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Expanding Globally:
KHS sets up a new plant in India
In opening a spanking
new production facility in
Gujarat province in India,
KHS opens a second
factory in Asia, confident
that the region will
continue to show healthy
growth. Valentin Reisgen,
KHS’s CEO, shares about
the strategic importance
of its new factory on the
outskirts of Ahmedabad,
in Gujarat Province, India
48 FOOD & BEVERAGE ASIA APRIL/MAY 2007
K
HS has had a presence in India since the late 90s, and it has been
successful from day one. As its business in India continued to grow,
KHS took the decision in 2004 to built a new greenfield factory in
Ahmedabad, securing its position in the Indian market, and renewing its
commitment to its Asian partners.
The new factory, a joint-venture between KHS and the Mamata Group was
opened in February, and the entire KHS Management board was present to
witness the opening. As a further commitment to this new facility in India,
KHS has raised its shareholding in this venture from 62 to 89 percent, and by
2011, it will be able to increase its ownership to close to 100 percent. For the
time being, this factory will be supplying the machinery for the Indian market,
but there are plans for it to be fully integrated with KHS’ global network,
providing not just machinery and aftersales support, but even contributing
technical know-how to KHS’ facilities in the other parts of the world.
Valentin Reisgen, CEO, KHS AG, in an exclusive interview with FBA, on
why this new factory is so important to KHS’ global strategy:
FBA: Could you outline the strategic thinking behind KHS’s decision to embark
on setting up this latest overseas production base in Ahmedabad, India?
Valentin Reisgen: KHS’ clearly defined orientation is, “KHS is a global market
leader and preferred supplier of the packaging industry with focus on beverage
applications and complete systems.” As a worldwide concern with headquarters
in Dortmund, Germany, KHS maintains a total of eight production plants in
Germany, along with several production facilities abroad. In addition to
construction of a new plant in India – a market, incidentally, in which we have

VIPs at factory opening, left to right: Mr Roland Flach, chairman of the Management Board, Klöckner-Werke AG and
Supervisory Board, KHS AG; Mr Yatindra Sharma,
Ltd.; Mr Valentin Reisgen, CEO, KHS AG; Mr Mahendra Patel, Chairman, Mamata Group; Mr Maternus Gemmel,
Member of the Board, KHS AG. A bright and spacious shop floor in one of the four halls (right).
been active with local production
since the 1990s – our most recent
activities include acquisition of the
controlling interest in GLM2, a
company located in Shantou in the
province of Guangdong, China. KHS
also has production sites abroad - in
the United States, Mexico, Brazil, and
Mexico. Besides production facilities
at home and abroad, we also have
more than 60 sales and service offices
based on all continents. We are thus
“within easy reach” as a point of
contact for our customs wherever in
the world they are located.
As you can gather from my
remarks, this is not at all a first step
for KHS in the direction of
internationality but rather a further
step taken based on existing facilities,
which, in light of the current situation
in the Indian and Asian markets, is
more than welcomed by our
customers.
FBA: Can you elaborate on the
factors that drove and influenced your
decision, e.g. the market trends,
customer expectations and feedback,
future changes in your domestic cost
structure, nature of competition from
both other European suppliers as well
as Asian companies, logistic
considerations?
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VR:We see the tremendous growth
potential offered by the Asian market
in general, and the Indian market in
particular. We anticipate a nearly
eight-percent yearly increase in the
packaging machine market in India by
the year 2010. One reason favoring
building the new KHS plant in India
was of course the high growth rate
expected in the Indian and Asian
region. An even more important item,
however, is that we are always
oriented to the requirements of our
customers and consistently respond to
their visions around the globe. “The
customer, the customer, and again the
customer” – this is KHS’ corporate
motto.
The fact that our regular
customers around the globe are as
equally interested as our locally active
customers in KHS’ increased
presence in India is quite logical in
light of the development in the
beverage, food, and nonfood sectors
there. Our customers will naturally
profit considerably from the logistic
advantages offered by our new
facilities and the related expanded
production capabilities. Our decision
to build new facilities in India was not
at all competitor-oriented. We have
always held our competitors in great
respect and consider their presence
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profile
from a standpoint of “competition
stimulates business”. KHS has all
along acted independently in every
respect and its focus has been solely
on the needs of its customers. We are
and will remain KHS and only the
customer, the customer, and again the
customer is and will continue to be
our yardstick.
FBA:What were the reasons for KHS
ultimate choice of India and
Ahmedabad as your production
locality? Related to this, did KHS
consider China as a location for a
greenfield plant? And given that in
the end, KHS opted to invest in GLM2,
instead, what would you say are the
benefits of taking this step in your
China strategy?
VR:KHS has been operating the
Indo-German joint venture company
KHS Machinery Pvt. Ltd. since 1997
and KHS machines have been
manufactured in Ahmedabad since
then. The Ahmedabad site is an
outstanding location. With a
population of almost 4 million people,
it is India’s sixth largest city, and is
the financial center of Gujarat.
Ahmedabad has an international
airport, it is situated near National
Highway 8, and has excellent access
to the Indian railway system.
FOOD & BEVERAGE ASIA APRIL/MAY 2007 49
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Opening with four main buildings, there is room on the property for future expansion
There is basically very little
difference between our approach in
the Chinese market and our approach
in India. KHS utilizes existing know-
how in the market here as well and
relied on acquiring a controlling
interest in GLM2. By acquiring
GLM2, KHS now owns an operation
that is well positioned in the Chinese
and Asian markets. With a sales
volume of more than 30 million euros,
GLM2 was one of the market leaders
in the filling and packaging industry
in China even before to this takeover.
GLM2 has an outstanding network
throughout China and Asia. GLM2’s
list of customers includes big names
in the brewing trade such as Tsingtao,
C. R. B., Yanjing, Kingway, Harbin,
Asian Pacific, San Miguel, Chonqing,
Lion, Jingxing, Heineken, and
Anheuser-Busch. In light of these
facts, it made sense to integrate an
outstanding operation, such as GLM2,
into KHS instead of setting up a
greenfield plant. For us, there were
several reasons, which spoke in favor
of this approach.
FBA: The beverage market in India:
from KHS’s point of view, how do you
expect it to develop in terms of
50 FOOD & BEVERAGE ASIA APRIL/MAY 2007
technology usage, market growth, and
product range in the near future, and
what opportunities would this
translate to for KHS?
VR:We are anticipating continued
strong growth in the beverage market
in India, primarily in the traditional
beverage segments. Classical soda
pop, cola-based beverages, fruit
juices, milk, well-known alcoholic
beverages – all of these product areas
will experience a tremendous boom
in the near future. We at KHS make
a general distinction between already
developed beverage markets and
those that are still to be developed.
In our opinion, India categorically
belongs to the latter and our past
experience tells us that such markets
always begin their development in the
standard beverage segments.
Wellness drinks are usually associated
with the high-price sector. Examples
include the fruit juice beverages
enriched with vitamins A, C, and E,
and bottled water flavored with herbal
extracts and these have, at least to
date, hardly generated any market
share in India at all.
As the development in the country
continues forward, this situation will
surely change. KHS’ system concepts
for Indian beverage producers can
even be designed today so as to meet
conceivable customer preferences in
the future. Our product classifications
are always based on our customers’
requirements. If a basic level of
technology is demanded, then, of
course, a basic level of technology
will be delivered. Those producers
active in the medium-performance
range will receive the level of
technology that is adapted to their
needs. Wherever the highest level of
bottling and packaging is demanded
in order to satisfy specialized
customers requirements, then high-
tech equipment will naturally be
supplied.
FBA: On the beverage market in
Asia: broadly speaking, what would
you identify as the key trends that will
affect this sector, in terms of both
investment and technology choices as
well as market-led preferences and
product/packaging selection?
VR: The Asian marketplace as a
whole can be characterized as having
a tremendous growth potential for
beverage consumption and I would
like to illustrate this point by giving
you a few figures for beer and water

Room to
Expand
With buildings covering an area of
25,000 sq meters and a production
floor space of 18,000 sq meters, the
ultra-modern production facilities
in India include the areas of rinsing,
filling, and capping/seaming
equipment as well as process
engineering, labeling technology,
and the complete range of packing,
palletizing, and conveying
equipment. KHS intends that this plant will be a
complete provider for it product line-up. This
includes a wide range of filling and packaging
equipment, able to meet the largest part of the demand
for KHS machinery in the Indian market. Delivery
from Germany is necessary only in order to supply
special solutions, such as keg technology or bottle
washing equipment.
Concerning maintaining worldwide KHS quality
standards, customers can equally count on a
controlled KHS quality strategy. For this reason, all
KHS plants focus on a KHS seal of quality predefined
down to the last detail. Only in this way, can a KHS
customer from any part of the world be certain that
each individual KHS product - whichever factory it
comes from - represents true value and satisfies the
highest quality standards. KHS claims that all its
machines are produced “from the same mold”.
Worldwide, KHS has set a standard a repuation
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for quality, one that is oriented on German quality
standards. It is well accepted that German quality
workmanship plays a key role in the international
arena and the company stands by its Teutonic roots.
With its diverse global manufacturing strategy the
emphasis is on “Made by KHS”, which is very
specifically associated with “Made in Germany”.
With regards to its strict quality strategy, KHS
has also set equally strict quality standards for
externally procured parts. Each of its suppliers is
subjected to exhaustive quality and service level checks
and is inspected repeatedly. Concerning moving to
India, KHS naturally welcomes its suppliers to set up
faciilities in India, or Asia, for logistical purposes, but
this alone is not a prerequisite for further collaboration.
The bottom line is quality, and this will continue to
remain paramount. This includes incorporating Asian
and Indian producers able to supply high-quality goods
in its purchasing process.
FOOD & BEVERAGE ASIA APRIL/MAY 2007 51
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There are plans in the future for the Technology Centre to have a direct link with KHS AG in Germany
from China and the Chinese market.
China has just reconfirmed its
position as the world’s largest beer
market with a consumption of
approximately 310 million hectoliters
in 2006. China has already clearly
surpassed the previous leader, the
United States. Experts are
anticipating beer consumption in
China to reach 370 million hectoliters
by 2009. Enormous growth rates are
also being expected in China in the
bottled water segment. An increase
of almost 50 million hectoliters from
2006 to 2009 is being anticipated for
bottled water alone. In light of these
figures, is seems obvious that the
demand for packaging equipment and
machines for the Chinese packaging
industry will likewise expand
enormously. We are foreseeing a
market of approximately € 900
million in the year 2010. Here is a
figure just for comparison: In 2002,
the market demand for packaging
machines in China just barely reached
€ 390 million.
Not only in China, but in other
Asiatic markets, as well, the preferred
packaging for beverages in the future
will be the PET bottle. Even today,
almost 100% of the bottled water,
52 FOOD & BEVERAGE ASIA APRIL/MAY 2007
more than 30% of the carbonated soft
drinks and more than 40% of fruit
beverages are sold in PET bottles. Up
to now, there is only one area where
the success story for the PET bottle
in China and in the rest of Asia is still
a little bit subdued: the beer market
and in the market for other alcoholic
beverages.
FBA:With KHS’s strong involvement
in the plastic and PET filling segment,
what challenges and future directions
do you expect for this category, in the
light of challenges such as longer
shelf-life/quality demands, rising raw
material costs, environmental and
recycling trends?
VR: The non-refillable PET bottle
will clearly lead the way in the future.
No other plastic materials, PEN, or
polycarbonate, for example, have
been able to gain a strong foothold in
the marketplace and, according to the
experts, will be unable to do so in the
future. Which specific type of PET
bottle is ultimately selected depends
on a variety of decisions that must be
made. Two different kinds of PET
bottles can be used for the bottling of
beer. Internally coated PET bottles,
for example, offer the advantage of a
glass-like layer between product and
packaging material that forms a gas
barrier. This internal coating,
however, is very brittle and therefore
vulnerable. Another decisive
disadvantage of the inner coating for
the PET bottles: These bottles can
only be manufactured in batches and
the manufacturing process needs to be
separated from the bottling process.
In contrast, all types of multi-layer
PET bottles can be produced in a
blow-molder installed upstream to the
filler, fed directly into the system via
the air conveyor, and processed
continuously.
However, multi-layer PET bottles
have the disadvantage that segregated
recycling of the bottle material is not
possible. The recyclate produced
from internally coated PET bottles on
the other hand can be utilized again
for new bottles. Unlike with beer,
carbonated soft drinks and bottled
mineral water can be bottled, for both
non-refillable and for refillable
bottling applications, into standard,
non-refillable PET bottled without a
protective barriers and without
scavengers. Any CO2 loss that may
occur can easily be counteracted
through the higher level of

carbonation. Additionally, both carbonated beverages and
sparkling water are not particularly sensitive to oxygen.
We are assuming that in the future we will see new ways
to recycle PET bottles and increased shelf lives being
demanded by both the beverage industry and the consumers.
We are also assuming that the weight of the PET bottles will
be decreased even more.
FBA: KHS is also moving quite strongly into the non-
beverage sector. What does KHS bring to this side of the
business? How is the food/non-beverage business different
from the KHS beverage markets?
VR: That is correct. KHS has previously been extremely
strong in the beverage industry and is now taking giant steps
towards the food and nonfood sectors. With 42 percent, the
brewing industry continues to be the most important sales
pillar for KHS. Here, KHS is a supplier to 19 of the 20
largest brewing groups in the world. This is followed by the
soft drink sector with 29 percent, the fruit juice sector with
10 percent and the mineral water industry 9 percent. The
wine, champagne, and liquor sector represents 4 percent
of KHS sales. Even today, KHS realizes 6 percent of its
total sales in the food and nonfood sectors. In the future,
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we anticipate even higher growth rates than in the beverage
branch of industry. We would like to cut a big slice out of
that cake. We have proven in practice that we have the know-
how to do so. Experience shows that the know-how required
for the beverage industry generally far exceeds the
requirements of the food and nonfood sectors. We are
currently profiting from this fact. Our international circle of
regular customers includes big names in the food and nonfood
sectors, and many big players who are equally convinced of
KHS technology as are numerous medium-size companies.
The global players in the food and nonfood trades profit just
as much from our global network and the new organizational
structure grouped into business areas as the global players in the
beverage sector.
FBA: With your twin operations in Asia, what message would
you wish to convey to your industry partners in terms what
they can expect from KHS in the near future?
VR:This question can be answered with three words: Quality,
quality, quality. Quality with regard to the products, quality
with regard to service, and, last but not least, quality with
regard to cooperation with local KHS partners based on
mutual trust.
FOOD & BEVERAGE ASIA APRIL/MAY 2007 53