there are new topics as well as “old wine in new skins,” which are very similar in the fashion industry. We are observing constant questioning of production processes in the search for new possibilities. We try to pick up ideas, together with our customers, and offer corresponding solutions. For this purpose, we have — amongst other capabilities — our Test Center, where we are able to reproduce all known processes and consistently develop new ideas. With our expertise and equipment, we can — as an example — support our customers in intentionally achieving irregular product forms in order to make the products seem handmade.
Markus Rustler: In general, the confectionery industry worldwide has become more marketing-driven over the past 10 to 15 years. Subjects such as health and wellness, high-value, nostalgic products as well as exclusive products, have become more important for our customers.
In general, these trends result in shorter lifecycles of confectionery products, further added value regarding recipes, packaging and, last but not least, a demand for flexibility within the production machinery. Furthermore, seasonal products have seen an increase in demand.
As a supplier of wrapping technology, we have coped with these new market trends by introducing more flexible machines that are modular in design and can easily be converted between different product formats as well as wrapping styles – without sacrificing the production outputs required in today’s world.
Ralf Schäffer: Sollich is very often involved in product developments with customers, which are, of course, proprietary. Healthy food and quite exclusive products are the focus of our customers.
Christian Werner: Many of our customers are in contact with us already during the product development phase. This makes sense since — in the end — the ideas need to be produced on an industrial scale and not only in the laboratory. Reduction in fat, lighter fillings, higher fiber content, rye flour all these points are being discussed and looked at during the product development.
Thomas Bischof: Honestly, for us, we’re not that involved regarding these themes. There is some tangental participation, of course, such as enhancing wellness through gentler processing in order to maximize cocoa flavonols. Also when it comes to sugar-free or sugar-reduced chocolate, we assist our customers since it requires slightly different processing techniques because of changing physical properties.
CI: Despite some moderation, commodity costs remain high across several key confectionery segments. Is this the new normal?
Christian Werner: High- quality ingredients make good- quality products and this is— in the end —what the consumer is paying for. It is difficult to make good products with low quality ingredients. That’s why it is so important nowadays to have the best technology and the highest possible efficiency when it comes to production lines. A simple production line may in the end result in wasting too much energy as well as costly ingredients!
Markus Rustler: Overall commodity prices related to the confectionery industry have seen a substantial increase over the last years, be it sugar or cocoa beans. There are two main factors that drive the commodity prices: Onebeing a growing demand in terms of volumes; and second, our befriended investment bankers, which drive prices by speculation.
The growth in demand is not something that be overcome in the future, simply because of population growth. The increase due to speculation can only be solved on a political level. It remains to be seen on how this will develop in the future.
Miriam van Dijk: Probably this is the high normal. However, we would rather say that it looks like volatility is the new certain.
Ralf Schäffer: Our customers try to compensate high raw material costs with more efficient equipment so that at the end the selling price of the product can remain stable or even be decreased. The reduction of waste and rework as well as to re-use the rework in an efficient way is also one way how production costs can be reduced.
Thomas Bischof: We have different opinions on that. Considering the scarcity of cocoa and the growing demand for real chocolate in emerging market, one could argue that trend of rising cocoa prices will continue. Other commodities, such as sugar or milk powder, have always had some price peaks in the past. As a result, here we can again expect to see price volatility in the future.
Wolfgang Pförsich: In general, prices for consumer goods rarely decrease. Still, this isn’t always a truism with confectionery products. We offer our customers a highly controllable process that enables them to save energy as well as raw materials. This may at least partly offset the increasing costs for energy and raw materials.
CI: What development within the confectionery industry surprised or delighted you last year and how did you take advantage of that occurrence?
Jan Hammink: One of the most important developments is the increase of organic- and Fair Trade-certified chocolate. Because of this trend, our customers decided to dedicate production of this special chocolate on separate equipment. At this moment, we addressing this equipment need and, as a result, increasing our market share.
Wolfgang Pförsich: Our customers keep on surprising us with new ideas. This input provides the basis and motivation for our constant progression. The impact of these developments can be seen amongst others at our exhibitions and on our website. All customers are invited to discuss new product ideas with us and to develop ways with us to make them come true.
Moreno Roncato: Customers keep on innovating with the aim to surprise consumers with new products. Consequently, we are involved in this process of continuous innovation, following market trends and developing machines able to satisfy our customers’ needs.
Ralf Schäffer: Bigger customers are getting even bigger by merging or taking over other companies. Because Sollich is a strategic partner for these multinationals, we do have some advantages compared to smaller machine suppliers who cannot serve the customers in the same way globally as far as we can regarding equipment supply and service.
Thomas Bischof: Definitely the development of emerging markets like Brazil, India or China was a highlight for us. We have already addressed this issue two to three years ago and now are able to offer solutions that target the needs of local producers as well as multinationals, which are expanding into these markets. For example we launched a compact moulding line at interpack 2011, which has been successfully sold into these regions.
Christian Werner: The growing markets, such as China and India, are looking for better product quality and this helps us in supplying them new, high-capacity lines. Other markets are looking for new products and ideas where we work together with our customers to provide such products.
Lorenzo Maldarelli: In general, developmentscentered on providing packaging solutions always present more interesting challenges than those involving renovation or even increased output.
Mads Hedstrom: First of all, we find it very positive that the market within the confectionery industry has not come to a complete standstill, and we still sense the need of innovation, new product developments and heavy investments.
Naturally, the market’s constant need of new developments is an advantage for Aasted, given its tradition for pursuing emerging trends and, as a result, developing innovative equipment to capitalize on those trends.