demand for bigger, centralized bakeries has been instrumental”

Koenig closed FY 2022 with sales amounting to EUR 114 million, a new record in the company’s history. Wolfgang Staufer, the company’s CEO, gives us a glimpse into the work behind these results and shares his views on the state of the industry, its future and Koenig’s role.

+Catalina Mihu: In light of record-breaking financial results last year, what types of solutions were among the most requested? What innovations drove sales momentum throughout a challenging year for the industry?

Wolfgang Staufer: Requests received last year were increasingly shifting towards the big industrial lines we offer. We are seeing high demand in this segment as the industry is investing considerably in order to achieve more cost-efficient production. Although a high proportion of our turnover comes from the artisan market – small and mid-sized bakeries, we have been seeing a shift over recent years to bigger, industrial lines.

Mihu: What have been some of the popular requests in each category?

Staufer: For the industrial sector, it’s big bread roll lines, for which we are offering complete solutions that typically start from make-up or even from mixing through to baking and cooling products. For small and mid-sized bakeries, mid-size sheeting lines have been in high demand in recent years. In addition, we have developed a new line in this range, the Artisan SFM sheeting line with Easy Clean design; it brings a very innovative approach to line cleaning as it was designed to ensure complete access to the line for cleaning, as well as maximum flexibility to allow bakers to maximize the ranges of products that they can manufacture using it, with minimum changeover times. These features have received a positive response on the market.

Mihu: Speaking of the Easy Clean design and flexibility, what are the main innovations that have helped drive sales, especially so in a particularly challenging year?

Staufer: Looking at the main demands in artisan baking, hygiene has become a predominant topic in recent years. This is why line cleanability has become a main focus for Koenig, which has been met with positive feedback on the market. Production efficiency is another aspect, leading to the demand for increased production capacities; we are now producing lines that we could not imagine would ever have been requested 10 years ago. A bakery that doubles its production of bread rolls per hour does not need to double its investment costs, or double the operating personnel, cleaning costs, or energy needed, in order to achieve this volume. The energy factor, especially, is in very high demand at the moment, because of the dramatic rise in energy costs and the cost of raw materials. To do this, entire production chains need to be optimized so that operations can ultimately provide affordable products to the final customer. This has been a peak motivation for investments in the industry, particularly over the past year.

Mihu: And what changes can be observed, when compared to the year before, which was also a year not without challenges?

Staufer: The main change we have observed over the last year has been in energy-efficiency improvements and the overall efficiency in production capacities – including waste reduction. Looking at changes on our side, from the perspective of plant and machinery builders, in turn, one of the biggest challenges has been the supply chain factor. It is a problem we encountered over the past years, which has been exponentially increasing recently. Material costs have seen a steep increase over the past few years. The same is true regarding the cost of components, especially electronic parts. Sourcing components such as CPUs, or display panels, for example, is one of the biggest challenges at the moment. Steel, in particular has become more easily available this year. Electronics and plastics markets are still very volatile. These challenges bring a decisive factor for our customers: the delivery time that we can currently offer. If I compare the time currently required to complete a project to that of a similar installation from three to five years ago, the time from the finalization of the engineering up to the delivery of the machine ex-works has increased by at least two-three months. In some cases, this means double the time, a delay mainly caused by the availability and delivery time of specific components. There are also seemingly almost absurd situations that occur, when certain components had delivery times of 200 working days. This means that if you want to supply something next year, you need to already know from this year what you want to supply; otherwise, you will not be able to supply it to the market. The management of the logistics chain has been one of the stringent challenges in the market. A reliable delivery time has also become one of the biggest demands from customers.

Complete technology redesign

Mihu: What are the strategies that contributed to such a positive outcome to FY 2022?

Staufer: We have made significant investments in the design of our lines over the recent years. When we were considering the marketing strategy for Koenig’s 50-year anniversary in 2016, we thought about drawing a comparison between bakery lines, ‘now and then’. But we saw that when we compared the lines with those that were delivered 40 years ago, there were few design changes. Materials had changed with painted materials being replaced by stainless steel; but, the overall designs of the two models, 40 years apart, were virtually identical. However, this is no longer valid today: there have been significant design changes recently, due to the focus on hygiene and ease of cleaning. We kept the proven Koenig process and technology concept, but have completely reworked all the machinery we supply. The equipment now allows easy access for cleaning, a feature that was very well received in the market. We have clients telling us that they save up to three hours when cleaning one of our new lines, compared to one of our older designs. This is a decisive factor for cost-efficient production. Alternatively, the capacity and the capability of the line have improved considerably over recent years. When we were opening our final assembly facility in Hungary, five years ago, we could compare old peak lines to the maxed-out new ones: they were miniatures. We have been very successful in the market because we are able to provide these very large capacity lines, in line with market requests. They allow our customers to be more cost-efficient in production to give them a decisive edge in their field. Higher production capacity has been an ongoing request.

If you look at the design of our lines, the Koenig standard design is that, when standing directly in front of the machine, the operating direction is from right to left. This has remained unchanged for the better part of 50 years. In recent years, we have had to produce mirrored lines to answer capacity requests. These often included capacity increases that could not fit onto one line, and therefore mirrored, side-by-side configurations were built so that the operator could manage the parallel lines simultaneously while being in the middle, in between the two. The desired output was achieved in this way, while only having one operator running both lines. This meant a design change to our lines. The demand for bigger, centralized bakeries running with high-end efficiency levels has been one of the determining factors in the industry recently, in response to in-store bakery growth. Small bakeries inside supermarkets is a trend that goes back 15-20 years and is one that is growing, with the demand for making fresh products from scratch. Koenig has been able to accommodate this by selling smaller machines. Larger supermarket chains would order 100 pieces of equipment, to install in all of their stores, for example. The lack of skilled personnel for these operations and the demand for consistent product quality across all sales outlets, however, shifted the focus to centralized baking configurations, which allow products to simply be baked off in the market, instead of being prepared from scratch.

Priorities: efficiency, hygiene and safety

Mihu: What other market changes have brought growing opportunities for Koenig in 2022?

Staufer: For the artisan market, it is the demand for higher product quality and more efficient machinery. Efficiency, in this respect, is not only related to producing more pieces per hour but having a higher level of flexibility and lower cleaning requirements. Hygiene has become more and more important, especially in European bakeries. Looking at the German market, authorities have been enforcing hygiene regulations much more strictly in recent years. It is therefore much more important for the baker to have a machine that is easy to clean, since an unannounced inspection can happen at anytime. In combination with the flexibility and reliability of our machinery, providing hygiene-supporting features has given us an upper hand on the market.

Mihu: How was hygiene brought to the designing table when Koenig redesigned its machinery? How was accessibility balanced with maintaining equipment safety and production efficiency?

Staufer: Safety features contribute more and more to the overall cost of a line. The challenge that required a tremendous engineering effort was to keep the machine compact while making it easy to clean. On the one hand, lots of metal coverings fixed into place with bolts had to be replaced with metal coverings that could be easily removed; then, we had to design bigger – and removable – doors for easier access. Another aspect, applied to many of the lines, was to separate the drive unit from the portion of the machinery that was exposed to contact with flour. Machines with older designs would have the motor covered in flour dust; chains running inside this area, which were consequently much more difficult to clean. Nowadays, much of the machinery has its drive and electronics separated from the dough-processing sections. In this way, we could minimize the cleaning efforts required for these machines, by isolating the hard-to-clean parts away from direct contact with raw materials.

Turnkey solutions, complete with spirals

Mihu: 2022 was also a year of acquisitions for Koenig –with the takeover of cooling spiral specialist Vulganus Oy. What made the Finnish manufacturer an interesting acquisition for Koenig?

Staufer: Our strategy over the past few years was to transition from being a company that supplied make-up lines (for product dividing and forming) to a full turnkey solution supplier for bakery lines. This required us to have competence in every process stage, starting from mixing, dividing and rounding, to forming, proofing, baking and cooling. In this way, we could control the parameters of the entire process and ensure its efficiency. We had started on this path by supplying spiral coolers and freezers in Italy, although that operation was rather small. However, we saw that the potential of spirals – proofers, coolers, or freezers – would continue to grow in importance in the future. By acquiring Vulganus Oy, we wanted to expand our technological capability and capacity, to better establish ourselves in this field, because our Italian operation specializes in sidedrive spirals, while the Finnish operation is manufacturing drum-drive spirals, a different technology suitable for different applications.

Mihu: Should investments such as this be made even in challenging years?

Staufer: Definitely! It may be more risky, but if you want to have a certain footprint in the industry, then you need to take opportunities when they come along. The results already look promising, and we hope they will further improve in the future.

Mihu: What has the acquisition entailed from an operational standpoint, for both companies?

Staufer: It’s an ongoing process; the first step was the integration of our engineering environment, to have compatible engineering solutions and to be able to source parts within the group of companies. We have manufacturing sites in Austria, Germany, Hungary, Italy and in Finland. We integrated Vulganus Oy to become a part of our manufacturing network. We are also utilizing the resources of the Finnish company for some work for our Austrian operations. In addition, we are now in the process of establishing centers of competence for certain products. The Finnish operation will become our center of competence for spiral products, from proofers to coolers and freezers. Some of the proofers will be assigned to the Italian center of competence.

Mihu: And what were the changes at Vulganus Oy? Has it expanded the volume of its operations?

Staufer: We made the acquisition in the summer of 2022, so the expansion is still underway. In the meantime, Vulganus has already gained better market access, because it is now connected to our network. While before it was predominantly focused on the CIS and European markets, it now has a global reach. Moreover, we are in the process of expanding its reach into certain markets, and we will be bringing Vulganus to the North American market in the coming years. Koenig is well-established on this market, as it has been present in the US market for over 20 years with our own subsidiary, and via dealers before that. We are supplying bread roll lines on this market, for medium and large sized bakeries. Over the past few years, Koenig has also entered the turnkey market, supplying complete bigger, lines. In this segment, we are planning to include Vulganus equipment. Vulganus will be supported to also expand its markets in the years to come. We are pursuing a two-brand approach, in which Vulganus is selling standalone units under its own name as well as under the Koenig brand, with solutions being integrated into some Koenig turnkey solutions.

Mihu: How has the acquisition repositioned the development and delivery of engineering solutions? How are complete, turnkey solutions developed now, compared to the steps carried out before Vulganus Oy joined?

Staufer: The turnover of Vulganus is about EUR 10 million; the turnkey portion of our operations is about EUR 20 million, so, from this perspective, the business has increased, in terms of turnkey parts that include final proofers, ovens and cooling solutions. The make-up line part, Koenig’s core processing field, is not influenced by the acquisition. We are planning to expand the turnkey segment of our business over the following years, a market where we see the opportunity for growth.

What comes after a record-breaking year?

Mihu: Following an impressive business year, what are the anticipations for FY 2023? How is the year shaping up?

Staufer: We have a very high order backlog this year and we expect the business to match last year’s performance. We hope it will be even better.

In addition, we are entering new fields such as tin bread lines in the next few years. Of course, the race is on and, looking at the solutions we were supplying 10 years ago, in comparison with our current portfolio, we have made a big step in terms of closing the gap between high-capacity, extrusion-based bun lines and the capabilities of the lines based on dividing and molding, which we are currently developing.

Mihu: How have current and ongoing challenges changed the way in which Koenig works?

Staufer: We have taken the step forward from a machinery company to a project-oriented company that manages the implementation of complete lines. This has changed the way we work, from project management to resource planning and time scheduling in our operations as we expand. We used to synchronize between Austria and Hungary production facilities at first, while now we coordinate projects with components coming from Austria, Hungary, Italy, or Finland, into one project. We are shifting from a more centralized company operating from our Graz headquarters to a more distributed, international way of working within the group.

Mihu: At a time when sustainability is among the biggest priorities in the industry, what does sustainability mean at Koenig? How is it reflected in the way solutions are designed and in the way equipment is manufactured, revised, updated and customized?

Staufer: From the standpoint of our in-house operations, we have greatly emphasized our focus on energy efficiency in the production area. We’ve invested in new, more efficient machinery and higher electrical power supply capability in our facility. We will be able to optimize processes such as electric heating, which was previously using gas. We are also switching to electric cars, in our efforts to reduce Koenig’s CO 2 footprint.

The biggest change that we are generating is through our products. We are designing them for more energy efficiency. Looking at our rack ovens, for example, improvements made over time are rather easy to quantify. Talking with a client who has been using our ovens for decades, we learned that, with the latest-generation technology, the bakery could achieve around 30% energy savings compared to using the old oven. It’s quite an impressive improvement! With the developments we made over the past decade, we have achieved energy savings in the range of 10-20%. Another important aspect is the sustainability improvement achieved via our new production and logistics strategy. Looking at mid-sized bakeries, vacuum conditioning is increasingly a standard for products. This means the cooling process, performed by placing the product into a vacuum chamber and evacuating the air, is very fast, while also stabilizing the product. This gives us three main advantages for our customers in terms of sustainability: the energy efficiency of the vacuum process is better than actively cooling and freezing the products; vacuum-conditioned products allow energy savings because baking times can be considerably reduced; by vacuum conditioning parbaked products, they can be brought to the point of sale for bake-off. In this way, bakeries can work around a limited shelf-life of only three-four days, which, again, means saving energy. Moreover, the new vacuum process called the ‘ready-to-eat’ process entails that the fully-baked product is vacuum conditioned and frozen. When thawed, this product is crispy and retains the properties of a freshly-baked product, while skipping the bake-off process entirely – meaning, more energy is saved (typically, point-of-sale ovens are not as energy efficient as centralized baking solutions available in bakeries). In this way, flexibility is higher and product waste is also minimized. All these steps contribute to increasing production sustainability.

Mihu: Do times of crisis hinder sustainability efforts, or can they also act as a catalyst for improvements?

Staufer: From what we are seeing now, it is dramatically acting as a catalyst, because the CO 2 reduction achieved by lowering the energy bill is at the moment a very high priority for bakeries. We have been speaking with bakeries that currently have energy bills 10 times higher than before the crisis. In such cases, energy-efficient solutions are a first priority, to lower costs. Improving production efficiency is the driving factor for investments in the industry at the moment, which, in turn, also drives innovation for better machinery solutions.

Mihu: Since 2015, Koenig has been increasingly focusing on large-scale roll lines. What changes in industrial baking have you experienced since the first crisis in the series began, the pandemic restrictions?

Staufer: There are no significant changes in demand. The increasing request for bigger lines was a trend even before the pandemic. As we have become more experienced in developing this type of lines, we are also in a better position to fulfill these market demands now. From our perspective, we observe that the demand is shifting to bigger lines because they can be more easily financed. A small, artisan bakery is currently struggling so much with energy bills, that it cannot easily invest in efficiency-upgrading technology, even if they wanted to. Alternatively, it is easier for larger bakeries to finance such projects, which also explains the market shift to bigger lines. The request is clear for us: more economic, more affordable solutions are needed, especially in the industrial sector.

For the mid-sized range, we also see customers who are still investing in improving their market position by upgrading to more hygienic and energy-efficient solutions, such as vacuum conditioning technology or new-generation baking ovens.

Mihu: What strategic priorities are outlined for the upcoming two-three years for Koenig, as the company approaches its 60th anniversary?

Staufer: We are working on consolidating our market position. We re-entered the turnkey market about six years ago and we want to strengthen our foothold as a sustainable supplier of turnkey solutions. In the future, our solutions could also be aimed at other products, in addition to bread rolls, a segment in which we are established. We are also planning to expand our operations internationally and improve cooperation within the Koenig network, between our various centers of competence. We are planning on expanding our position in key markets, by being close to our customers for their service needs.

In addition, there is the ongoing challenge of developing new products. We see a growing demand for automated solutions, a demand which has heightened since the pandemic. To meet this demand, we are also developing our robotics expertise and our automation offerings, in order to develop more intelligent lines in the future.

Mihu: How would a decentralized network structure be managed to ensure that Koenig consistently provides the same values anywhere in the world?

Staufer: Establishing the centers of competence is key to that. We are also working very closely together, utilizing digital tools. This is a lesson we learned early on in the pandemic crisis, expanding our digital capabilities worked well when we were unable to travel. To some extent, such tools can be used to install production lines remotely, in cooperation with our service partners. This was the case in South America, where we were able to install lines with local partners and supervision from our headquarters here, in Graz, via digital channels.

Mihu: To summarize our conversation, what are the biggest trends at Koenig now?

Staufer: Continuous optimization of the machinery designs is among the biggest trends – for improved flexibility, efficiency and hygiene. The next step is developing more intelligent machines. In this regard, we are installing new sensors, new controls and planning features into the machinery for a higher automation level. This is why we started delving into robotics in our Italian subsidiary. Developing fully-integrated solutions is key in the market, for industrial bakeries as well as for artisan operations, which can benefit from linking production optimization features incorporated in the machines. +++

Read the full interview on www.bakingbiscuit.com.

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