David Kohler: Flushed with success

David Kohler, the president and COO of one of America’s largest privately held companies, talks consumers, competition and commodes
David Kohler: Flushed with success
By Ed Attwood
Sat 08 Feb 2014 10:42 AM

A musical showerhead? Check. A vibrating bathtub? Check. An all-singing, all-dancing toilet complete with footwarmer and ‘ambient lighting’? Check. A trip to a Kohler Company showroom gives an interesting — if slightly surreal — glimpse into the kind of lifestyle normally reserved for the absurdly rich. If you’re a member of the 1 percent, the chances are that you organise your life with an iPhone, drive a Ferrari, wear a Patek Philippe watch — and perform some of your most intimate tasks with the aid of Kohler plumbing.

The man driving Kohler’s mission to provide the ultimate sensory experience for the most private room in the house is a fourth-generation member of the family that founded the company back in 1873. President and chief operating officer David Kohler, son of chairman and chief executive Herbert Kohler Jr, is genial, sharply dressed and immaculately groomed, despite having just arrived from Wisconsin via the company’s private jet.

“The firm is something that’s always been part of my blood and we grew up around it,” Kohler says, when asked at what age he knew he would be taking on a role in the family firm. “I always knew I would be involved in some capacity, but it wasn’t until I got heavily involved in the business after college and grad school that I really got the passion for it.

“One of the great things about my parents was that they really wanted us to find something we enjoyed doing. But at the same time, I think my father was very pleased that I actually found a passion for the business.”

That passion helped the Kohler Company achieve its second-best year ever in 2013, Kohler says, racking up $5.5bn worth of sales. Further details are hard to come by; the Kohler Company is privately held — in fact one of the largest private companies in the US — and Kohler doesn’t give too much away when it comes to profits, investments, and specific future plans.

According to Forbes, however, 2013 appears to have been a stellar year for the Kohler family, with its wealth estimated at $6.4bn, putting it in 65th place on its list of America’s richest people. The figure is a whopping $3.8bn up on the year before, largely down to the rebound in the US housing market and a strong performance in the stocks of publicly traded competitors.

Demand for new homes in the world’s biggest economy rose by 16.4 percent, according to the Commerce Department. New homes, and new hotels and office space all spell new business for the kind of products that Kohler provides.

Kohler himself puts the performance in the firm’s home market in slightly more measured terms.

“We saw a nice recovery in the US market; the housing and construction market has really started to improve and we’re seeing a nice steady increase in the general economy,” he says. “Asia Pacific continued to be a strong region for us, and we haven’t seen the weakness in China that other companies have seen.”

“And then in important markets like the Middle East we saw some nice growth last year, and that was the case in the other emerging markets such as Russia, Africa and India. We did see weakness in Western Europe but other than that, all around the world, we continued to grow and improve market share.”

While the company has launched a series of manufacturing and design centres all over the world, including in the UK, France and China, the Middle East is still something of a gap in this portfolio. However, Kohler says that’s a point he’s keen to change.

“I think over time it’s absolutely a consideration to put a facility here in the Middle East,” he adds. “I think as we continue to see the market develop and grow, with Expo 2020 coming and all the development we’re going to see around that, it certainly continues to give us more justification to put manufacturing facilities in the region.

“So I would expect , over the next ten to 20 years, you’ll see us invest with assets on the ground in this area.”

Certainly the Gulf, with its massive housing, hospitality and infrastructure plans, is an attractive prospect for the firm. Kohler points out that the company’s power generation equipment and marine systems products (Gulfcraft is a particularly big customer) are also attracting plenty of interest.

Another area in which Kohler is expanding is its hospitality arm. In the village of Kohler, Wisconsin — which was effectively founded in 1912 when the company shifted its operations west of the town of Sheboygan — sits the American Club, a golf resort and spa that will host the PGA Championship in 2015 and the Ryder Cup in 2020. In Scotland, Herbert Kohler bought the Old Course Hotel in St Andrews in 2004, adding Hamilton Hall to the site more recently. So given the Gulf’s love affair with the game, surely the company is considering opening something similar here?

“We’d never rule it out,” laughs Kohler. “It’s always about the right piece of land, and the right value and the right situation. We are definitely continuing to scan the world for the next golf resort destination. Certainly there are some beautiful resorts and courses that have been built in this area, and there’s a group of consumers that want to travel to this region because of that. So it’s certainly not out of the question.”

But Kohler’s passion really emerges when he’s talking about his products. He cites the Moxy shower head, which has a wireless speaker that connects via Bluetooth to an iPhone, allowing users to sing along to their favourite tunes in the shower. “The number-one thing they’ve asked from us in the shower — besides a great water experience — is music,” Kohler says.

There’s also a ceiling mounted bath tap, steam generators for showers, and baths you need a streetmap to escape from. This journalist’s personal favourite was the Numi toilet, which displays personalised welcome messages (just the thing for lonely millionaires), a built-in music system and made-to-measure ‘bidet functionality’. “It’s the most advanced toilet we’ve ever done — certainly the coolest commode in the world — and an incredible consumer experience,” smiles Kohler. It may be the coolest, but it’s probably also the most expensive, with the priciest version of the Numi costing an eye-watering $8,800.

So what’s next? Sadly, Kohler is keeping his cards pretty close to his chest. But he does point out that 90 percent of the firm’s profits are recycled back into the business, ensuring a level of R&D spend that few publicly-listed companies can match.

“We’re working on a lot of things that anticipate needs, and we’ll be able to deliver those needs in a very simple and intuitive way,” he says. “We’re looking at sensing technologies, and we’re also doing a lot of work on understanding how to create deeper therapeutic benefits for customers.”

And while the focus seems to be on Kohler’s glitzy bath and kitchenware, it’s also putting its technology to good use in more impoverished parts of the world as well. About half the world’s population lack access to proper sanitation, leading to higher incidences of diseases like malaria, tuberculosis and diarrhoea. To help solve the problem, Kohler is working with students and scientists at Caltech (California Institute of Technology) and the Bill and Melinda Gates Foundation.

“They’ll be launching in India later this year, with a test pilot of a fully closed loop toileting and sanitation system that can be used in rural areas without proper sanitation to provide a healthy, sustainable way for those communities to use the basic facilities that we all take for granted,” says Kohler.

An even more ambitious goal for the company is to have a net zero environmental footprint by 2035. When questioned as to how it’s actually possible to achieve this for a $5.5bn company, Kohler seems unperturbed.

“The tack we’re on is to reduce our footprint by at least 3 percent per annum, so a steady improvement,” he says. “Then we focus on different materials and process technologies that are going to help us change the processes and products we use to really drive us to that goal.

“We’re launching a whole new material set this year in the US that uses a lot of sustainable material; it’s innovative and unlike anything else you’ll see on the market today.”

If you thought there was any chance of the Kohler Company going public any time soon, then think again. Kohler says the firm is in a strong financial position, with very little debt, adding that there are no plans to take the 140-year-old firm to the market.

“We don’t have to bow to short-term quarterly needs, or to requirements to make analysts happy,” he says. “We can embark on strategies and invest in those products and businesses and technologies that we think are right for the future.

“You’ll see in a lot of publicly traded companies that they’re changing strategy a lot. The average tenure of a CEO is five years, so there’s a lot of different directions. And I think being privately held and closer to the business allows us to maintain a stronger organisation of people.”

Long term, Kohler is again reluctant to provide too much in the way of detail, but does state that the company’s corporate objective is to grow by 10 percent every year. Other than that, he says he doesn’t plan to radically change a strategy that has served the company well over the last century and a half or so. But it’s certainly a good bet that the firm will be revamping a bathroom near you with some high-end gadgetry in the not-too-distant future.

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