The only way you can survive 150 years is by discipline and perseverance: David Kohler

David Kohler, chair and CEO, Kohler

Kohler, a global leader in the kitchen and bath space, inaugurated its third experience centre in Bengaluru last week. David Kohler, chair and CEO, also the fourth-generation family member leading the US-based company, talks to Forbes India about what it took for the company to survive 19 recessions, two wars and two pandemics and maintain its position as a global luxury brand in various markets.

Q. Kohler is completing 150 years. What does it feel like to be a part, and a member of the founding family, of a company that's 150 years old?
It's a tremendous honour and I'm very proud and humbled to serve in the capacity I do as chair and CEO of a 150-year-old private company that has been held by the same family for that period of time. It's an amazing company, I think, in the quality of the people, the quality of the purpose, the mission, and the social impact that we've had over the years. So, there's a lot of pride, and a lot of responsibility to all the stakeholders that we impact all around the world, from shareholders to all our 40,000 associates, to all the communities that we operate in around the world. We touch a lot of families, and so it's a great responsibility.

Q. Apart from being a member of the founding family, you have also worked in several verticals within the company over the years. What would you say are the principles or the ethos that hold everything together?
The only way you survive for 150 years, let alone thrive, is if there's a level of discipline and sticking to a set of values that have made you successful. So, I think our story is one of perseverance and discipline guided by our mission, which is to enhance the level of gracious living for all those people touched by our products and services. We really believe in our mission and are driven by that. Those really form the DNA of the business strategy that you see in all our businesses.

Our first and foremost guiding principle is to live on the leading edge of design and technology in product and process. So, driving innovation is the heart and soul of our competitive advantage in what we do. The second principle is to always produce to a single standard of quality, regardless of price, across our business. Third is around quick, consistent delivery. And fourth is maintaining an organisation of passionate associates that truly take ownership and pride in what they do. And our final guiding principle is to reinvest over 90 percent of our earnings back into the business.

So, I think it's this combination of left brain-right brain thinking: Disciplined, analytical, conservative financially, but at the same time being entrepreneurial and inventive, which allows you to continue to innovate with the changing markets and environment.

Q. You mention changing markets and environments. Today we're talking about a lot of stagnating, slowing economies across the world. In a 150-year history, I'm sure the company has witnessed many tough times. What are the fundamental lessons that, as a company, you can take away from hard times?
Through our history, we've been through 19 recessions in the US, two pandemics, World Wars, crises of plants burning down, and all sorts of things. And I think the lesson we always take away is a discipline and a commitment to the long-term as a business and a tenacity to be able to weather cycles and challenges by controlling what we can control. We can control our attitude, we can control our energy and our effort, we can control our financial discipline.

So, historically, there's always been economic cycles in our business and challenges, particularly being in a housing-related business. We've always had to have a conservative balance sheet position and never get over-leveraged or over-extended because you can't make it through cycles if you exist like that. It's this combination of financial discipline and operating discipline combined with a tenacity and a perseverance and a confidence that we can really control our destiny and work through any challenge that we face as a company.

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Q. The third Kohler Experience Centre [KEC] has just been inaugurated in India, in Bengaluru. What plans does the company have for India, as a market and as a manufacturing base?
Well, it's an exciting time because India is the only country in the world where we now have three KECs. So, it's one of a kind, and we plan to add more KECs in India over the next few years. They're critical to bringing our products to life for consumers and creating an immersive experience. India is one of our top three markets, and one of the most important markets in the world strategically. This is because of the growth rates that we see in India. It's the fastest-growing large economy in the world; 6 percent-plus GDP forecast going forward. Incredible demographic growth in terms of per capita GDP and the wealth creation of the middle class and affluent class and luxury class.

It's an incredible market opportunity for our brand and business, and we've been growing at twice the market rate over the last five years. We also think that Indian design and fashion sensibilities, and the pride that people have in their homes—this has only been accelerated post-Covid—is an incredible growth opportunity in terms of expanding the market size over a period of time.

India has been an excellent area for us to manufacture in, and it's been central to our success in the country. We couldn't be where we are today in India if we didn't manufacture in India, because we otherwise couldn't provide the array of products, or the consumer value for those products, or the service levels that we do. We have two manufacturing facilities for our kitchen and bath business in Gujarat. We also have a diesel engine manufacturing facility in Aurangabad in Maharashtra, and we're building an electric vehicle control facility in Pune.

Our manufacturing plants here are some of the most advanced, and best managed plants we have in the world. They allow us to deliver an array of products that have been designed and developed for India, which is one of the factors that has made us successful. We don't just take global product lines and bring them into India. We study what the Indian consumer likes and wants. We've developed special colours and special products uniquely designed for the Indian market and consumer.

Q. Is this the same approach that you follow in other countries and markets as well?
It is. It's been central to our success in China and the United States and in different markets. And it's something that we started really early on in India, that is designing and developing based on insights from the Indian consumer. So, it's, it is a playbook that has worked elsewhere and it's the playbook that has allowed the best performing companies in India to succeed.

Q. What are the plans for India where investments are concerned?
We have ambitious plans. We'll be expanding showrooms across India. This year our plan is for about 160 new showrooms in India, plus the KEC. There'll be more KECs and hundreds of showrooms every year. So, we're continuing to expand our commercial reach of the brand as the leading premium brand in the market. On the manufacturing side, we're investing in all our areas and expanding all our lines of business with millions of dollars of investment over the next few years.

Q. Although India is not your top-most market, it now has the highest number of KECs. Do these centres play a significant role in the B2B or B2C segment? What kind of customers do you aim to attract through them?
KECs play well in both B2C and B2B segments. If you look at the KECs, they're an incredible showcase of the largest assortment of our products you can find anywhere in the country. We'll have a wide array of every product, colour and finish for consumers to see. And it really opens up consumers' minds as to what's possible, because many of them only see fragments of a product line. And then [at a KEC] they're able to see what's possible and work with professionals who can help them understand the product line and how they could specify a whole product assortment for their homes. And the same is true for architects and designers. We have professionals who can work with people from architectural studios and design studios to understand what products might be best to specify in different types of commercial projects, high-rise residential or hospitality projects.

Q. What percentage of the bath and kitchen vertical products that are manufactured in India cater to the domestic market and what percentage is for export?
Today it's 80 percent for the domestic market. And that's really a function of the growth of our domestic business, which has been so strong. We've needed the available capacity for the domestic market.

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Q. What have been the factors behind this growth over the last few years?
Certainly in the last decade there's been some government policies and moves that have helped improve the economic foundation of the country. Also, the infrastructure investments in the country have helped improve the economy. And I always also say that demographics, at the end of the day, drive pretty much everything. When you have such a young population growing in affluence and the desire to purchase goods and homes—I think 27 percent of homebuyers now in India are under 35 years old—all these things contribute to a rapidly growing economy where people are increasing their income and want to improve the quality of life.

Q. In India, we have a lot of family-owned businesses. Many of such bigger business houses are taking various steps where succession planning is concerned, including processes where the founding families take a step back and professionals are brought in to manage the company. How do you keep the family as part of the business? Do you see future generations of your family being equally invested in the company or do you have plans of succession planning in other ways?
First and foremost, we think about our business as a privately held company. Now, it is family controlled, but it's a private company. And my goal, our goal, is to build a company that's so strong, that it doesn't matter whether one of us or multiple of us are taken out of the company, the company can continue to thrive and grow because of proper succession of leadership. We also believe it's not imperative that a Kohler family member lead the company.

But we also want to foster in our family, a pride of stewardship and ownership of the company. So that's something we do very much with our generation, the fourth generation, and then the fifth generation, where there are 10 in the next generation. We're really teaching them about the company, and engaging them in the company so that they can be proud and responsible stewards for the company, whether they just serve as a shareholder of the company, or whether some of them decide to work in the company.

We certainly think a number of the next generation will work in the company. But to rise up to senior levels over time, they're going to have to demonstrate their competence, their passion, their commitment, as a part of meritocracy, to deserve the right because, at the end of the day, we need to make sure that the leaders operating the company are the most qualified people, whether they're family members or not. So, we have to maintain objectivity, but it is great to have family members that are passionate and competent, because they bring an X factor, if you will, to the equation by being part of the family that is stewarding the company. So, we are hopeful that we'll have a number of the next generation who want to play significant roles in the company over time.