Stybel Flour Mills grows with Israel to become milling leader

by Josh Sosland
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Stybel Flour Mills
A devotion to serious study of milling technology runs deep at Stybel.

In 1955, Baruch Turgeman was a 23-year-old graduate from technical high school, working in Israel as an electrician. His career path took an abrupt turn when his girlfriend’s father offered him a job for a single day.

The offer came from Ze’ev Stybel, who had established Stybel Flour Mills 20 years earlier.

“It was Labor Day, and Ruth’s father needed some workers,” Baruch Turgeman recalled.

In Israel and a number countries at the time, International Workers’ Day was not an official holiday, but many workers took the day off. Mr. Stybel had some staffing gaps to fill to keep his flour mills operating.

“He asked me whether I wanted to work and make some extra money,” Baruch Turgeman said. “I’ve been here ever since.”

Baruch Turgeman married Mr. Stybel’s daughter Ruth, and the couple’s three children also have made a career of flour milling. A grandson, Omer, is now head miller of the company’s new Ad Halom flour mill outside the port city of Ashdod. Ad Halom is Israel’s largest flour mill. Over the last 20 years, the Turgeman family has propelled Stybel to become the largest milling company in Israel.

A deep commitment both to flour milling and family are evident in the management and culture of the Stybel Group, said Josef Pfister, a milling engineer with Bühler Ltd. who has regularly worked on Stybel projects for six years. While many family milling businesses exist globally, Stybel stands out, he said.

“The constellation of the Turgeman family is very unique,” he said. “Many of them, beginning with Baruch and continuing with Omer, attended the milling school in Switzerland. Dalit (58) works in the head office; Boaz and Assa are managing directors and are very focused on milling technology. For all that, Baruch is the head of the family. He has the last word. The sons defer to him.

“I have known them for six years. I have never seen them arguing. Even during the wars. One of the strengths of the family is how close they are.”

A devotion to serious study of milling technology runs deep at Stybel. Baruch Turgeman participated in the third milling course at the Swiss School (completing the course in 1959). Boaz attended the 33rd class (1987), Assa the 40th (1994) and Omer Thon the 59th (2016).

The family’s cohesiveness is a valuable attribute given that Stybel operates in the Mideast, a complicated and often difficult environment. Diverse, often fractious populations, cultures and traditions mix in what has been perhaps the world’s most politically combustible region in recent decades. Not surprisingly, the milling industry in the region does not entirely escape this complexity.

It is against this backdrop that Stybel Flour Mills has risen from its mid-sized status to become Israel’s leading milling company.

The complications overcome by Stybel to build the Ad Halom mill echo many of the elements that make Israel such a challenge. As Stybel worked to complete the project, the company was in a race against time to close another mill located in a neighborhood densely populated with Orthodox Jews, contended with severe damage sustained in an accident at still another mill, fought government regulations and endured two wars.

Parallels Israel history

Stybel’s history largely follows that of modern Israel, a nation established in 1948.

The company’s origins stem from the popularity in the 1930s of European baked foods.

“My grandfather, Ze’ev Stybel, came from Poland in the late 1920s and for many years was in another business,” said Boaz Turgeman.

Mr. Stybel came to Palestine at a time of seismic change. The land had been part of the Ottoman Empire almost continuously since 1516 but was conquered during World War I by the British, who were given a mandate over the territory in 1922 by the League of Nations. It was in this environment that Mr. Stybel was trying to establish a new life.

“Shortly before World War II, my grandfather visited Poland to get advice on business,” Boaz Turegman said. “He was told many Jewish people from Germany were fleeing to Palestine and wanted the sourdough bread they enjoyed in Germany. They advised him to go to Germany, which he did.”

There Mr. Stybel learned about the Steinmetz milling system, which he brought back to Palestine. The stone milling system used proprietary technology to clean and pre-germinate the wheat.

The first Stybel mill in Palestine was built in 1935 in the northern port city of Haifa. And the company supplied flour to bakers contracted to bake whole wheat sourdough Steinmetz bread, a popular brand at the time. An image of a young Ruth Stybel was featured in a 1935 advertisement promoting Steinmetz bread.

Beyond capturing a share of the growing market for specialty baked foods, the timing of the new flour mill proved fortuitous.

“During World War II, Stybel had to supply as much flour as possible to the British Mandate that was occupying Palestine,” said Baruch Turgeman. “The British had been importing flour from Australia before the war.”

At the end of the war, Stybel expanded, purchasing a second mill in Haifa with capacity to mill 40 tonnes of wheat per day. The mill was equipped with Robinson/Simon milling machinery.

However whimsical his start at Stybel, Baruch Turgeman’s training could hardly have been more serious. A few years after joining the milling company, he studied at the Milling School in Uzwil, Switzerland, and then at a Simon flour mill in England.

“I went to Belfast (Ireland) as a trainee and helped restore an old mill there,” he said. From there he returned to Israel and worked with his father-in-law, who continued to be active in the business until his death in 1982 at the age of 87.

Six-Day War enlarges market

Through much of the 1950s and 1960s, flour milling companies in Israel struggled, but the extended slump ended abruptly in 1967 with the end of the Six-Day War. Israel captured and occupied the West Bank and Gaza from Jordan and Egypt, respectively, and there was a significantly enlarged population to feed. Suddenly, Israeli millers faced a shortage of capacity. The heavily regulated industry was given a green light by the government to expand.

“After the 1967 war, the flour market doubled,” Baruch Turgeman said. “The government allowed Stybel to buy new equipment and add a new mill.”

Built in Haifa in 1968, the new flour mill also had a daily wheat milling capacity of 120 tonnes. The mill was equipped by Henry Simon.

Also during this period, the battle over milling industry regulation ramped up. Stybel took its grievances to Israel’s supreme court, where the company won its case. A process toward deregulation began in 1970.

Under regulations, milling companies were constrained by a quota system tied to the total length of each mill’s roller mills. A government audit of the milling industry after the court case resulted in Stybel gaining a double quota, Baruch Turgeman said.

Stybel viewed deregulation of the flour milling business as an opportunity to expand while others in the industry saw the free market pivot as a cue to exit.

“They (competitors) understood that the system was changing,” Boaz Turgeman said.

For example, a cooperative in the southern city of Beer Sheva decided to exit milling. In 1992, Stybel acquired the mill, a 1950s Bühler pneumatic mill. Five years later, Stybel acquired a flour mill in Netanya, a town on the Mediterranean seaboard about 20 miles north of Tel Aviv. The seller of the Netanya mill had just acquired a flour mill in Ashdod, 25 miles south of Tel Aviv. Stybel leased the Ashdod mill beginning in 2009.

Importance of grain storage

Because of the country’s dependence on imported wheat (about 80% of wheat consumed is imported), access to grain storage is crucial for Israeli flour milling companies. Stybel made a major move toward enhancing its grain storage position in 1999 with the acquisition out of bankruptcy of a large grain elevator, Haifa Silo, in the northern port city.

While a number of companies were said to be interested in acquiring the elevator at an attractive price, Baruch Turgeman said Stybel bypassed other would-be buyers with a simple plan.

“We approached the bank, asked what they were owed, and we paid it,” he said.

The elevator has 24,000 tonnes (about 900,000 bus) of storage and is located about a mile from the company’s Haifa mill.

“It provided additional storage for our entire system of flour mills,” Boaz Turgeman said. “Haifa and Ashdod are the only ports in Israel.”

Yeshayahu (Shaya) Beeri, import manager, estimated about one-third of Israel’s wheat imports come into Ashdod.

For cost effectiveness, wheat is purchased in cargoes of 25,000 to 30,000 tonnes at a time (about 1 million bus).

“You need a lot of storage available when it is time to unload a ship,” Mr. Beeri said. “We need to do it within eight days. Otherwise we pay demurrage to the port authorities.”

In total, the company has 147,000 tonnes (5.4 million bus) of grain storage at seven different mills and elevators.

Boaz Turgeman said Israel’s milling industry generally faces overcapacity. He estimated that milling operates at about 65% of six-day capacity. Mills operate 24 hours a day, six days a week after holidays (following several days of downtime), but otherwise generally do not run 24 hours a day, avoiding peak electrical usage times.

“All mills shut down for Saturday,” Boaz Turgeman said. “Saturday night, after Sabbath, mills start up again. They try to use best electrical rates. Mills usually run at night to take advantage of lower electric prices.”

Over time, Israeli flour mills have shipped diminishing quantities of flour into the West Bank and Gaza as those areas have developed their own milling markets.

“Ramallah, a large West Bank city, has a relatively new flour mill,” Boaz Turgeman said. “Five flour mills operate in Gaza.

“This has created overcapacity. Israel’s lost 30% of the market, West Bank and Gaza, because of donated flour and donated wheat. That has been the main reason for the increase in overcapacity.”

The excess capacity has contributed to a realignment of Israel’s milling industry. Three flour mills have closed in the past year alone, including the one flour mill in Jerusalem, an inland location.

While production stopped at the Beer Sheva conventional mill in 2008 following the collapse of a silo on the mill there, Stybel continues to operate a specialty mill and distribution warehouse in the southern city.

“We mill organic, whole wheat and other specialty flour at Beer Sheva,” Boaz Turgeman said. “It’s also a staging station for shipments farther south. We have a warehouse, packaging facilities, bulk flour storage and even wheat storage in Beer Sheva.”

The company’s other mills are in Haifa and Netanya (in addition to Ashdod and Ad Halom).

The new Ad Halom mill packages flour in sizes as small as 1 kg bags for home and small pizza shops. Packages as large as 600 kg in jumbo-bags are produced as well. The tremendous diversity of the company’s product line reflects the mix of its customer base. While Jews have inhabited the land of Israel for centuries, millennia even, the majority of Jews and a significant number of Arabs have their roots elsewhere. Migration into Palestine spiked in the late 19th century, continuing sporadically through the 20th.

Diversity seen in baked foods

Waves of Jews arrived from Russia, Poland, Morocco, Yemen, Iraq, Ethiopia, Poland, Romania and Tunisia help create what is modern day Israel. In addition to the nation’s 6.1 million Jews, Israel has 1.7 million Muslim Arab citizens and 300,000 citizens who are Christians or followers of other faiths. The population of the West Bank and Gaza total another 4.2 million Arabs.

The diversity of the population increased later in the 20th century and the mix of baked foods has followed suit.

“In Israel, the variety of the baked goods is really something exceptional,” Boaz Turgeman said. “The Jewish community came from all over the world, and each community came with its own traditional bread, or pastry or whatever. Everyone brought their own local traditions. We produce more than 100 different products.”

Boaz Turgeman said large baking companies producing conventional products have struggled, in part because of the increased popularity of alternative products but also because of continued government involvement in the industry.

“The bread price is controlled and generally is not updated with rising costs,” Boaz Turgeman said. “The controls cover sliced bread, challah, dark, white bread, products that account for 25% to 30% of all flour use. The companies lose money on these products. Pita is not price controlled, but is very affordable because of intense competition.”

Meanwhile, small and medium bakeries are growing, Boaz Turgeman said.

“Major companies like Unilever and Nestle are large flour customers, too, for breakfast cereal, frozen dough, par-baked, pizza, frozen baguette, semi-baked,” he said.

A further significant demographic changed occurred in the late 20th century.

“The customer profile altered dramatically with waves of Soviet/Russian immigrations in the 1970s and 1990s,” Boaz Turgeman said. “They brought in traditional east and north European bread. Rye bread. Dark bread.”

Boaz Turgeman said flour demand from matzah bakers has been declining at a gradual rate. Of about 1 million tonnes of wheat Israel’s mills process each year, roughly 15,000 tonnes is used to make flour for matzah, he said.

“It has become more popular in the Arab community,” he said.

Bulk shipments account for 50% to 80% of Stybel flour production, depending both on the region and the time of year, Boaz Turgeman said.

Each mill across the Stybel system operates as a separate profit center, Boaz Turgeman said, “to keep the focus on each mill.”

For example, Assa Turgeman heads the Stybel milling operation in Netanya 30 km of Tel-Aviv.

Stybel is rebuilding an existing mill in Ashdod by the port, replacing the milling unit there with a new Bühler mill. The mill will have daily capacity to grind 450 tonnes of wheat.

Additional projects are contemplated, but the Turgemans declined to disclose their plans. Asked whether Jerusalem, to the east, could be of interest, Baruch Turgeman noted that the mill there shut down recently after 60 years.

“One of the reasons the Jerusalem mill closed is the cost of the transportation of the raw material from Ashdod or Haifa,” Baruch Turgeman said.

Even beyond the milling industry, the Turgeman family’s passion for its craft has not gone unnoticed. In 2016, Baruch Turgeman was selected by the Industrial Association as the top industrialist of the year.

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