MIDDLEBURG, VA. — In a discussion with the U.S. embassy over a visa application to enter the United States, Stefan Birrer of Bühler was asked to list the countries he has visited.
Mr. Birrer, who heads industrial milling globally for Bühler, hesitated and said, “Honestly, it may be shorter if I list for you the countries I haven’t visited.”
Even at the fairly young age of 46, Mr. Birrer has logged wide ranging experience in the milling business (in addition to millions of miles of travel), a background giving him rich perspective on the dynamics of global milling.
In an interview conducted Sept. 9 at the annual meeting of the North American Millers’ Association, Mr. Birrer, attending his first NAMA annual meeting, recounted highlights of his travelogue, which, in turn, offered a glimpse into dramatic change that has occurred in a number of milling markets around the world over the past quarter century. Speaking about the U.S. market specifically, Mr. Birrer suggested that keeping up with ever rising market quality requirements has become increasingly difficult and costly at older mills, even when considerable sums are spent upgrading these facilities.
Mr. Birrer was born in central Switzerland. His father was head of operations at a small flour mill in Sins, and Mr. Birrer was drawn to milling from his youth.
“When I wasn’t in school, I would go to the mill with my father,” he said. “A mill is an exciting place to a young boy.”
When he was old enough, Mr. Birrer served as an apprentice at the Sins mill, giving him experience in practical milling. He then attended the Swiss Milling School at St. Gallen before joining Bühler in Uzwil, Switzerland, in 1991.
Rather than taking the normal career path at Bühler working in milling technology, helping customers with project start-ups, acting as an adviser and designing mill flow sheets, Mr. Birrer started in project management. In this role he trained to develop new mill projects.
“After five years in production, I thought there is more to milling than production,” he said. “Project management, the design of new mills, new plants or new projects was quite interesting.”
Bühler runs a dedicated training department for project managers.
“You cannot get people from the university who are capable of understanding the process and then designing the project,” he said.
After two years, Mr. Birrer spent a year in Milan as a project manager.
Back in Uzwil in 1993, Mr. Birrer, still in his early 20s, began work on a major multi-facility project in the Mideast. A year into the multi-year project, though, he was asked to move to Mexico to lead milling sales, engineering, technology and customer service for the Mexican milling market. In Mexico, Bühler is based in Toluca, near Mexico City. The company operated a factory there.
While historically Mexico is a fairly quiet milling market, the opportunity Mr. Birrer faced in 1995 was extraordinary.
“In late 1994, the North American Free Trade Agreement was put in place, and the milling business in Mexico changed dramatically,” he said. “Mexico had been a completely protected market until 1994, a market that had semi-closed frontiers. With NAFTA, all of this disappeared. It was a huge move from a regulated market to a completely open market. The industry wasn’t ready. Before 1994, the price of wheat, flour and bran were regulated. Now, efficiency began to matter a lot, and only some companies were ready to take advantage of this. Those companies are today the driving force of the milling industry. Between 1995 and 2000, there was a lot of capital investment. We built every year two new mills and upgraded many others. At that time it was a 5-million-tonne per year market, much smaller than the United States but a reasonable market. There was major consolidation of the Mexican milling industry during this period. To this day, Mexico milling is very modern and efficient.
“We had been in Mexico for more than 70 years already, and the build-up of trust helped us capture most of the projects.”
These initiatives included the construction of four new flour mills for Grupo Bimbo S.A.B. de C.V., facilities that later were spun off into the separate Grupo Altex mills (and still later sold to Bunge).
Overall, the years he spent in Mexico were good ones for Bühler and Mr. Birrer, who was in his mid-20s at the time. In 1999, Mr. Birrer moved to Australia, where he spent five years in a very different milling environment serving the Australia, New Zealand and Pacific Island market.
“It is a market that has passed the consolidation phase,” he said. “It was highly concentrated with three companies controlling 80% or more of the market. It was a much less dynamic market than Mexico but a constant market with ongoing investment requirements. Every three years maybe one new large plant was built. The main business was upgrading, customer service, adapting plants to new market requirements.”
The experience gave Mr. Birrer exposure to the brewing, feed and rice milling businesses.
After five years, in 2004 Mr. Birrer moved back to Mexico, soon after a significant reorganization was done at the business there. This time he headed the entire office, assuming responsibility for Mexico, Central America and the Caribbean.
“The boom there was over,” he said. “During the boom years, we built up too large of an organization with manufacturing and could not sustain it. In 2003, Bühler did an organizational restructure that was difficult. I had maintained contact over the years with our customers, and I returned in 2004 to reestablish trust with customers. It went well; we rebuilt the company and operation.”
After four years, Mr. Birrer moved to Switzerland, where he has been ever since.
“My family was ready to move to Switzerland,” he said. “It was time. After nearly 15 years abroad, it was time to move to the head office. I think there is a time frame to reintegrate into a large organization. If the time is too long, it is hard. When you’re abroad, you’re an entrepreneur. You have to find solutions. You develop these abilities.”
Initially in Uzwil he headed milling sales, overseeing 150 sales people globally. It was this assignment that took him to many additional countries, with visits for major, strategic projects or customer relationships in Asia, Africa, the Middle East, Russia and Latin America (he is proficient in English, German, Spanish and Italian).
His responsibilities began shifting over the last two years as Bühler, under the leadership of Johannes Wick, organized its milling business into five separate units, including industrial milling (including wheat, durum and rye); specialty milling (including oats, soybeans, barley, quinoa, maize and other ancient grains); bakeries (and pre-mix plants); brewing and flour services (selling flour improvers and enhancers, a business focused in China).
Mr. Birrer in 2015 became head of the first (and largest) of the five units.
Asked to compare the U.S. milling industry with milling elsewhere in the world, he noted that the U.S. industry has become quite consolidated, mirroring the consolidation that has taken place in milling’s largest customers.
“The big advantage of the U.S. milling industry is that it sits on a lot of grain,” he said. “Good grain. It allows millers to operate large scale plants. The industry also benefits from good transportation infrastructure. It’s easy to move products around.”
The U.S. milling industry is no
longer competitive in the export flour market, Mr. Birrer said, describing that as a two-edged sword.
While meaning less business for U.S companies, the absence from the export market leads to fewer month-to-month swings in flour production and reflects that U.S. milling margins tend to be better than in many other parts of the world.
Characterizing how technologically up to date U.S. flour mills are in 2016, Mr. Birrer said there is great diversity across the U.S. milling infrastructure.
“The U.S. has some of the most advanced companies operating plants, very focused, able to produce flour with low bacteria count, heat treated,” he said. “Other parts of the industry are still operated with plants built 50, 60, 80 years ago. They don’t have the same opportunities to respond to today’s market requirements. It’s very challenging.”
Asked whether older mills can be remodeled/retrofitted to fully meet market requirements, Mr. Birrer expressed some doubt.
“The buildings were designed for different market requirements,” he said. “If you have to adapt this to today’s market requirements, it is extremely expensive. Sanitation, food safety, quality control, process control. To operate such a mill requires very skilled labor force. You lose this skilled labor force — it’s very tough.”
He said the investments companies were making to update their facilities varied widely from one company to the next.
“Some of the companies are investing in new state-of-the-art plants,” he said. “Others are hesitant to make big changes. But the technological change supporting the changing market requirements suggests if you don’t invest, you will fall back, as in any industry.”
Commenting briefly on other milling markets around the world, Mr. Birrer called Europe “very dynamic” while noting the China market has slowed considerably.
The development in Europe represents a marked shift following an extended period of little growth. This period has ended over the past five years amid a price fixing scandal that resulted in European Union fines totaling more than €40 million imposed on 20 flour milling
companies.
The freer market that followed the breakup of what in essence was a cartel has given millers impetus to invest in new, more efficient milling capacity.
“Another very dynamic market is Africa,” Mr. Birrer said. “It may be the most dynamic market, driven by the growth of consumers — in the Middle East and East Africa.
“Asia went through a dynamic phase, driven by China, but three years ago the Chinese government changed the support structure for the industry, and this has changed the rules in the Chinese milling industry and has definitely slowed investment.”
While translating into less business for companies like Bühler, Mr. Birrer sees a silver lining in the slowdown.
“For the mid- to long-term, this development is very good, back to normal after a highly dynamic situation that was not sustainable before,”
he said.
Also slower, with less of an evident silver lining, has been activity in Latin America.
The economic downturn in Brazil has created difficult times.
“There is a lot of uncertainty in the market, and uncertainty means less investment,” Mr. Birrer said. “But the industry in Latin America is in general on a very good level, very
competitive.”
As a company, Bühler has expanded its technology portfolio into other markets such as animal and aqua feed, rice processing, extrusion for breakfast cereals, cocoa and chocolate processing, advanced color sorting for grains, nuts, vegetables and others. Further to that, the company offers technology for the non-food sectors such as automotive and optics. Still, Mr. Birrer said global milling, headed since June by Ralph Schuck, has become no less a core business at the company and continues to grow.
“Milling was at the beginning of Bühler, and still today it is considered the core business at the company,” he said. “Fifteen years ago milling contributed one third of revenues, and it still does today. It has maintained share of the overall business.”
Looking at how milling technology is changing, Mr. Birrer said advances have been demand driven rather than supplier driven.
“The technology advances with market demand,” he said. “Today, the market is demanding finished product within very small quality tolerances. This requires a very good process control. Automation is the base that enables a good process control. Now we have NIR and many tools that help us to ensure that we set the parameters of the process precisely.
“On the one hand we have a huge variety of raw materials, which these days in global wheat trading, mills must be able to process nearly any wheat that is available in the world. It’s no longer dedicated to a certain region. On the other side, the finished products, the variety, is much greater than in the past, and the quality specifications are much more narrow. This is a big challenge for mills. Process controls with intelligent on-line process controls allow you to meet your customers’ requirements.
“Another main driver is food safety. It has changed the way millers look at their process installation.
“You cannot compare a 50-year old mill with a brand new mill. It’s a completely different set of tools they can work with. Traceability and process control are extremely important. Consumers want to know where the wheat comes from and who did process it. Consumers in Europe have asked these questions many years ago but now also U.S. millers have to be prepared to answer. In the future mills must provide traceability.”
