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Heidelberg and Gallus CEOs reflect on key happenings in 2021

In this interview, Ferdinand Rüesch, anchor shareholder, Heidelberger Druckmaschinen AG (Heidelberg) and senior vice-president, Global Key Accounts Gallus, and Rainer Hundsdörfer, CEO of Heidelberg, talk about the two businesses and how they have faired during the pandemic. They also explain why a sale of Gallus to Benpac failed. Additionally, they discuss the changes they have made to Gallus, as well as explore wider changes to the Heidelberg business to ensure its long-term success.

Firstly, in what are unprecedented times, how have the last 18 months been for Gallus?

FR: Yes, the last 18 months have been a very challenging time for everyone. However, COVID-19 made us fast-track a few things that we might not have done so quickly, supporting a wider strategy to reposition the business, improve efficiencies and drive profitability via a number of new initiatives and business changes.

RH: Indeed, the pandemic impacted the whole world and none of us were immune. However, at the same time, the impact of our transformational process for the wider Heidelberg business started to bear fruit, and with increased sales throughout the year, business recovery was much faster than expected, which has obviously helped every business within the group.

FR: We still have many pandemic-made issues to overcome, such as electronic parts availability, how to socialize with our team and the wider market, restrictions on travel and much more – it’s far from over, but we are very positive with regards our future and the potential of the business.

Rainer Hundsdörfer

In terms of Gallus, what specific changes have you made to the business?

RH: Well, to realize the potential that Ferdinand talks about, we embarked on another transformational program that had begun many months before, which was expedited when the Benpac acquisition had run its course. To do that, we completely restructured the Gallus business, providing it with the flexibility and autonomy to make its own decisions and be agile and creative once more. As a member of the Heidelberg Group, Gallus has sole responsibility for all business within the labels market, and this customer segment is important to us.

Today, Gallus has separate sales, service and R&D operations, and can respond very quickly to specific customer requests or wider market trends. Gallus and its management team report only to me, which makes decision-making faster, but the Gallus team has also been able to retain the Heidelberg elements that made sense, such as manufacturing its digital elements at our advanced manufacturing facility in Wiesloch (Baden-Württemberg, Germany), as well as use our in-country market presence for a wider reach. It has the best of both worlds. We’ve also seen the return of several ex-Gallus employees– really talented individuals from all over world who know the business and our customers, and are now instrumental in driving the business forward.
Sounds impressive, but I’m glad you mention Benpac – what was the situation there?

FR: When Benpac approached us at the beginning of 2020, Gallus wasn’t actually for sale, but following early discussions with them and our internal review, strategically, the sale made sense for the wider Heidelberg business.

RH: However, the acquisition process wasn’t typical. It took several turns that through no fault of our own, either completely stalled progress or made us very uncomfortable, with the sale eventually collapsing.

FR: Since then, and with a committed team, we haven’t looked back. With all the changes we’ve made– a solid strategy in place, the right people, amazing products and the strength of Heidelberg beside us – we now have all the assets and potential to lead the labels and packaging markets and make a huge contribution to the group.

Does this mean that Heidelberg is no longer seeking a buyer for the business?

RH: That’s correct; Gallus is definitely not for sale. During the pandemic, we received a very good offe, but now we are very happy we did not sell the business. Gallus helps us in the packaging business, which offers excellent growth potential, and it also perfectly meets our quality requirements. We are giving Gallus all the freedom it requires to grow and further develop the highly specialized label business, and we will offer our synergies wherever this makes economic sense. On this basis, we are expecting Gallus to make a valuable contribution to the Heidelberg Group result in the future.

FR: I would like to emphasize once again that we are 100 per cent committed to the business and our people. Moreover, we’re excited to bring further innovation to the labels and packaging markets, crucial in enabling customers to not only improve their operations, but to leverage new profitable applications too.

For Gallus, what has been the result of these changes so far?

FR: The attitude of our people has changed dramatically. We now have a dedicated team with the thinking and flexibility of a start-up business, where creativity is encouraged, and nothing is impossible. Where we were firefighting issues before, we’re fixing them now.

Another big change has been in our ability to honour customer commitments. Our independence has enabled this to happen, and it has already seen customer relationships blossom once more. Additionally, with Gallus R&D now back to full speed, we’re increasing cost efficiencies and overall product quality within the supply chain, which is having a big impact on revenue. In fact, by the end of 2021, we are on target to be profitable for the first time in many years.

Have you made any changes to the existing Gallus portfolio?

FR: Yes, we have been doing a lot. I can’t discuss too much, but I can mention that we will shortly be conducting field trials of a new Gallus Labelmaster 570, which promises to deliver many new customer benefits. We also started selling the Gallus Labelfire with a low migration capability, and from the end of 2021, the world’s first ‘flexible UV Inkjet Ink’ for 1200 dpi will be available on the Gallus Labelfire for digital folding carton production. With this new ink you will be able to die cut and crease folding cartons without cracking or splintering, and we will extend this innovation to other applications (e.g. tube laminates).

We have also ramped-up our secondhand press business, renamed ‘Gallus Classics’, where we buy, refurbish and sell warranted pre-owned Gallus presses. We also provide a ‘matching’ service, putting buyers and sellers of second-hand Gallus presses together. There was large demand from customers looking for parts for older machines, so we have developed upgrades for those presses that are at the end of their ‘electronic’ life, but would otherwise go on for many years. For instance, Gallus Classics provides control system upgrades for Gallus EM Lines and the Gallus TCS 250.

Utilizing our extensive R&D experience and in-depth application understanding, together with our customers, we also develop highly customized solutions on a project base – these aren’t intended for serial production.

Finally, we are going to launch a new production system at the very top end of our product range. It is too early to announce details, but it will be exciting.

Can you tell us more about the benefits of the ‘low migration’ capability of the Gallus Labelfire’?

FR: Labelfire is a hybrid, up to seven-colour plus white and 1200dpi, digital inline label press combining the benefits of digital and conventional printing with further processing technology in one system.

For customers specializing in food, pharmaceuticals and cosmetics we needed to provide further assurance about ink migration. So, we were delighted to pass all the necessary industry certifications for that, and more importantly, our UV low migration inks meet the requirements of Swiss Ordinance and Nestle Guidance – a huge milestone for Gallus and our customers. With this now all in place, we believe that Labelfire offers the highest quality UV inkjet solution on the market, with the ability to integrate with any label workflow without limitations. What’s more, our total cost of ownership calculation shows the lowest cost per print over all run lengths. Now, the press opens-up the food, pharmaceuticals and cosmetics sector with low migration.

Is the new low migration capability for the Gallus Labelfire commercially available today?

FR: Yes, it is.

Switching to Heidelberg, what did you do to enable the business turnaround?

RH: Too much to summarize succinctly, but we have been making fundamental changes to how the Heidelberg business thinks and behaves. We are learning to be humble, and that impacts every element of the business from equipment and product life cycle to customers and addressing their needs. After 200 years of working in a single industry and serving it in our way, old habits die hard. Internal culture change has been one of the biggest barriers to moving us to where we need to be, but with some truly inspiring leaders, we’ve made amazing progress, and success breads confidence and further success.

Given that we are, hopefully, turning a corner with the pandemic, what are both of your thoughts as to the immediate future of the industry?

RH: Interestingly, in terms of Heidelberg, business performance in June 2021 represented our best month for 10 years. Some of this was due to a pandemic bounce-back, but our transformation process and new business lines were also a huge contributor to this turnaround, and we see this trend continuing.

FR: We are also very optimistic. Not only are we making great progress, but also seeing sales increase across the portfolio, especially for Labelfire and its ability to meet the new demand for ‘profitable’ digital label jobs and a post-COVID consumer boom.

Finally for Gallus, where do you see the business in five to 10 years’ time?

FR: Well, we obviously have a long-range business plan that we’re mapping progress against, but firstly, we need to continue the transformation process. What’s more, and like any manufacturing business right now, we have the impact of the pandemic to navigate. As previously mentioned, the most immediate issue involves sourcing parts, specifically electronic parts for our presses.

From a product perspective, we will have a portfolio that caters for every labels and packaging customer requirement and budget. We are pretty close already, but within the next five years we will close all the gaps with new, innovative products. In addition, we will continue to evolve our presses to drive the innovation and efficiencies that our customers need, and that means continuing to develop our digital offering. If we continue as we’ve started, we expect to be a strong, growing and profitable business in the coming months and years.