With its headquarters and factory in Ahmedabad, Gujarat, West India, on a production site of 18,000 square meters, KHS Machinery Private Limited plays a significant role in supplying the KHS portfolio to customers from India and Southeast Asia. At Brau Beviale in Nuremberg, Germany, Susanne Blueml spoke with Partho Ghose, executive vice president and board member, about the strategies of the Indian company concerning the product portfolio and actual requirements in the packaging landscape.
Susanne Blueml: KHS India is active for over 20 years. How have its activities developed since its beginnings in 1997?
Partho Ghose: This Indian manufacturing plant started from a rented factory in Ahmedabad, way back in 1997. I was one of the founding employees, with five others who went about building and shaping a dream under the able leadership of Yatindra Sharma, our present managing director. Back then, our primary goals were – to significantly improve the service standards for the KHS machines, which were already present in the market before this company was set up, and secondly, to start manufacturing some of the key equipment like beverage mixer, bottle washer and crate washer for returnable glass bottle (RGB) operations in the soft drinks industry.
However, our first customers, Coca-Cola India and PepsiCo India, liked the idea so much that they encouraged us to take more on our plate. Soon we were manufacturing complete packaging lines of 600 BPM (bottles per minute) except the key filler/crowner machine. We built the first filler in 2001. The portfolio gradually expanded in line with the requirement and relevance of the developing market in India. The year 2001 also saw our entry into the Indian brewery industry as well as the PET bottled water market. The glass bottles market was still the predominant force in those days, but PET was slowly but surely making inroads. By 2002-03, we were delivering small to medium capacity PET lines right from air conveyors to pick-n-place packers but excluding the stretch blow molders. Over the next decade and more, we kept increasing the Indian machines portfolio primarily with machines of higher capacity and more advanced technology. Our latest achievement was the successful inauguration of the mold shop within our Ahmedabad plant in February 2018.
How did KHS Germany support the activities?
The KHS Germany management board has supported us all along. KHS India started as a joint venture, with 60% ownership of KHS Germany. Over the years, it increased its share to more than 95% today but at the same time helped in expanding the pie. The company, which was created to cater only to the Indian market, slowly spread its wings and started exporting to markets in Southeast Asia, China, and Australia with the support of KHS Germany. Our first lot of machines to Africa was delivered in 2012 for a brewery in Cameroon. Besides that, KHS Germany has continuously supported us with a robust know-how transfer process, excellent training and professional project management at every level.
What share of the machines of KHS India are manufactured in the country?
For that, you have to understand a little bit about the segments in the KHS portfolio. If we classify glass bottle lines, PET bottle lines, or canning lines, different proportions are relevant. Glass bottling lines with a capacity of 36,000 bottles per hour for soft drinks or beer have a very high percentage of localized content, sometimes above 90%.
However, the moment it turns into a PET bottling line, where you have to blow the PET-bottles from preforms, this ratio drops as India does not build the blow molders, on-line inspection systems, or high-speed labelers or packers even today. When it comes to PET lines, between 30 and 60% is made out of Germany, and the rest is coming from India.
In which steps did you increase the portfolio?
I can surely give you the steps, but a more in-depth insight would be to know – whenever we make a machine – to what depth are we making it? This means that we could have a smaller portfolio of machines in terms of machine type, but with a very high amount of localization in India.
The other way would be to move more extensively on the surface and have a broader range of machines in the local portfolio but with higher import content of critical components of the machines from Germany. These are the two different models of manufacturing which have been used from time to time in a nice balance, depending on the requirements of specific market segments.
In some ways, our customers dictated this journey. They wanted us to build maximum machines as fast as possible, so in the first phase, we committed ourselves to offer a wide variety of machines from our local portfolio. But since we took a lot on the plate, we focused initially on getting the most critical parts from Germany and offering value addition in terms of assembly, testing, installation and project management services while producing many non-critical parts locally. This benefited our customers with a high level of local currency transactions while, at the same time, providing us the breathing space to develop a suitable infrastructure to augment our portfolio in the days ahead.
Besides the time saved by manufacturing in India, how much money can your customers save in import taxes?
Indian customers have had to pay import taxes in the range of 5 to 10% when importing machines from outside. One might say it isn’t substantial saving, but you are right on one point – the time factor. The real saving for the customers is on timely service and availability of spare parts, more so during emergency break-downs, during the entire machine life span of over 20 years. This saving is hugely boosted when suppliers have a local manufacturing set-up.
Our primary aim was to cut down the capital cost of the machines when building in India. We realized that operating in a VUCA world with the minimum inventory of parts will help us to limit risks and remain cost-effective. A local plant would not, on the other hand, help us to cut machine-building timelines, but lowering capital cost was a more preferred trade-off for our customers.
This trend amongst our customers, I must add, has slowly but significantly changed over the years. They are now asking us for much faster delivery, which has pushed us to augment our inventory of long-lead components so that we also can cut down the delivery times.
Do you see that the actual plastics debate is changing the customer’s strategies as well?
You are right that the plastics discussion has forced our customers to think differently. And I believe that plastics are not as harmful as they are made out to be in the debates, but our customers always have to respect the changing perceptions of consumers. And this perception has hugely changed against plastics; there is no denying that fact. Looking at the sordid conditions of our oceans and waterways and the deadly effects on marine life and environment, you can’t blame governments and regulatory authorities, too, for coming out with strict measures against SUP (single-use plastics). However, the problem in hand is not an easy one as viable alternatives are hard to come by. And some solutions implemented with good intent but in haste might turn out to be the problems of the future.
Our customers are seriously brainstorming on the issue and implementing specific proactive steps. There is no clear trend emerging yet that they wish to move their primary beverage pack away from a plastic bottle to a metal can or glass bottle. Most of them are focusing on a robust post-consumer bottle collection and recycling route while also exploring options in parallel, around bio-degradable plastics.
But we do see an emerging trend to cut out plastics in the secondary packaging area. I give you an example – a shrink packer with shrink film – customers are trying to get rid of that first. They can still have a PET bottle, which can be put into a paper carton instead of a film shrink-pack. In this way, they can show to the consumers or the larger world that they are sensitive to this plastic pollution menace and have started taking the first steps while contemplating more concrete steps for the future. Yes, they are doing that, and we see the potential of changing procurement patterns in the coming years. But, at the same time, we have to understand that there are no easy or real alternatives today to replace PET. For instance, trying to shift even half of the Indian PET beverage market to glass or can seems a daunting task in my view due to various reasons, including but not limited to – the much higher carbon footprint of glass and can, higher cost and less convenience to consumers, and inadequate glass production facilities in India.
You said, PET is not as bad…
The benefits of PET as a packaging material are multi-fold, and, with the latest technological advancements, PET can provide answers that were traditionally available so far, with glass or can packaging only. However, what is wrong or rather very bad is the littering by consumers and the lack of adequate collection and recycling of post-consumer PET. This can be resolved by implementing appropriate anti-littering regulations, awareness programs, innovative collection systems, and finally, recycling – initially ‘down-cycling’ but with a final goal of bottle-to-bottle recycling. Biodegradable PET or returnable PET could be other routes to explore, although they have their unique challenges too. As I said before, knee-jerk reactions by individual segments (for example, banning SUP) of society might harm our environment further – as topics like increasing carbon footprint, water depletion, deforestation and climate change are no less important than plastic pollution. Solutions that are being discussed now are trying to tackle this plastic problem on a superficial level without taking a holistic view. This ‘thinking in individual silos’ approach, in my opinion, is not a good way to solve it, but if public perception is driving it, and governments are forced to make legislation on it, then the industry has to follow too.
Are there any plans to do cooperation with recycling companies?
I was in Düsseldorf a month ago, for the K show – and we have had discussions with prospective partners. For KHS, sustainability is a vast topic – all our solutions are focusing on sustainability and efficiency. It is also one of the top strategies of our customers, who are now getting into the EPR regime – which means extended producer responsibility. Customers are coming to us for solutions to partner with them on this journey. For instance, both at the K show as well as in this exhibition, KHS presented a 100 % recyclable PET juice bottle with enhanced barrier properties for added shelf life and product safety. This is what we are doing from the technology side, and these are things we will definitely continue.
You are representing a German company in India and you are producing there. What about the confidence in your products?
When we started the company, and even today, we have been using one tagline to define our offerings – ‘German technology – made in India.’ We are trying to convey that this is the best of both worlds – top-end technology from Germany manufactured without compromise in India and backed by world-class local service. Quality and reliability are the cornerstones of this manufacturing philosophy, and we can deliver it consistently due to the implementation of a very robust know-how-transfer (KHT) and quality assurance process. This is done by a team which comprises of German and Indian engineers. When a machine is built for the first time or new technology is introduced in India, this team ensures that the product coming to the Indian market is meeting all the requirements of the global design of KHS and specific local conditions. We may offer certain features optionally to local customers but we never compromise on the essential design criteria and quality. In short, we deliver the same machine performance with an Indian-built KHS machine as we would do with a German-made one.
Are there any opportunities to introduce Indian requirements in the machinery?
This has been a constant discussion over the years. Let me classify it into two main buckets – one is that if a German machine has got something as an inbuilt feature, I might offer it in India as an optional feature to give that cost vs. benefit choice to my customer. But this process is strictly controlled at our end and offered only after careful study of the said feature(s) and not merely because a customer ‘wanted’ it. This is one kind of differentiation.
The second one is that we sometimes change specific components within a machine, mostly third-party components, where better local serviceability of the same, as an example, may trigger the need to change. For instance, we are not a specialist in pump manufacturing. So if Germany will select a pump for a standard global product from company A in Germany, the KHT team might decide in favor of a company B due to its strong service support in India, provided all technical specifications and performance parameters are met. The local service back-up thus might become a very big and deciding factor in the end.
How big is the share to adapt the machine for the Indian market?
It is difficult to give a percentage. The guiding factor is the performance of the machine, one factor that is never compromised. For some machines, it could be even 0%, and in some others, it could be as high as 20%, but typically not exceeding that, because the basic machine is not changed at all.
How long does it take to find the right partner in India, when thinking of these parts in the machine?
It is not very difficult in that sense since our first non-negotiable guiding principle is not to compromise on performance. If we are developing another third party, we first do a complete engineering evaluation. But even when it has passed all the tests separately, it will not be immediately inducted into the manufacturing program until it has undergone ‘on-field’ testing for a minimum of 6 to 9 months in a running machine. If it is not giving the desired results, we take it out and put the original component back.
Digitalization as a point in the beverage market – still, even now developing: are there any differences in requirements in the Indian market as to data collection?
We do know that Industry 4.0 does include all of these points as machine learning, augmented reality and artificial intelligence. It is going to be a game-changer, but it is probably going to affect our industry in India at the last. This is what I personally feel. Many of our big clients see a lot of value in this for their manufacturing operations but may not be approaching players like us to develop holistic solutions for them, for the simple reason that we are only catering to one part of the plant, e.g., a packaging line. They want to partner with companies who are specifically in the IT field and who have an umbrella understanding of the whole operations and deliverables of a plant or network of plants – right from resource planning to shipping and inventory management, and even beyond. This, however, is not to suggest that we are not doing our own developments within our ‘packaging line area’ to provide significant value-adds to our customers.
Is KHS then influenced by an umbrella of any data transferring cloud – with machines as an object?
Yes, there is interface management. The machinery will produce all the relevant data, and that will be done within the KHS boundary. The customer, through an interface gateway, will collect and use the transferred data to another IT system – to be developed by him. Within our boundaries, there will be new areas, which are coming, for example, such as predictive maintenance.
But we have already been talking about it for some five or ten years…
Yes, but the technology space is rapidly changing, and you are now faced with a situation that you have to develop, let us say a predictive maintenance system, but without too many bells and whistles which drive up costs. There are also other challenges like obsolescence of parts/technology, IP rights, security concerns, and above all, capability building in the workforce through a very different unlearning and re-skilling process. This field is evolving so very fast that sometimes I wonder whether it is a good idea not to have a head-start, so as to limit the cost of a rather bumpy learning curve! But that is another debate.
Back to the market – are you expecting to develop further markets in your region?
This process started a few years ago. KHS India would also like to play a larger role in the global strategy footprint of KHS, particularly for emerging markets that need advanced solutions that are somewhat less expensive than the German ones and which are in a different level of evolution. We have to develop these markets in close cooperation with our international colleagues. We see in the future, and already some of our customers are saying it, that markets will open up in a more decentralized way. Clients will not be tied to legacy perceptions and thus won’t bother whether machines are made in Germany or outside of it. They will only be interested in the machine performance monitored on a real-time basis. Our key account customers are giving us this message, and we also see it that way.
Which perspectives do you see for your production site?
We have enough land, and we did purchase some additional property in the recent past, so we are gearing up for future expansions. Currently, our German board, who are also members of the Board of KHS India, have been very favorable to support the Indian operations to help expand our market presence as well as expand the solutions out of Indian plant for external markets.
I did mention briefly earlier that in 2018, we started a completely new mold shop inside KHS India with state-of-the-art technology and high-end automated machines. Ahmedabad is the second facility in the KHS world, besides Dortmund, to start manufacturing molds for blow molding machines made in Germany. Since then, and we are just in the second year, we have already delivered close to 900 molds. This excellent success has boosted our confidence to do more in-house manufacturing projects. The manufacturing time for a set of molds takes, let’s say, a week if we talk about a mid-size machine, once the drawings are available and the design is approved. We shall also implement a mold design center in Ahmedabad in the next phase, which will help our customers with quick turn-around times for new market launches, as the entire process from basic design to shipping will then happen under one roof.
Besides this, we see a lot of topics in sustainable production at our customers’ sites. We are providing solutions that are using less energy, water, and utilities, and all such initiatives in favor of sustainability and efficiency will continue to get top priorities from us. Another topic very dear to our heart is continuous knowledge enhancement. Be it in the form of a global engineering hub or a world-class training academy, and we will continue investing and developing this area in the years ahead.
Mr Ghose, thank you for this overview.