No feeling of a 40-year crisis for Kafeko – the future looks bright
It is commonly referred to as a mid-life crisis, a time when a person reaches a kind of midpoint in their life. This kind of crisis cannot be applied to a business, and especially not to the agency company Kafeko, which this year celebrates its first forty years.
Optimism flows through the business and the forecasts for the future look interesting. In other words, there is not much to cause grey hairs for CEO and owner Johan Hintze.
Text: Bo Walltec, Photo: Kafeko
Caption top image: Syntegon horizontal flowpack and toploading line for chocolate at one of Kafeko’s Nordic customers. From on the left is Steven Rossmann, Syntegon Food Sales Director EMEA, Johan Hintze, Kafeko Nordic, Christian Korte, Syntegon Food Vice President and René Jelen, Kafeko Denmark.
“Our service technicians are very qualified, but when it comes to the really big and advanced installations, we often have to rely on our principals, which in itself is not a problem.”
A lot has happened since Esko Ahtola founded the company in 1981. He had been in Germany for a few years and had made contact with some companies that could provide a basis for an agency business in Finland. Initially, it was just him and a part-time bookkeeper. The business kept going and Johan Hintze joined the business in 1990, leaving it for a couple of years in the mid-nineties and coming back again with the idea of buying the company from Esko, who had reached the retirement age. So it was, and soon Johan owned seventy percent of the business (in 2008 it became his for one hundred percent). The company name was changed to Kafeko Nordic Oy six years earlier.
– I realised early on that we needed a Nordic presence in order to be able to expand in the way I wanted,” he says. However, this was not a foregone conclusion and it took more than five years of discussions with our principals to realise that we could handle the entire Nordic market.
– We succeeded and we obtained the rights. Kafeko was established in Sweden and Norway in 2010 and in Denmark a year later. Iceland is also part of the Nordic region, and we have actually done some good business there, but we manage that market from Norway.
When Esko Ahtola started the company, he had two legs to stand on, the first being the agency for Hesser AG, a company dating back to the mid-19th century and which was one of the founders of the German packaging machine industry. They produced packaging lines for coffee, flour and sugar. It was acquired by Bosch in the seventies (Robert Bosch Apparatebau GmbH, which later became Bosch Packaging Technology). Incidentally, Bosch itself was new to the market in 1969. The second leg was process equipment for coffee roasters, manufactured by the world-leading firm Probat.
It is no longer called Bosch. In 2020 it became Syntegon, with high quality manufacturing of packaging lines for food and pharmaceutical products and, together with Probat, they are still two pillars of Kafeko’s business, which today also includes Swedish Evomatic, which supplies automation solutions, HDG, which manufactures bagging machines, Rotzinger PharmaPack, which manufactures pharmaceutical packaging machines (and is a spin-off from Syntegon) and Mekitec, which supplies quality control equipment. It is a mix of companies that Johan Hintze is comfortable with. Kafeko has offices in Karlstad, Helsinki, Korsør (Denmark) and Oslo and five service technicians in Sweden, Finland and Denmark.
– It wouldn’t be a problem to add companies to the list, I get at least one call a week about proposals for collaborations, but we feel that we are quite satisfied now. If we are to take on more agencies, we must feel that we can really contribute and have the staff to do so, and today we are busy with what we have.
– At the same time, we don’t close the door to discussions, that would be wrong.
When Esko Ahtola started, sales were around EUR 0.5 million. Today, Kafeko sells for EUR 45 million, with fifteen employees, and more are on the way.
– Our plan is to reach EUR 55 million and twenty employees by 2024,” says Johan Hintze.
So far, the food industry accounts for the bulk of turnover. In principle, Kafeko is involved with all the large food companies in the Nordic region, in one way or another, but also with smaller companies, such as family businesses. The development trend in the food industry is interesting.
– We can clearly see how the interest in plant-based foods is increasing. This applies to all companies, even the large ones, and often requires investments in machinery to make it work. Many of the installations we have made in the last eighteen months are related to plant-based foods. You can’t run them in the companies usual lines.
– This is something that is driving our development. Another driver is sustainability issues,” says Johan Hintze. This often involves new packaging materials that need to be incorporated into existing lines or that require new investments in machinery. These are often large processes and we have many projects in this area at the moment.
– The food industry has fared very well during the pandemic, growing by between 6 and 10 per cent. At the moment, this has not affected us much. They have been so busy that these investments have had to be postponed. However, we are now starting to see the effect of a pent-up demand and things are looking very interesting for next year.
– It is also interesting to note that the current problems with logistics chains mean that companies are bringing forward their investments to ensure that they have the capacity they need in the future. Delivery times are currently about 1–2 months longer than before the pandemic.
– We haven’t seen much of it in the Nordic region yet, but it’s clear in other markets, such as the in US.
Investment needs in the coffee industry
Coffee is of course a foodstuff, and if we look specifically at this area, Johan Hintze believes that there is also a major need for investments here. New packaging materials require new technologies and there is a general need for investment. The machinery in this roasting-oriented industry is starting to “rust” a little and needs to be replaced. A major Swedish producer has just completed investment in a new factory and much more is in the pipeline. The coffee market accounts for about twenty percent of Kafeko’s turnover.
More mono materials
Many customers nowadays are looking for mono materials and an increasing number of alternatives are appearing on the market. The problem is often that they behave differently from traditional laminates.
– This is an interesting development. If someone had predicted a couple of years ago that there would be mono materials for packing coffee, for example, I would have said there is no chance. Now there are both material and machine solutions.
– However, these are solutions that require more machinery. One example is the temperature accuracy of the sealing jaws. While there is a margin of plus/minus fifteen degrees when welding a laminate, it is only two degrees for a polyethylene or polypropylene mono material. If you don’t get the temperature right, you don’t get a seal or you burn the material.
– In addition, both pre-sealing and main sealing are required. Mono materials require knowledge, and that knowledge is available to coffee producers in the Nordic market.
Another trend is the move from plastic to paper, and for example, BillerudKorsnäs and Syntegon launched a solution about five years ago. In other words, there are new materials and new machinery solutions, which in turn open up new opportunities for Kafeko.
Medicin across the Nordic region
There are many indications of a positive development for Kafeko, but more is needed if the company is to reach its turnover targets in 2024, and this will be solved by investing heavily in packaging machines for the pharmaceutical industry, which is a very demanding area. Syntegon is a reliable supplier here, as is Rotzinger PharmaPack.
– Syntegon has a fifty-fifty ratio of life sciences to pharmaceuticals, it has equipment for both liquid and solid drugs, and in many countries different companies represent the two areas. With the exception for Finland, we have so far only sold to the food industry in the Nordic countries. Now we have reached an agreement with Rotzinger PharmaPack and are starting to sell to the entire Nordic pharmaceutical industry, which is an interesting but demanding area.
– This involves a completely different sales process that is much more advanced and demanding, which means that you cannot automatically sell to this market simply because you are good at selling to the food industry,” says Johan Hintze.
– Every step of the marketing process has to be documented and authorised by pharmaceutical authorities, which requires a lot of knowledge and takes time. It must be validated, optimised and approved. The cost of this alone is significantly higher in the pharmaceutical industry.
– This is our big expansion area and we will need new sales capacity and will have to be structured strategically correct, but it should be emphasised that we are not starting from scratch.
More advanced machines
Packaging machines are becoming more and more advanced and capable of working at higher and higher speeds. In addition, more and more electronics are being incorporated. This place demands on a company like Kafeko, not least in terms of service.
– Our service technicians are very qualified, but when it comes to the really big and advanced installations, we often have to rely on our principals, which in itself is not a problem.
– The machines can perform more and more by themselves. There is often talk of lines completely without operators, and these may be introduced in some areas, but when it comes to packaging machines that work with different products and materials, I think this transition will take time. To be honest, I don’t believe in machines working completely without operators.
Today, Kafeko is one of the major suppliers of packaging machines in the Nordic region, and we intend that this will continue, as you can see from what has been said so far. The plans have been drawn up, but naturally it is also true that as an agency company you are completely in the hands of your principals and what they invest in and develop, but considering that several of them are world leaders, Johan Hintze has no worries in that regard. The intention is to continue to grow and find new colleagues.
What does Kafeko mean?
Johan Hintze provided clear opinions and answers during our conversation, but the answer to the final question is a little more uncertain. It is natural to ask why your name is Kafeko, what does it mean?
– A lot of people wonder about that, and I guess we do too. I asked Esko Ahtola when I joined the company, but I didn’t get a good answer, just something about calcium and ferrum, but nothing that made me wiser, so actually I don’t have a good answer. It would be obvious to think it has a connection to coffee, but like I said, I don’t really know.
Nord Emballage congratulates Kafeko on its first forty years and what appears to be a bright future. It feels like the future is bright!