Case study

The Zelmer Group

The Zelmer Group, for many years present only in Poland, has been growing dynamically also in central and Eastern European markets for the past three years. For that, they have required a trustworthy business partner. Interview with Magdalena Bartoś, financial director Zelmer Group S.A.

Could you explain the circumstances behind such a strong expansion of Zelmer into other markets?

For years the company was present mainly in the Polish market, claiming more than a twenty-something percent market share and a leading position. Yet, Zelmer’s growth in Poland was becoming more and more difficult and expensive. That is why, in 2008, we started increasing our presence in Central and Eastern Europe, especially in Russia and Ukraine. Paradoxically, the crisis was very helpful to us. When the bigger players withdrew from high-risk markets, Zelmer took a chance and entered them. In 2009, we decided to launch an advertising campaign in Russia on a huge scale. The shortage of other advertisers made it possible to conduct cheap campaigns in the media and bring more focus to our presence in the market. As a result, we took the Russian and Ukrainian markets by storm and generated high sales – 20% of the Group’s sales in Russia, and 15% more in Ukraine.

Was the Eastern expansion the decisive impulse to build the new factory, while at the same time remaining close to the previous location?

In line with our “Profit” strategy, we intend to focus on Central and Eastern European markets, especially Russia and Ukraine. More and more often, the customer from beyond the eastern border is looking for products originating from the European Union. Yet, the direct stimulus behind the decision was the desire to free up value. I should point out that the old factory is a very large, 10-hectare facility in Rzeszów city centre, which took decades to develop, but now makes it impossible to effectively manage logistics, both internal and external.

Tomasz Swat

It was important that our partner be reliable, has a good track record in the Polish market and be familiar with the realities of construction and local administration.
That is why we chose Panattoni Europe.

Magdalena Bartoś, financial director Zelmer Group S.A.

What were the requirements for the new factory?

We were looking for a facility with a better location, which would solve the problem of internal logistics. In November 2009, we carried out analyses of the production processes at the old factory and defined the bottlenecks. Consequently, we were able to identify the elements of the production processes which required improvement and change, and develop the blueprint of the new factory which was to function as a complex of small factories, the so-called value streams. In the winter of 2010, we sent our requests for bids to potential developers, including Panattoni Europe, with whom we signed a contract on 10 August 2010. We could tell that this decision had been right when our sales in Russia and Ukraine started growing. We already knew that there would be demand for the products from the new factory. It gave us confidence to assess the decision favourably. In addition, we were aware of the benefits brought about by operating within a special economic zone.

Zelmer’s factory is a specialised build-to-suit facility. What kind of partner were you looking for to execute this project? Why have you chosen Panattoni Europe?

The project we embarked on was extremely complicated, in terms of Zelmer’s specific requirements, but also due to the large number of cooperating partners. For potential developers our request was probably a novelty – it included a detailed description of the production process of small household appliances, and highlighted aspects which were of special importance to us as a manufacturer. The choice of Panattoni Europe was not a coincidence. You are the strongest company in the Polish market and have the largest number of non-standard projects under your belt. Due to the energy and work put into preparing the investment, we were looking for a partner with whom we would be able to
cooperate and work totally in line with the defined schedule. Moreover, there emerged the option to build the factory at your cost and lease it  in the long-term, which helped us reduce the involvement of capital and solve the problem of financing. Summing up, the factors that determined our choice included your leadership, market standing, reliability, effectiveness and attractive price.

Let us go back to the factory itself. Which of your products will be involved?

We will continue our production under the Zelmer brand, i.e. vacuum cleaners, ordinary and water-based, mincers, mixers, food processors, kettles, blenders and slicers. All of these will still be made in Rzeszów. The new factory will also open new opportunities to develop contacts and strategic partnerships with other manufacturers of small household appliances and make products to their order.

What will happen then to the factory at the previous location?

We are currently in the course of the relocation process, with production both going on at the old location and about to start in the new factory. Our production process has been divided into streams and each stream – assembly line after assembly line, and production line after production line – will be moved. All the production lines not affected by the relocation process continue to work at the old factory, whereas for the lines subject to relocation twoweek breaks have been planned. During this time employees are on leave and the relocation company moves all the machines comprising the production line to the factory in Rogoźnica. The whole process should be completed in August, when the new factory reaches its full production capacity. The old factory will be sold then.

And how do the employees respond to all this change?

For the most part, the response has been positive, even though the change of location is not the only change they are facing, while being the most important. It is worth stressing that we have undergone a carefully planned communications process concerning the change within the organisation. As we enter the new factory, we are also completely changing the entire production philosophy. We intend to manufacture under the stream system, unlike the previous work centre system. For the employees on assembly lines this means they will need to work on a rhythm. While changing the structure of production, we also appointed production line managers and the so-called young production leaders. I am convinced that ultimately our employees will grow to like the new factory and work system.