“During the last ten years, the number of EU flour mills has come down from approximately 3,000 to fewer than 2,500. Unfortunately, this downward trend is ongoing. Reasons for this decline are manifold. However, the main drivers are dwindling export markets, stagnating domestic demand, declining margin profitability and a lack of industrial efficiency in this sector.Today, the whole sector is undergoing a process of consolidation process – only the fittest will survive.” Siegfried Meyer Productivity Improvement Consulting SGS Siegfried Meyer, a productivity improvement consultant from Geneva-based SGS, which has a major role in shaping the European grain trade, gave an exclusive interview to Miller Magazine. Meyer, who has more than 25 years of profound experience in the international food processing industry, with focus on productivity improvement, made important comment on future of the EU milling industry. Noting that the competitiveness of EU milling sector is crippled, he said the industry was going through a consolidation process and only the companies with strong structure would survive. Siegfried Meyer, Productivity Improvement Consultant at SGS, answers our questions: Could you please provide us with some brief background information on your company and its activities? SGS is the world’s leading inspection, verification, testing and certification company and is recognized as the global benchmark for quality and integrity. With more than 95,000 employees, SGS operates a network of over 2,400 offices and laboratories around the world. SGS Turkey operates with 9 divisions, approximately 1,100 employees, 12 offices and 15 laboratories across the country. With its expertise at every stage of the milling process, SGS has long been a reliable and professional supplier to the country’s milling industry. Our services range from control of the quality of raw materials, production and final products, to fumigation and most recently to improving productivity. We know the number of the flour milling plants has been declining. What are the reasons for this decline? Can we talk about “restructuring of European milling industry”? What are your future expectations for your industry? During the last ten years, the number of EU flour mills has come down from approximately 3,000 to fewer than 2,500. Unfortunately, this downward trend is ongoing. Reasons for this decline are manifold. However, the main drivers are dwindling export markets, stagnating domestic demand, declining margin profitability and a lack of industrial efficiency in this sector. Today, the whole sector is undergoing a process of consolidation – only the fittest will survive.   What are the challenges for EU flour millers and can you draft possible solutions? The competitiveness of the EU flour milling sector is crippled which means it is crucial to act quickly. At a national level, it’s important for EU operators to further consolidate and increase unit capacities in order to reduce OPEX and improve margin. Furthermore, the EU’s single market allows flour milling companies to operate at a pan-EU level. This offers advantages in wheat procurement and opportunities to catch market growth in industrial bakeries and modern retail. This is a phenomena that is spreading all over the continent. Finally, it would be very beneficial for operators to specialize in the milling of niche products, like durum, rice, corn, and oats. This enables them to benefit from their potential to add value. What are the new trends in consumption? As mentioned before, the industrial bakery sector is growing rapidly. Modern retail becomes the largest distribution channel, but at the same time this puts additional pressure on conventional non-industrial bakeries. The only exception to this is those non-industrial bakeries that produce premium products, which provide higher margins. However, this will only benefit a very limited market segment. Another driver for growth is out-of-home consumption, which will expand the traditional B2B supply chain of flour millers to B2C as well. You are an expert on productivity. What do you suggest for the millers to increase their productivity? In the first place, the scale of production is the biggest driver for OPEX reduction. Meaning that the bigger the production capacity, the lower the costs per metric ton of flour produced. This gives the miller a comfortable position in relation to their competition. However, in order to secure this advantage sustainably, we advise our clients on increasing yields, reducing losses, saving energy, adapting personnel costs, and improving technical maintenance, thereby helping them to increase their factory utilization rate to benchmark levels. We have more than 25 years of experience and 170 plus very experienced industry experts to support improvements in productivity in the flour milling sector, worldwide. World wheat prices are now determined in the Black Sea – Not Chicago! Russia and Ukraine are strongly moving forward with their wheat flour exports. There is “Black sea influence” on world yield. Do you think the wheat production of these two countries are sustainable? The development of wheat production in Russia and Ukraine during recent decades is breathtaking and to be honest, they will grow further since their export markets in China and India are very hungry and demand is growing quickly. Just recently, I attended a conference in Russia dealing with the export of agro commodities and it’s really amazing to see the future export potentials in regard to China & India. As a result, we believe the development is very sustainable. Additionally, they have already started to vertically integrate and hence they have already built huge flour milling capacities with serious consequences for the future market landscape.