Fresh off the March commissioning of its newest flour milling line, Shiraz, Fars, Iran-based Khousheh Fars Flour Mills (KFF Mills) is well positioned to serve a market that is poised for growth. With the January lifting of the United Nations’ sanctions on Iran, many international brands, including those in the global food industry, are cautiously eyeing Iran’s 80-plus million people as a target for growth. The appeal of this market is all the more enticing as a significant portion of the population is between 15 and 45 years old.

Located in one of Iran’s wheat-producing regions, KFF Mills today has two lines — Mill A and Mill B — with a total annual flour production capacity of around 200,000 tonnes. The company is also capable of storing 120,000 tonnes of wheat. Sitting on 10 acres (40,000 square meters), the entire operation is comprised of the milling lines, mechanized storage facilities, a laboratory, home use packaging and a workshop that includes a roll fluting and sand blasting machine.

When it was founded in 1971 by M.H Jamshidi, KFF Mills had a daily milling capacity of 80 tonnes of wheat. Throughout its history, KFF Mills has worked with leading suppliers to install modern equipment to expand its production capacity. In 1981, KFF Mills established a state-of-the-art laboratory to meet the quality standards. Moreover, in 1989, KFF Mills was among the very first Iranian milling companies to obtain the national standards for its products.

It has been part of KFF Mills’ strategy to emphasize quality products, customer satisfaction and team value. These efforts have resulted in the following awards:

• Top Exporter 2010

• Outstanding National Flour Mill 2010

• Top Performer on Food Inspection standards 2010

• Top Performer Industry and Mining Ministry 2011

• National recipient of Quality & Standard 2011

• Top Performer on Food Safety - Ministry of Health 2012

• Top Performer Industry and Mining Ministry 2013

• Top Performer on Food Inspection standards 2014

• National recipient in creating employment opportunities 2015

The original ownership was a combination of family and local wheat co-op members. During the late 1970s and early 1980s, the partnership included up to 32 people. Today’s company is run by Chief Executive Officer and Managing Director Merzad Jamshidi, son of company founder M.H. Jamshidi, who owns more than 98% of the company. Jamshidi, who also serves as chairman of the International Association of Operative Millers Mideast & Africa District, is a highly respected figure not only in Iran’s milling and baking industries, but also in the global flour milling community.

Diverse sourcing

In a recent interview with World Grain, Jamshidi discussed the history and growth of his company and the Iranian milling and baking industries. All flour mills in Iran work with partially subsidized wheat provided by the Governmental Trading Corporation (GTC), which is affiliated with the Iranian Ministry of Industry, Mine and Commerce.

During the past few years the market portion supplied by GTC has gotten smaller, and depending on the region and province, the percentage ranges from 20% to 60%. KFF acquires 40% of its wheat on its own and sources the other 60% through GTC.

“The origination is mainly domestic wheat, which is used as the base of KFF consumption. Three main origins of imported wheat are utilized, which for the past year has been mainly Russian, German and Lithuanian as higher protein wheat. But Australian wheat remains the market favorite,” Jamshidi said.

Iran’s baking industry is comprised of a large number of smaller bakeries, and efforts to establish large commercial bakeries have not succeeded. “Iran’s baking industry has one of the most elaborate distribution networks with 4,300 bakeries in Shiraz and 7,500 in Tehran and surrounding areas,” Jamshidi said. “KFF tailors its product for the small bakers and supplies more than 800 bakeries. Large industrial bakeries tend to utilize more of a base flour, which is easier for any miller to supply.”

Jamshidi noted that recently, with the support of the government, industrial-type bakeries went into production. However, only a few have been successful. “I believe this is due to years of habits of the Iranians wanting to have bread warm from the corner bakers’ ovens.”

He did note that Iran’s commercial bakery segment has seen increased sales and offerings through supermarkets. Also, with the reduction of subsidies, the traditional bakeries’ production has dropped.

“The key to our continuous growth has been diversification and custom-made products for our customers. For one type of flat bread, we offer three different flours, enabling the baker to maximize his performance.”

KFF Mills closely works with its customers to develop new products for their use. “We have created customer profiles identifying their market needs, the equipment used and their products. This gives us the ability to customize and provide detailed specification to meet customers’ needs.

“We have added nine flour types for three different flat bread types and one more pizza flour type as we currently offer three different pizza flours. We are also currently working on wheat germ packing and wheat bran home usage. Still our number one selling products are flat bread flours, closely followed by soft semolina for pasta producers.”

KFF Mills’ primary brand is “Khoushe,” and that’s the “K” in KFF mills. “Given our products by nature are business-to-business and then business-to-consumer, we market through different channels such as exhibition, product promotion and training seminars for the bakers, and for our retail side we also do media advertising.”

About 80% of KFF Mills’ products are bagged. The company utilizes 10-kg, 25-kg, 40-kg and 50-kg bags. “This packaging ranges from traditional bakery to specialty pizza restaurants and with small packaging for home usage, which is sold through supermarkets and retail outlets.”

Market challenges and prospects

Iran has around 300 flour mills with a total milling capacity of 21 million tonnes. As they are supplying a domestic flour market that needs 11 million tonnes, the Iranian milling sector suffers from overcapacity. Despite this, KFF Mills is able to operate at a 95.5% capacity utilization rate.

Jamshidi noted that the reduction of the wheat subsidy in Iran has meant that the demand has also dropped and many large industrial flour consumers have set up their own flour mills. “The market is going through reform in which each mill is trying to survive by different methods. Some are getting out of this line of business and others are being taken over by other mills. As far as the government is concerned, the export market to Iraq has become a key strategy, which the government is trying to promote. The Iranian millers are trying to compete with aggressive Turkish millers who enjoy generous support from their government.”

Transportation costs are an increasingly important factor as Iran’s diesel subsidies are being lifted. All of KFF Mills’ products are shipped by trucks in bagged and bulk format.

“It’s essential to be close to basis of consumption. However, with the exception of Tehran and some other large cities, most of the mills in the country are situated near wheat-growing regions and are further away from the center of consumption, which adds to miller’s costs taking away your competitive advantage.”

KFF Mills’ operations are situated both in Iran’s wheat heartland and close to a population center. The Fars Province has annual wheat production of close to 1 million tonnes, and with nearly 1.5 million people, the city of Shiraz is the fifth largest in Iran.

“Our products are all shipped by trucks in bagged and bulk format,” Jamshidi said. “The plant is well within the city limits, which causes its own challenges, but at the same time it has given us a great advantage of being able to service the customers and distribute the products in a quick way.”

Iran is a nation that the global business community is looking to with bated breath. On one hand, they are cautious, because there is still some uncertainty about the status of the sanctions. On the other, Iran is a market made up of around 80 million people with a highly educated populace that is hungry for international brands.

“Given that Iran is a young country and with sanctions partially lifted, we expect to see the coming of many international brands in the food sector and fast food lines having their own requirements,” Jamshidi said. ‘So the demand in growth is anticipated in the next five years, and for the next 10 years it all will be growth. Given we just commissioned a new mill, we will run both lines at full capacity, enabling us to expand with another line within the next five years.”

New milling line

When KFF Mills was founded, its first facility was the second flour mill, Uzwil, Switzerland-based Bühler had equipped in Iran.

Four years ago, KFF Mills’ leadership determined that it needed to expand capacity. “KFF had to reject orders due to a lack of capacity, which initiated the plans for expansion and given the reduction of margins on milling. The expansion was critical to enabling KFF not to turn away new customers and maintain profitability of the company,” Jamshidi said. “The specific goals of the mill expansion were a strong focus on extraction and a very flexible mill, enabling the miller to produce different types of flour. Along with the mill, a new flour blending line consisting of six silos for the sole purpose of ready-made formulated flour was installed.”

Jamshidi noted the mill is equipped with state-of-the-art technology from Bühler.

“KFF has been a long-standing customer of Bühler,” he said. “Even though during preliminary analysis other companies were considered, given the history of the mill, the management decided to install Bühler’s latest technology.”

The entire plant is fully automated along with a specific control system where the PLC controls the wheat mix into the mill as well as flour blending. “Since we always have to use domestic wheat, and it reacts differently with wheat of different origins, the exact percentage of the mix is crucial,” Jamshidi said. “Also, the cleaning section is equipped with the latest model of Sortex.”