Expanding the family business

by Arvin Donley
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It has taken a little less than two decades for Tondo SA to climb from the 12th ranking among flour milling companies in the state of Rio Grande do Sul in Brazil to one of the biggest operators in the region.

“Today, we have the leadership for homemade flour and the second position in local cake mixes,” said Rogerio Tondo, president of Tondo SA. “We are also second in terms of production and market share.”

The company’s ascension among the nation’s millers is a great source of pride for Rogerio Tondo, a second-generation member of the family business that was launched 58 years ago. The company was founded by Rogerio’s parents, Dalvino and Thereza Tondo, Italian descendents whose family came to Brazil in the 1870s. The business will eventually be passed to third-generation family members who are currently working with the company, Rogerio Tondo said.

Tondo SA, which employs 440 people, is headquartered in Caxias do Sul in southern Brazil. Rogerio Tondo said the company’s strategic plan over the next two years is to consolidate all of its recent investment in the milling and biscuit business.

“We want to increase our EBITDA (earnings before interest, tax, depreciation and amortization expenses) next year,” he said. “After that, another cycle of expansion is already planned.”

LATEST EXPANSION

In recent years, Tondo SA has undergone numerous expansions in flour milling.

The company’s latest expansion is taking place in Caxias do Sul, in the state of Rio Grande do Sul, Brazil, where a new 400-tonne-per-day flour mill is being constructed. Total investment in the project is $12 million and Tondo expects the “C” mill to be operational by September 2011.

Tondo SA has hired Buhler AG, Uzwil, Switzerland, to design the mill and supply equipment to the facility.

When the project is completed, Tondo said it will have a milling facility that is energy efficient and features a sanitary design, production flexibility and lower total production and distribution costs.

The mill is specially designed to fulfill the growing emphasis on food safety, which is extremely important to its industrial customers, Rogerio Tondo said.

The cleaning system is equipped with a Buhler Combinator MTCD, which is designed to reduce the risk of mycotoxins. The mill also features a Sortex Z+ color sorter with InGaAS infrared technology that helps reduce mycotoxin content. A light peeling system is used in the second cleaning with the main objective being the reduction of heavy metal content as well as microbiological contamination.

Buhler’s WinCos.r2 automation system, which features total product traceability, is being installed.

The C mill will be equipped with Buhler’s all-stainless steel SIRIUS Plansifters, which feature NOVAPUR synthetic sieves designed for easy maintenance and shorter downtime.

The entire building is being modified to be pressurized with filtered air, which will help ventilate the facility and help prevent dust and insect contamination.

Rogerio Tondo said about 60% of its flour production is used to make its own products, which are sold under the company’s Orquidea brand.

“We produce home flour, bakery flour and mixes, cake mixes, dried pasta and biscuits,” Tondo said. “The other 40 percent is dedicated to our industrial bakery, pasta and biscuit clients. Since we produced the finished-good products, we can control the quality much better and develop tailor-made solutions to our industrial clients.”

All of Tondo’s flour is transported by truck with about 60% of it packaged in 50-, 25-, 5- and 1-kilogram bags. Tondo said about 25% is packaged in larger bags and 15% of the flour is delivered in bulk.

“We invested in a new bagging system (from Haver & Boecker), with a bag discharger that is able to produce 900 25-kilogram bags per hour,” Tondo said. “It is fully automated with the valve bag and a safety seal, either on paper or plastic.”

For the domestic bags (5 and 1 kg), the machine used is manufactured by Italpack, an Italian supplier, he said, adding that all of the packaging machines are integrated with robotization and palletization system design by another Italian company, TMG.

At the same site of the C mill, Tondo built a plant five years ago that produces long, short and nest pasta. The products at the plant, which has a monthly capacity of 3,000 tonnes, are made primarily from a blend of soft and hard wheat, and a very small percentage from durum wheat.

“This year we started our new biscuit plant with a line bought from Imaforni, a well recognized Italian manufacture,” Rogerio Tondo said. “The total project is for four lines, and we plan to be done by 2013. We will have a production capacity of 3,000 tonnes of cookies per month.

“This integrated project — flour mill, pasta and cookies facility — is the first one in southeast and south of Brazil. The main reason for this integration is to add value to the flour, optimize cost efficiencies and distribution, and mainly to support and grow the Orquidea brand line.”

Consumption of wheat/flour products in Brazil is stable in southeast and southern Brazil, following trends in population growth, Rogerio Tondo said, but in the country’s north and northeastern region, growth in per capita wheat/flour consumption is trending higher. He said there is growing demand in all parts of the country for more whole grain products.

RAW MATERIAL CHALLENGES

Brazil’s tropical climate is not very suitable for growing wheat, and this problem is reflected in the fact that two of the country’s less tropical states, Parana and Rio Grande do Sul, account for over 90% of wheat production. Despite the domestic production, Brazil only meets about half of its wheat needs and therefore has to import around 6.5 million tonnes of wheat every year.

Rio Grande do Sul, where Tondo is located, is the second largest wheat-producing state, but since most of the local crop is soft wheat, Rogerio Tondo said the company must import most of its hard wheat from Argentina, Uruguay and Paraguay.

The current situation is contrary to the government’s stated goal of becoming self-sufficient in wheat production. Wheat is the only major food item that must be imported into Brazil and the government set the minimum price for wheat at a high level to encourage increased production. Due to the strong Brazilian currency, imported wheat is priced below the minimum price, so millers are shipping in imported wheat. Farmers do not want to sell into the domestic market at prices below the government’s minimum, so the only way to get that minimum price is to sell to the government. As a result, farmers are petitioning the government to set up a series of auctions at which farmers can sell their wheat to the government just like they did for safrinha corn produced in central Brazil.

Between January and November 2010, 5.8 million tonnes of wheat were imported into Brazil. During the August-November period, wheat imports were 29% higher than during the same period in 2009.

Rogerio Tondo said the explosion of domestic wheat prices in recent months is having a major impact on the local milling industry.

“This will impact the price of flour for all of the first semester of 2011,” he said.
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