Plumbing & Mechanical interviewed Kohler Co. Chairman and CEO Herb Kohler Feb. 9 during the International Builders Show in Orlando, Fla. As chairman and CEO since 1972, Kohler oversees the company’s diverse operations, which include bath and kitchen products, engines and power systems, furniture, hotels and golf courses.
Family-owned Kohler Co. employs 30,000 people worldwide and over the last 35 years has attained an average compound growth in book value of more than 10% per year.
PM: When plumbing contractors and wholesalers think about Kohler Co., what is their perception?
HK: I think the first thing is leading-edge design. They think innovation. Hopefully, they will think a single, consistent level of quality, which we try very hard to do. We don’t always do it, but most of the time we do. And I would suggest that for many of them, that’s the product they put in their own home. Probably the biggest asset we have is when they do that.
PM: What bath and kitchen product excites you the most?
HK: Which child do you like best? It’s very, very hard to say. I have more than 200 design patents, and many of them are still alive. Now, let’s talk about a product I haven’t designed. The Numi toilet is a marvel of good design, which I mean not only the skin and the shape but even more important is the processes that went into that shape. And if you can create innovative processes and still have a distinctive, leading-edge shape, you’ve really achieved something. I think Numi does that.
PM: What is it about creating plumbing products that you find most satisfying?
HK: I love the ability to think five years, maybe 10 years, in advance and try to conceive what this human being really wants and what will improve my lifestyle. Not something that’s just trivial but would really make my life comfortable, enable me to move at a faster pace and enable me to be totally refreshed without a lot of hassle. What is it, and what can I do to make that happen?
PM: What products will bathrooms in the future have that they don’t have today?
HK: Without question, water con-servation will continue to be important. We’ve made great strides in water conservation. We’ve taken a 5-gallon toilet down to six-tenths of a gallon for the light flush and 1.28 gallons for the heavy flush. Imagine going from 5 gallons down to 1.28. That’s a remarkable reduction, and with the 1.28 gallons we’re getting a more effective flush than we did with 5 gallons. More than half the toilets in America today still flush 5 gallons or 3.5 gallons. So, look at the tremendous water savings still possible even with today’s products, much less what will be invented five years from today.
The shower will continue to grow in its ability to clean and rejuvenate us. Electronics will continually play a greater role in the future in the control of water.
PM: Why is stewardship of the environment and of your community important to you?
HK: Kohler Co. makes a variety of products that impact how we live, and how we feel about how we live. We make kitchen and bath products, furniture, tile, engines and generators. All of these have an immediate impact on how we live. Back in 1900, when we moved our facilities four miles out into the country from Sheboygan, Wis., and created a planned community, we intentionally planned this community to be to the south, to the west, and to the north of the factory because prevailing westerlies would take our emissions and cast them off on vacant land.
We’re always trying to improve how we live and how we impact the environment. And it’s not only my environment, it’s your environment. We feel we have an obligation to try to continually improve. Part of that is trying to become more and more sustainable.
PM: Will people spend more time in their bathroom in the future?
HK: Many of these products make it more efficient, so I’m not sure the whole experience in the bathroom will be longer. But you’ll be able to do more things and do them more effectively.
PM: How will Kohler Co. build on its reputation as a green plumbing manufacturer?
HK: We don’t cut back materially during a recession on our R&D. We keep pushing ahead. Green products obviously are important. So, in the process of invention and serving consumers what they really want, you receive an award or two here or there if you’re on the leading edge. Kohler Co. has been honored with WaterSense awards four times. The awards have been in existence four years, and we’ve received one all four years.
PM: Is it difficult to balance water conservation with a product’s performance?
HK: You just have to do it. Leading-edge design is always a challenge because you’re trying to do something that’s never been done before. You’re balancing forces that often are contradictory.
PM: The National Association of Home Builders predicts a 17% increase in residential construction starts in 2012. Does Kohler Co. see the same level of growth in the housing market?
HK: No. We see 10% to 14% in multifamily and probably zero to 3% in single-family. When you add those together, they don’t add up to 17%. Repair and replacement will be stronger than typical remodeling, but that’s where there will be activity. People have to fight this feeling, “Will I improve the value of my home with this remodeling project?” Obviously, in the recent past with home prices declining, boy, that’s tough.
But we think home pricing has reached the bottom for the most part. It’s not going to jump up immediately, but people will slowly gain confidence that a well-conceived bathroom or kitchen will indeed add value. People are more likely to buy something that has been refurbished as opposed to something that is just plain worn out.
PM: What’s your outlook for the hospitality sector in 2012?
HK: It’s a great time for remodeling in hospitality because the average daily rate in much of existing hospitality has been increasing. So, revenue for available rooms has been increasing as a result. That’s a good thing with materials and product available, prices are as low as they’re going to get. It’s a good time and hotel chains are taking advantage by rehabbing their properties. As an independent, we have The American Club and the Inn on Woodlake in Kohler, Wis. We’re in the process in the last couple of years of remodeling The American Club from stem to stern, putting in some $30 million into this redo. It’s a great time to do it.
PM: What do you see as the biggest challenges facing plumbing contractors and wholesalers today?
HK: Trying to stay alive is probably everyone’s challenge because the volumes in many cases are 40% less than what they were five years ago. Costs have not increased rapidly but they have increased. So not only do you find more difficulty covering your fixed costs, in addition your variable costs have increased. It really makes it much more difficult than it used to be. Then, consumers are having a hard time trying to get loans, and so are the contractors and the distributors. If they are excellent financial managers, they can get over it, but you really have to be exceptional in today’s environment.
PM: If you had one message for plumbing contractors and wholesalers, what would it be?
HK: We love the plumbing industry. We appreciate the circumstances that the contractor and the wholesaler have to deal with, including the Internet and the recession. They continue to play a great role, and we encourage them to stay in the industry for the long haul. This industry will come back - probably surge back - and we will need all the skilled people we can muster. So, hang on.