Multivac, global supplier of film-packaging machines, is in the process of consolidating its global presence into a formidable commercial machine. Tom Albrighton spoke to Sales Director Matthias Ehrat, Marketing Director Frieder Grimm and Production Director Tim Slomp to learn more.

Multivac Sepp Haggenmüller GmbH & Co. KG produces machines for packing products in film, including reel-fed thermoforming, lidding and chamber packaging solutions. The company employs 900 people and holds over 200 registered patents in Germany and abroad. Founded in 1961 and venturing abroad for the first time in 1969, Multivac has grown to be a global supplier to the food processing industry, manufacturers of disposable medical equipment and other sectors. In addition to the parent company and factory at Wolfertschwenden in Germany, 20 subsidiaries and more than 40 agents sell and service Multivac machines around the world. Present turnover is just over €400m.

“Thermoforming really has its roots in the development that occurred in the 1970s, when we started using vacuum technology and, later, gas-flushing technology to give dairy and meat products a longer shelf-life,” comments Matthias Ehrat. “That was the starting point for most of our industry partners as well as for ourselves.”

Market areas

Matthias Ehrat outlines Multivac’s customer base. “Today, our customers can be split into four distinct groups: meat and dairy, disposable medical devices, fish and what we call consumer industrials,” he says. “Traditional meat and dairy customers have been with us from the start, and we grew the company with them. They’re still the most solid part of our customer base, with by far the largest chunk of our turnover.

“Medical device manufacturers are the second largest group,” he continues. “This business started in the early 90s, when the makers of syringes and disposable medical products were seeking modified-atmosphere solutions for sterilised products, and we grew with what was effectively a commodity range. The trend was to move away from hospital sterilisation of multi-use syringes and towards disposables, and we catered to that requirement. However, today disposables only make up around half of our medical device turnover. The other half being in very complex products – those requiring lots of systems engineering, total-line integration and so on. Examples are titanium artery stents [expandable wire meshes or hollow perforated tubes inserted to keep the artery open] hip replacements and spinal implants. These are the areas where the real technical challenges are.”

The third area is the fish packaging industry. “This industry has similar requirements to the meat and dairy industry, but we separate it because of its geography and some differences in terms of packaging style,” explains Matthias Ehrat. “This market grew mainly from Japan, where we’ve been operational from the beginning and today have a significant market share in thermoforming and MAP equipment. We deliver the base machine from Germany and manufacture the customer-specific die-set locally in Japan, which gives the customer a sense of buying a Japanese machine. That strategy made us very successful – we’re one of the few overseas packaging manufacturers to succeed in that market.

“Finally, consumer industrials covers traditional high-volume consumer products in areas across foods and household goods, with a common theme of high-volume, high-speed packaging rather than technical requirements like modified atmospheres.”

Better packaging

So, what is the essence of Multivac’s offer? “Well, what we do is provide better packaging!” laughs Frieder Grimm. “But if we go a bit deeper into what we mean by that, it has at least two dimensions. First of all, it's a better result in terms of the product. We provide a better package in terms of appearance, functionality, precision and maybe also in terms of the price that they can offer to their customer.”

“The second dimension is the packaging process,” he continues. “That’s where our knowledge delivers good efficiency and return on the client’s investment in packaging equipment. We offer an efficient, reliable and precise packaging solution. The packaging machine itself has a superior balance of output and cost of ownership.

“Plus we also offer tailored solutions, perhaps with some kind of technical innovation, that help to deliver cost savings. That might be a different version of the packaging itself, or a new way to combine various packaging types. For instance, a customer might be producing three different packages on one machine, and this gives him the chance for him to take three products in different price levels. The first category is the premium pack, the second category is the medium pack, and the last category the discount pack. Each is quite different in appearance, but he can run everything on the same machine. And of course, that’s a big cost saving.”

“In terms of the machines themselves, we have three main product ranges,” explains Tim Slomp. “There’s the typical chamber machine, which is a manually operated machine, typically used by butchers and so on. It sits on the table-top and can be used to pack products such as meats and cheese. Second is the tray sealer, which works with a preformed tray. We seal the top film, and eventually modify the atmosphere within. Finally, we have the so-called rollstock machine, which works on a similar principle to the tray sealer, but we form the tray too. In a typical year we build about 1000 rollstock machines, about 100 tray sealers, and about 2500 chamber machines.”

Three types of requirement

When customers come to Multivac, how do they typically express their requirements? “It happens in many different ways, and that’s the big challenge for us, but also a great opportunity for us to differentiate ourselves from the competition,” says Frieder Grimm. “At one extreme, we have the global key accounts with entire development departments. They give us very clear pricing and very detailed specifications, and we have to see can we fulfil that. Or we might even have to go through a corporate development process if it’s a new requirement. This is the most sophisticated approach that we can provide: very specific, very detailed.

“At the next level is the customer who has an understanding of what he wants to pack and what the results should be. But he's not very clear on details like materials, packaging features and the packaging process, so we have to guide him through or navigate him actually through this entire process.

“Finally, we have those who know the product to be packed and have a rough understanding of how it should look. But the onus is on us to show them different options. What are the choices? What are the benefits and limitations of each option? And we have to take each perspective in turn, looking at the solution from the cost side, from the appearance side and from the feature side.”

Clean designs

Tim Slomp outlines Multivac’s approach to production. “We have two manufacturing plants. The main facility is here in Germany; it also houses processes like sales and R&D. And then we have a separate manufacturing facility in Austria. They do parts manufacturing and some sub assembly, but we do the final assembly here.”

Multivac is relatively vertically integrated, seeing value in producing many parts in-house. “We aim to manufacture our parts ourselves, so our manufacturing depth is extremely high,” says Tim Slomp. “There are some parts we have to buy, such as drives, switches and electronic parts, but the mechanical parts are manufactured by ourselves. It's our opinion that if you have a certain economy or skill that it's just cheaper to produce it yourself, because if you have to buy it, you have to pay the overhead of another firm.

“We recently invested in sheet metal production, which was something we previously had done outside the company,” he continues. “At the moment, we’re seeing a real move towards stainless steel and away from aluminium, plus a trend for ‘clean design’. One of our biggest priorities at the moment is to make the machines easier and quicker to clean, so clients can clean the machine without taking it apart. It’s actually quite easy to design a machine in this way, but traditionally we just haven’t focused on it.”

Do it yourself

Integrated manufacturing in Western Europe – does Multivac see that as sustainable? “Yes, it is our strategy to stay here in Germany, because we think it is the cheaper solution in the end,” asserts Tim Slomp. “You don’t have any transportation. Your quality cost is much lower, and the level of education in Germany is extremely high compared to Eastern Europe. I’m not talking about education on university level – the university level in Eastern Europe is very good. But the workers here, the technicians and so on, they are extremely well trained. All the younger technicians have trained on the job for four years, working for a master who has done his technician degree and then gone to a master school, training for 15 years.”

Moving elsewhere might damage or disrupt one of Multivac’s most precious assets – knowledge. “Designing, building and selling packaging machines can’t be learned from a book,” says Tim Slomp. “The only way you can learn is on the job. And it takes years to become an expert and be able to advise the client.”

He goes on to offer an interesting perspective on moving production eastwards. “Moving everything to China is what you might call the MBA approach. I think the real solution is to say, well, no, we want to keep the facilities here, because our people have to work. They need a job. We should generate ideas for reducing cost rather than just saying, ‘let's go to Eastern Europe because labour is cheaper there’. Automation is one way to reduce labour, as opposed to just labour cost, that we think about very carefully – that’s why we invested millions in automating our milling department. When I go home, the machines are still producing, although there are no people there – you can’t save any more that! Eastern Europe can’t help with intelligent cost savings like that. Plus you always have to be a few metres further east than your competitors, so you're like a nomad travelling the whole globe, but you will end up at home. So I think it’s better to focus on your product and your clients. Focus on savings, for sure, but as a continuous process of improvement like Toyota do it, not a one-off achievement.”

Formshrink

Formshrink is Multivac’s new shrink-wrap system for irregularly shaped products such as meat and cheese, offering an attractive result with significant efficiency gains. It was invented by Multivac in partnership a film supplier called Cryovac, and is owned by Multivac. “It's a shrink package where the film fits like a second skin on the product,” says Frieder Grimm. “Before this technique, this was achieved with so-called shrink packs. Formshrink allows us to carry out the process on a high-performance machine. The sealing zone of the pack used to get contaminated very easily, and there was a fairly high failure rate in sealing too. The top load mechanism is much faster, much easier and much cleaner. Our customers are reporting savings in labour costs as a result of using this new solution.”

Tim Slomp provides the technical perspective. “In the past, everybody used a plastic bag with one open side, and they put the product in the bag and sealed it and shrunk it. As you can imagine, it was difficult to automate because you have to open a bag, put the product of variable size inside, close it and put it in a chamber. Normally this was done by hand; the only automated solution was a gigantic machine, ten metres square. But if you take a rollstock machine, where you form the pockets from a roll, it's a very compact machine that’s very easy to automate. So a few years ago, the idea arose of making shrink bags on a rollstock machine and sealing them. The main advantage is that you do not have to open a preformed bag. You just put the product in a pocket and then the upper film goes on top, it seals, and then it goes into the shrink tank.”

“Also, the appearance of the pack is improved,” adds Frieder Grimm. “The film fits the product perfectly, no matter what its shape. We can make a very individual shape for every product, not dependent on the shape of a specific pack. We can wrap any individual shape without any kind of corner or overlaps. The more irregular the shape, the better the pack seems like a second skin. It works really well on products such as cheese, offering a new tactile sensation to the consumer. And it can reduce costs too.”

Tim Slomp thinks the market might take a while to see the benefits, but there’s no doubt that Formshrink is the future. “Having a material that you can thermoform in a rollstock really is a revolution, so much so that it takes time for the market to adjust to it. Everything is still done by hand in the meats and cheeses market, but that will change. People running a five-shift system will be able to save something like four people per shift. So instead of moving to Eastern Europe, you can stay on site. There’s a speed advantage too – maybe 100 packs a minute compared to 10 a minute by hand.”

Global presence

One of Multivac’s biggest strengths is its formidable international sales network. “We work locally with geographically focused teams who understand the requirements of each market,” says Matthias Ehrat. “Each sales person serves a defined number of customers, as is responsible for discussing all aspects of their project with them. It’s one of our greatest challenges to ensure that each sales technician can operate in this way.”

The firm’s ambition to be present wherever there is suitable business to be had. Matthias Ehrat dicusses the different levels of implementation achieved by the firm around the world so far. “Our main market in terms of sales today is North America, followed by traditional meat markets like Scandinavia, the UK and Poland, which is a very important market because it’s such a significant producer of meat. France, Germany and Japan are also very important for us. Those are our ‘A’ regions.”

“Around four years ago we started an initiative to grow into the remaining markets of the world by expanding our sales organisation,” states Matthias Ehrat. “It’s our clear and declared goal to serve our customers locally in almost any significant marketplace. The countries in question are mainly developed countries where we previously had distributors or agents, and we’ve brought them into the Multivac organisation. Examples include New Zealand, Australia, South Africa and Chile, where we now have good sales capability with strong technical customer support.”

Emerging markets

Emerging and developing markets play an important part. “We also have sales organisations in what one might call borderline or developing markets such as Ecuador, Columbia, Peru, Egypt, Libya, Iran, Albania, Croatia, Slovenia and Serbia,” says Matthias Ehrat. “In Russia, China and Spain we operate through joint ventures. Over the last two years, we’ve aimed to be there with a competent partner and the Multivac brand in more or less any country where we see potential business.”

Developing new territories means taking some calculated risks. “People said we were stupid when we moved into Albania!’” laughs Matthias Ehrat. “But today we have very good business there, profitable business, and a salesman who’s helping local meat producers to supply the growing supermarket trade. We don’t want to be a follower, we want to be a leader, and that means taking some risks in market development. Right now, I would say we’re seeing the biggest growth in Latin America, the Middle East and Asia-Pacific.”

“The process of improving our global network will probably continue for at least five years,” says Matthias Ehrat. “We want to be a global solutions provider, and that means having a salesperson present in every potential market where we can afford it.” Multivac won’t be pinned down on growth figures, but the firm has employed 9% more staff in 2005, which gives an indication of its rate of development.

Dedicated network

Multivac’s ideal approach to consolidating its position overseas is as integrated as its production technique: it aims to acquire distributors outright, bringing them into the Multivac organisation. “There are several benefits to that,” comments Matthias Ehrat. “Firstly, a much stronger focus on Multivac. Distributors acting for a broad range of providers sell machines in a fairly opportunistic way; now we’ve got much more customer focus. Secondly, distributors tend to concentrate on one market segment, meat for example, and we need salespeople who can operate across segments. We also have much better information flow back into the company on specific projects.”

A non-owned sales agent might make a sale for Multivac, but he might just as well sell a competing product. And there are probably limits to his knowledge too. ‘There's a certain level of complexity in our machines; just how close can an external agent be to our designs?” asks Frieder Grimm. “How much can he keep in his mind?”

A dedicated presence also enhances the after-sales offer. “We claim to have one of the biggest service and after-sales networks,” says Frieder Grimm. “We have more than 300 service technicians working full-time for Multivac around the world, plus eight service agents,” says Frieder Grimm. “Basically, that means we have a superior local presence in all regions of the world, and also a superior reaction time. And successful service too – reaction time is one thing, but you need a result too, and for the customer that means the availability of the machine.”

As with sales, an exclusive focus on Multivac products reaps benefits. “Our people are Multivac people servicing Multivac machines,” points out Frieder Grimm. “And we back that up with good spare-parts availability. Our network can serve customers with spare parts in less than 24 hours in some regions, or close to that time elsewhere. It all adds up to what we call maximum machine availability, which is one way that we minimise overall cost of ownership. Investment in a machine is one thing, but the productivity of that machine over ten or fifteen years is another matter. Sometimes, that’s much more important than the sales price. We sometimes say that the first machine is sold by the sales force, and the second one by the service people.”

Training is also offered, enhancing the customer’s ease with their purchase. “Once a machine is installed, the first thing the service technician does is provide introductory training to the customer’s maintenance people,” explains Frieder Grimm. “This is a much more direct way to ensure that there is understanding, that there is trust in the machine, and that there is know how around for the local people running it. We also offer training to service people, maintenance people and operating people. We have the international training centre here in our headquarters, plus satellites in our subsidiaries worldwide.”

New trends

Frieder Grimm offers his views on the trends that will shape Multivac’s business in the future. “Firstly, the trend for packaging to be used to differentiate products is continuing,” he says. “Products become more and more similar, and marketers are asking how they can differentiate their products from the competition. And that comes back to us a clear opportunity and challenge, to create more sophisticated individual packaging solutions. For instance, we have to consider how to differentiate premium retailers from discount retailers or premium products from discount products. The end result is more and more complex and sophisticated packaging solutions. Secondly, the drive for efficiency in packaging services is never-ending. We’re always looking at technical alternatives that can improve efficiency.

“The third trend is higher expectations in terms of after sales service. Our customers might be working two or three shifts at their site, and they might be in a warranty claim position with their own customers if they suffer production fallouts. So we have to put more effort into achieving maximum reliability.

“Finally, we’re seeing more functional or intelligent packaging that offers some specific type of added value, for example through being used as a storage box for the fridge, or a presentation device at the table. Or there could be a packaging where the product changes as the result of a specific chemical reaction in the pack.”

So, what does the future hold for Multivac? “For us as a company, we’re diversifying into new customer segments, putting more resource into areas such as bakery products, fish products, juices and of course all types of convenience goods,” says Frieder Grimm. “These are new areas of focus not only for our sales force but also in terms of market development and our engineering department here on site. And the other theme is the reinforcement of our local presence. We want to have an even stronger presence in regions like South America, Africa, Asia and Eastern Europe.”

“Looking forward, the biggest challenge is to maintain the level of customer-specific support and industry expertise that we’ve built up,” adds Matthias Ehrat. “My own task is to make the sales team highly focused on customers’ problems, and delivering expertise in rapidly developing areas such as IT. Our background is mechanical engineering, but increasingly the emphasis is on total solutions, including logistical aspects. The challenge, and the opportunity, is to master the complexity of such requirements and be recognised as a total solution provider.”