NOWEL: “The best products take time”

“The best products take time”

The Polish bakery NOWEL set its sights high in 2020 and, in the midst of the pandemic, invested in a line that transferred the concept of artisan bakery production into a fully automated process.

+Helga Baumfalk: NOWEL’s main products are bread rolls. In the past, you have produced more than a billion bakery products annually. Have you found that the pandemic has changed your sales channels and/ or regional markets? Elżbieta Zajezierska: It would be difficult to identify an area of the economy that has not been affected by the pandemic. COVID-19 has redefined the existing perception of business and made numerous companies leave their comfort zone after years of stabilization. For us, the first wave of the pandemic last year was like a test of our procedures and our readiness to make rapid and profound changes. Working closely together during the crisis has strengthened relationships with our business partners and improved our understanding of our common needs. Michał Zajezierski: What is important to mention, despite the experience of the last year, we not only maintained production, but we also did not slow down the planned investments and expansion of production lines. In just a few weeks, we have created the first consumer brand in almost 100 years, ‘Home Bakery’, which © NOWEL is frozen and packed bakery products for home baking. It was an almost immediate response to consumer concerns, especially important in the first months of the pandemic. We also invested in a new production line for premium stone-baked products. In February 2021, the products were launched in Lidl shops all over Poland with the ‘Baked on stone oven’ campaign. We were also able to open up new markets. Meetings took place from our desks, in the company office or from our home offices. Baumfalk: You produce bread rolls and bread with the ‘clean-label’ promise and organic baked goods. Did sales in these two categories increase during 2020? Karolina Zajezierska: Currently, almost all NOWEL products carry the ‘clean label’. In some product ranges, we have taken it a step further and also stopped using enzymes. These baked goods are based on just three to four ingredients. On the one hand, this quality is our trademark, and on the other – increasingly, our consumers expect it, not only in Poland but throughout Europe. Following these trends, each year we are increasing the number of organic products that we offer. However, we predict that despite the growing popularity of this group of products, it will still remain a niche market. This is particularly due to high operational requirements in stores – retail chains must ensure that there is no contamination between organic and non-organic products. Baumfalk: NOWEL is a manufacturer and supplier to retailers, but is not well known to consumers. Did the idea of launching a consumer brand come as a result of the pandemic? Elżbieta Zajezierska: We have had plans for a consumer brand for some time. COVID-19 has given new impetus to our efforts to launch 'Home Bakery'. Will this product continue

to be popular after the pandemic ends? Or will customers return en masse to the stores and choose fresh bread rolls straight from the oven? Time will tell! Karolina Zajezierska: ‘Baked on stone oven’ is our second brand that is ‘visible’ to the customer – it is the brand under which our new products are sold all over Poland and on European markets. The products are the result of several months of work and tests. Our goal was to create an original bread flavor that we remember from our childhood or our parents' or grandparents' generation. The intense, deep flavor and longer freshness of the baked goods result from a precisely determined maturing time and a multi-stage fermentation process. The products owe their crunchiness, golden-brown crust and rustic character to baking on granite volcanic stone from the Italian region of Val D’Ossola.

Baumfalk: Up until now, you have achieved about 30% of your sales in exports to about 15 countries. Has COVID-19 impacted these figures? Karolina Zajezierska: We have succeeded in maintaining the export share at a similarly high level. Seven further export nations were added in the past two years. Today, we are present with our products in 22 countries. We have noticed that customers are more open to new flavors. Buyers are more and more often looking for novelties and going beyond domestic suppliers, which significantly increases our export opportunities.

Baumfalk: Does this mean you will focus even more on exports in the future? Karolina Zajezierska: Strengthening NOWEL’s position on key European markets and further international expansion is our long-term and consistently implemented development strategy. Our products can already be purchased on the largest markets in Europe as well as in the USA and Canada. In the coming years, we want to offer our latest product lines, including ARTISAN. We will also work on introducing NOWEL bakery products to other European countries as well as on strengthening our position in those already acquired.

Baumfalk: From 2013 to 2019, NOWEL invested more than EUR 60m in the development and acquisition of production equipment. How much did you invest in 2020? Michał Zajezierski: We started with a very extensive investment plan worth EUR 22m, which we managed to implement despite the pandemic, largely thanks to good organization and exemplary cooperation on the part of bakery equipment suppliers. The first project was a line dedicated to the production of tin bread, mainly rye or wheat-rye, produced on the basis of our own sourdough. We implemented this project in cooperation with WP, Newcap, JBT and Diosna. The second project, which I see as the crowning achievement of our bakery and which, is also unique on a global level, as far as I know. We have managed to translate the artisanal process of producing bakery products into fully automated industrial production. Assuming that the best products take time to develop their full flavor, we designed the line so that the entire production process – from the start of wheat acid fermentation, through the maturing of the dough and further processes – takes over 40 hours. The products, made on natural wheat sourdough, with a long maturing time (over 12 hours), have a deep flavor, an open texture and also stay fresh for a few days after the final baking. Regarding this line, we would also like to thank our partners, namely Mecatherm, Diosna and Rademaker for developing together pioneer production solutions with us, and for the proper management of the installation process during such a difficult period.

© NOWEL

NOWEL Sp. z o.o.

NOWEL produces frozen bakery products (breads, bread rolls) for bake-off at a plant in Legionowo (about 30km from the Polish capital, Warsaw). In addition to supplying leading Polish retail companies, the wholesale baker also supplies food retailers and discounters in other European countries, such as the Netherlands, Germany, Czech Republic and Hungary. Other export markets include the USA and Canada. The export share is about 30%. With approx. 500 employees, NOWEL generated a turnover of about PLN 247m (around EUR 53.94m) in 2020, which makes it one of the top five bakery companies in Poland according to its estimates. In its home market, NOWEL is considered the market leader in the Kaiser bread roll and Wachauer (torn open) bread roll segments as well as in some mixed and wholemeal breads. The Zajezierski family are majority owners of NOWEL. The owning family includes Elżbieta Zajezierska (center, President of NOWEL Sp. z o.o.), Michał Zajezierski (VP of NOWEL's Management Board) and Karolina Zajezierska (Commercial Director). Less than 30% is held by the Polish investor Credit Value Investments (CVI).

© NOWEL

Baumfalk: In autumn 2019, you opened a modern research and development center in Poland. Do you work with universities? Michał Zajezierski: Yes, the center is also a platform for cooperation and exchange of knowledge with academic units. Together with them, we are conducting research and technological tests based on a completely new approach to bakery product consumption. This is a topic for our next meeting, but it will be a real revolution.

Baumfalk: Before the COVID-19 crisis, the out-of-home market was considered extremely dynamic and almost unstoppable. The pandemic changed that. What is the situation in Poland? Karolina Zajezierska: Indeed, during the first wave of COVID-19, after many years of growth, food producers in Poland saw a slowdown in the economy. The introduced trade restrictions and the appeals to stay at home also had a significant impact on the bakery industry, both on the domestic market and in the context of exports. Economic uncertainty, as well as a big increase in interest in home baking presented huge challenges. Fortunately, demand returned to normal relatively quickly. However, it is worth looking at the market situation in the long term. The convenience sector had been growing very quickly before the pandemic. Polish people had fallen in love with stores that provided them with necessities and were located close to their homes. Today, now that customers are accustomed to the difficult situation created by the pandemic, we may find that the convenience sector is one of the main growth drivers for many manufacturers. As shopping centers and supermarkets closed, small outlets and petrol stations expanded their ranges and took over parts of the basic supply including bread. BP and Orlen also offer snacks. Although there was no scientific evidence that SARS-CoV-2 could be contracted through food, consumers were initially concerned about buying snacks and eating them without additional heat treatment. As a result, a significant part of this segment in Poland was at a standstill. However, after a period of hard lockdown, it was reintroduced, which was met with enthusiasm, because in difficult times customers appreciated the convenience and the possibility of eating out.

Baumfalk: What are the main problems facing Polish bakery producers at the moment? Elżbieta Zajezierska: The main challenge faced by food producers is the rising production cost. Climate change directly affects, for example, the costs of raw materials and energy prices are rising as well. Companies are also paying more and more attention to sustainable development – elimination of greenhouse gas emissions and reduction of waste. These actions are inevitable and urgently required to save the planet, but are associated with higher production costs.

Baumfalk: How is the Polish bakery market currently developing? Michał Zajezierski: In Poland, the consumption of bakery products per person has been declining for some time. However, interestingly enough, the bake-off bread category has been gradually growing for several years. Of course, the pandemic will slow down this growth, but we do not expect changes in this aspect in the long term. It should also be emphasized that every year, the bakery industry in Poland is growing more and more intensively – mainly due to considerable investments in new technological solutions. As a result, the competitiveness of Polish companies on the international market is increasing significantly. What is more, the domestic market is becoming more and more saturated, which directly translates into an intense price fight. Each year, the Polish bakery market is becoming more and more difficult for companies, and the COVID-19 pandemic has further escalated the challenges. Elżbieta Zajezierska: The Polish market is very competitive, and also in terms of inter-industry sectors. It is not only the producers of bakery products that fight for customers. The younger generation is not consuming bakery products as frequently, but choosing substitute products. A traditional breakfast, which a few years ago would always be accompanied by a slice of bread or a fresh bread roll, often looks very different today. We are certainly dealing with very rapid growth in the sector of quick snacks and ready meals. Customers are also paying more and more attention to the variety of flavors and quality.