Founded in 1971 as a KHS sales organization in New Berlin, Wisconsin, KHS USA, Inc. is now one of KHS GmbH’s most successful subsidiaries realizing around 12.5% of KHS sales worldwide. KHS USA currently employs 375 people in its production, sales and service units, manufacturing KHS products in Waukesha, Wisconsin, and Sarasota, Florida. In the following interview Georg Zuzok, Head of Market Zone Americas for KHS GmbH, relates the story of KHS’ success in the USA, telling us where the American beverage industry believes KHS’ particular strengths lie, which future visions KHS has for the American market and which trends should be taken into account here – and much more.
Mr. Zuzok, could you tell us more about the development of KHS USA?
KHS USA has been in operation since 1971 and together with Brazil was one of the first subsidiaries of KHS. Up until 1973 we just operated a sales office from New Berlin, Wisconsin, after which we also started making machines. By the time we moved from New Berlin to Waukesha, also in Wisconsin, in 1978, KHS machine sales on the American market had already doubled. In Waukesha we wisely procured a plot of land around 53,000 m² in size, where five buildings now stand with a total area of approximately 16,000 m². As in the past the site in Wisconsin still chiefly produces filling machines and process technology for the beverage industry. In 2003 we took another important step in buying up pouch machine manufacturer Bartelt in Sarasota, expanding our portfolio with the focus on the North American market. In Sarasota we have a production area of around 9,300 m² on a site measuring almost 28,000 m². Looking at KHS USA’s standing within the beverage industry, at the moment we’re number two among the suppliers of filling and packaging technology and hold a market share of approximately 35%. However, last year we got extremely close to becoming number 1.
You just mentioned the production of fillers and process technology in Waukesha. Is this plant engineering in particular demand by the beverage producers of the USA?
Yes, indeed it is. At present we have an installed base of over 500 for fillers alone, for instance, and 60% of KHS’ total sales in the USA is attributable to filling and process technology.
This also suggests that the USA tends to order single machines in the main.
The USA is a classic single machine market, this being for traditional reasons. However, over the last years beverage producers in the USA have started to change and the demand for extensive KHS expertise in turnkey lines is growing here, too. Especially global players, who’ve already had very good experience with KHS turnkey performance in other parts of the world, are increasingly adopting this approach.
“Over last years beverage producers in the USA have started to change and the demand for extensive KHS expertise in turnkey lines is growing here, too.”
What’s the internal procedure like at KHS exactly when a beverage producer in the USA wishes to order turnkey KHS plant technology?
Just like it is anywhere else in the world. Our specialists give advice directly on site, go through the specifications of the proposed new line right down to the last detail and finally produce a line which is precisely tailored to the customer’s exact requirements and which KHS installs and commissions once it’s been built. As we’re reckoning on more and more turnkey lines being ordered in the USA in the future, we’re also planning to soon start producing packaging and palletizing technology in Waukesha. As far as our technical systems go, plus our process and order control, production and sales strategies and much more, we have a standardized approach worldwide according to which we act in the USA with the same strategic principles.
Is this uniform approach positively received in the USA?
Of course it is. The USA see KHS as a traditional manufacturer of machines with a wealth of experience which the US beverage industry naturally wants to profit from as much as it can. Here, our company stands for reliable mechanical engineering, focusing strongly on local production. We’re also popular with our customers through our particular strong presence in both our factories Waukesha, Wisconsin (process and filling technology) and Sarasota, Florida (pouches), which also includes perfect service.
Which specific services does KHS USA provide here?
We have a very large stock of spare and wear parts, are there for our customers round the clock seven days a week and also have a 24/7 delivery service. We have 70 service engineers permanently on call for KHS USA. Our range of services also of course includes various training measures, line optimization, conversions and upgrades, online services and much more besides.
“We have 70 service engineers permanently on call for KHS USA. This means that all customers are assured of very fast local assistance when and if service is required.”
To date pouch machines have also been produced in the USA besides filling and process technology. This suggests that there’s a lot of expertise on these machines available here. But how much knowledge is there of other machines in the KHS portfolio at KHS USA?
It goes without saying that of course our service engineers are jacks of all trades! Permanent coaching and training units, some of which take place at the KHS factories in Germany, keep them up to date. Our sales team is just as perfectly schooled. Each salesperson at KHS USA not only has a general knowledge of machines and lines but also specialist know-how in a fixed segment, such as filling, cleaning, packaging or labeling technology. Whatever a beverage producer wishes to order, he or she can rest assured that they’ll be advised and supported by KHS experts.
Does this specialist knowledge apply to breweries as well as to the non-alcoholic beverage sector and the wine, sparkling wine and spirits industry?
Of course. We’re fit in all sectors of the beverage industry and have very close ties to all of them. The brewing industry is still the mainstay of KHS USA’ business, however. Our customer base has long included brewery groups like AB InBev and SABMiller and also a number of craft breweries, such as New Belgium. We have a market share of 60% in the brewery sector for filling and process technology. Our market share for CSDs is 35%. We’re also well represented in the water segment, with bottlers like Silver Springs not only definitely committed to KHS technology but also clearly convinced by the benefits of KHS turnkey projects. In the past few years especially our technical systems have also been in increasingly strong demand from the wine trade. Looking at the last four years alone, our market share of new investments in the wine industry was 80%. The KHS customer base here includes wine cellars such as Gallo and Sutter Home.
You just talked about KHS having also discovered the craft brewing segment in the USA. What kind of plant technology does it provide here and how do you think the craft brewery scene will develop in the future?
I think that no one can stop the rapid development of craft breweries in the USA. These breweries successfully base their activities on slogans like ’Beer needs a home’, supplying their consumers with a whole range of new and established beer ideas and an explosion of taste experiences which are really popular. Craft breweries in the USA currently account for 7% of all beer sold and about 10% of the total beer revenue. In my view these percentages will also rise in the future, not least because the craft breweries have managed to again convince Americans that beer is a purely natural product. At KHS USA we began thinking well in advance of how we could support craft breweries on the one hand and profit from their growth on the other. We thus developed the concept and machinery for a microfiller for small and medium-sized brewing companies – in cooperation with the KHS Filling Technology Competence Center in Germany, of course. Our new Innofill Glass Micro filling system now has all the technological advantages of the high-performance filler and this is proving a big hit with America’s craft brewers, partly also because we manufacture this product in the USA for the American market. We’ve already sold eight of them there.
Apart from the trend towards craft breweries, what other movements can you see on the US beverage market at the moment and which developments do you think will characterize the beverage industry here in the future?
What’s clearly evident is that there’s an increasing health awareness among consumers. This also means that carbonated soft drinks are seeing a downward trend due to their high sugar content. At the same time the consumption of water and non-alcoholic beverages which communicate a health benefit is on the increase. These include isotonic beverages, teas and milk-based beverages. It’s also interesting that wine is becoming more and more popular among young adults. As regards containers, I’m seeing a growing trend towards smaller bottles in the alcohol-free beverage segment especially, which is dominated by the PET bottle. Here, people want single-serve plastic bottles instead of the family-serve size. PET lightweighting is another topic that’s becoming more important. I think the can will also remain popular, both in the CSD and beer segments. Glass will also continue to loom large in the beer and of course wine, sparkling wine and spirits segments.
Growing customer interest in the consumption of high-price craft beers and beverages with health benefits reveals that consumers in the USA are finding beverage quality more and more important. Does this also mean that beverage producers are showing a growing interest in top-quality equipment?
Yes, they are – but with a certain delay. It sometimes takes a little time for companies to realize that if you want to always provide the best beverage quality, you have to utilize high-quality equipment. Suppliers of top-quality plant engineering which is particularly sustainable – and that’s another important point – definitely have time on their side. And therefore, so does KHS.
KHS USA’s main area of business is the beverage industry. Are there any efforts being made to expand this target group? What other goals does KHS USA have for the future?
Our chief aim is to continue to build up our great presence in the beverage industry by providing absolutely top-quality plant equipment. We’re also planning on penetrating new branches of industry, step by step. For instance, we also serve the detergents market where special packaging solutions are required. In some areas the good reputation earned by our pouch machines is sure to stand us in good stead. However, we don’t want to get bogged down in too many different areas and will always ensure that we perfectly meet our own exacting demands for quality technology and service in each and every segment.
Mr. Zuzok, thank you very much for this interview.
“This year’s widespread trade show presence for KHS USA ranges from the recent and very successful Craft Brewers Conference in Denver (April 8–11) to PACK EXPO in Chicago. Our innovative microfiller and also our keg and packaging technology attracted great interest from the craft brewing community.”
KHS USA: strong player
KHS is also one of the leading players in the filling and packaging industry in the USA. This is demonstrated by …
KHS will be presenting its innovations, proven technology and great expertise at the following major US trade shows still to take place in 2014:
- June 5–7, MBAA Conference (Chicago)
- November 1–5, PACK EXPO International (Chicago)