Time for a Change
February 01, 1999
by Teresa Acklin
Name change, capacity increases at Swissmill, Switzerland's largest flour mill, precede the move to a free market.
By Diane Montague, European correspondent
The year 1998 was a dramatic one for Switzerland's largest flour milling company. Stadmuhle CMZ Zurich, the name under which it has operated for nearly 150 years, was changed to Swissmill.
At the same time, the company's milling capacity was substantially increased with the acquisition of the Minoterie Coop Rivaz mill on Lake Geneva. The mill, which will be used to process soft wheat and durum, is expected to increase Swissmill's production capacity by 30%.
These two moves have gone smoothly, and the management of Swissmill hopes that the next round of changes planned over the next 24 months changes that will enable the company to operate successfully in new free-market conditions will be accomplished as easily.
At present, Switzerland is an economic island in the middle of Europe, protected by high tariff barriers from the encircling countries of the European Union, of which it is not a member. Swiss agriculture is one of the most heavily supported in the world. But beginning in 2001, the tariff barriers will start to come down as Switzerland moves toward a harmonization of prices with the European Union. Support for farmers will, in the next few years, move away from price support and will be replaced with direct income payments heavily angled toward ecology and the environment.
The Swiss Grain Administration has been responsible for buying wheat from farmers and selling to manufacturers at a fixed price negotiated each season. This currently is around U.S.$600 per tonne, but will have to be reduced in stages between the years 2000 and 2007 until it reaches E.U. levels.
The S.G.A. also will be phased out over the next 24 months, after which wheat will be traded directly between producers and processors in the same way as barley, oats and maize.
Switzerland currently produces 560,000 tonnes of wheat a year from 100,000 hectares, with average yields having increased steadily from 5.5 tonnes per ha to 6.5 tonnes per ha.
Swissmill sources about 85% of its wheat requirements from home-grown grain. The rest comes from the European Union, Canada and the United States. All durum wheat is imported and comes from Canada and the U.S.; Scandinavia is the main supplier of oats.
The end of the S.G.A. will mean that Swissmill will have to set up a new grain buying department, which will be looking for new suppliers from all over Europe.
But far from being concerned about the threat from competition as trade barriers come down, Swissmill's manager, Josef Achermann, is enthusiastic about the opportunities.
However, these changes may force out some of the country's medium-sized millers who will not be able to implement the necessary adaptations, he said. Of the 100 or so milling companies in Switzerland, the four or five largest companies, which account for some 70% of the market, will have the resources to make the changes, he said. Many of the small local mills, of which there are about 50, will survive, he said, because they serve special local requirements.
Mr. Achermann said that Swissmill's wide range of products totaling more than 50 and its unique manufacturing mix will place it in a good position to maintain its existing outlets and exploit new markets.
The company has a 23% share of the home flour market in Switzerland and 40% of the country's durum flour market. Its major shareholder also is one of Switzerland's leading pasta producers.
HISTORIC FLOUR MILL.
The first mill was built in 1843 on the site not far from the city center of Zurich. In 1873, under the ownership of Eugen Maggi, a modernization program made it one of the most technically advanced flour mills in Europe.
The company was acquired in 1912 by the then newly established Milling Association of Swiss Co-operatives. The retail chain remains the major shareholder today.
Another large shareholder is Fenaco, a federal organization of the main agricultural producer co-operatives. Fenaco buys grain from its members and markets it on their behalf, and supplies its members with farm requisites.
An ongoing program of technical improvements at the mill began in 1983. Working with Swiss-based milling engineers, Buhler Ltd., Uzwil, Switzerland, has enabled the company to incorporate two flour mills; separate mills for durum, maize and oats; and a specialty mill all on one site.
The wheat milling process utilizes two mills producing 270 tonnes of flour per day. The two independent flour mills make it possible to dedicate one line for bakery flours and another for specialty products.
To meet the high standards of consistency expected by its customers, Swissmill blends the wheat before milling to produce flour to exact specifications.
The durum mill, which processes 130 tonnes per 24 hours, has been designed to meet the high specifications needed for pasta production. Table and gravity separators ensure that all impurities are eliminated. Two purifiers, double-stacked to save space, ensure that both normal and fine semolinas are speck-free.
With a processing capacity of 25 tonnes per 24 hours, the maize mill is the smallest unit at the Zurich site. Its output goes for production of polenta and extruded snack foods. Maize enters a degerminator after conditioning with steam and water to obtain a maximum yield of low-fat products.
The oat mill, with a capacity of 36 tonnes per 24 hours, incorporates a kilning process a hydrothermal treatment designed to improve flavor and shelf life. The groats and cut groats are treated with steam, then processed into flakes on a flaking roller mill, which also can be used to process wheat, barley and rye.
Storage, handling and warehousing takes place in the newest building on the site. The 2000-tonne holding flour storage and building on the site. The 2000-tonne holding flour storage and handling section is divided into 30 bins. This section has been designed to allow quick responses to customers' requirements.
The batch blending and mixing system has a capacity of 30 tonnes per hour. The high-rise warehouse has 600-pallet storage locations for efficient storage and retrieval. Finished flours can be supplied in anything from bulk lorries to 1-kilogram bags for home baking.
HIGH LEVEL OF QUALITY.
Despite the size of the business and the wide range of products, Swissmill does not employ a sales team. Mr. Achermann and one customer liaison manager maintain direct contact with the large-scale bakeries that account for about 60% of the company's sales as well as the smaller bakeries and retail outlets.
Instead, Swissmill has concentrated on maintaining a high level of quality control and detailed technical advice for its customers.
A large state-of-the-art laboratory and in-house bakery constantly monitor production for quality standards. Customers are encouraged to call the laboratory or bakery for help with problems or when developing new products.
The company's primarily local customers also will change as the free market system is phased in, Mr. Achermann said. Although there may be more competition in the Swiss market, he said, there will be new markets for Swissmill in other countries where the ability to buy a complete range of products and receive technical service and advice from on supplier could be technical service and advice from one supplier could be an important selling point.
In the constantly changing field of consumer likes and dislikes, Mr. Achermann forecasts that the demand for organic products will increase. Organic flour already accounts for 5% to 10% of the wheat market and 20% of oat sales in Switzerland, and is growing steadily, he said.
The demand for non-genetically modified grains and products also is increasing, and there is a constant demand for new mixes to produce new products. Ideas for further development are being acquired through outside research.
Pressure also is increasing in Switzerland for more environmentally friendly methods of manufacturing and transport. The Swiss have voted for a much higher proportion of goods to be moved by rail. At present, 99% of raw materials come into the mill by rail but only 20% of finished products are distributed this way a level that will have to be increased over time, Mr. Achermann said.
Underlining Swissmill's commitment to environmental improvements is its decision to install solar panels on the side of the grain silos when they were rebuilt in 1996. The power generated by the panels is sold to consumers in the city of Zurich.
In recognition of this, Swissmill has become the first flour mill in Europe to be awarded ISO 14001 certification for standards of environmental management, in addition to the ISO 9001 certificate for quality management.