Pumped up

Compressor Firm Thrives on Expansion

boge_PR
Not feeling the squeeze.
  • Why it matters

    Why it matters

    Mid-sized German companies such as Boge have achieved considerable success in foreign markets but are now facing increased competition from cheap international producers.

  • Facts

    Facts

    • Boge supplies more than 100,000 companies in 120 countries.
    • More than 60 percent of its sales are international, amounting to an expected €120 million ($152.17 million) this year.
    • Company profit margins are more than 4.5 percent.
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    Audio

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It’s little surprise that Boge Compressed Air Systems is the subject of a “Hidden Champions” profile: Its headquarters are rather out of the way.

The buildings are tucked away in the middle of nowhere in the district of Jöllenbeck, near the city of Bielefeld in northern Germany. As the locals say,  “There’s a lot of country roundabout.”

The product Boge manufactures is just as inconspicuous as its location. The company builds compressors, machines that suck in air and compress it with pistons or huge rotary screws, then release it as pressurized air. Almost every industrial plant has a compressor in its cellar and Boge supplies more than 100,000 companies in 120 countries. Its most important customers are hospitals, which use the machines for medical applications. Boge claims 95 percent of German hospitals use its compressors.

Managing director Wolf Dietrich Meier-Scheuven is the fourth generation of his family to lead the company, which was founded by his great-grandfather, Otto Boge, in 1907. The elder Boge was a tinkerer who developed products ranging from door-closing mechanisms to motorcycles before he began building the first piston compressors in the 1920s.

He quickly recognized the benefit of the development because compressors could be sold year-round to business customers at high margins.

Today, Boge employs 650 people on four continents, though most work remains in Bielefeld. The mid-sized company generates more than 60 percent of its sales abroad. BMW in China uses Boge compressors and Mumm Sekt positions the labels on its bottles of sparkling wine with Boge equipment.

BMW in China uses Boge compressors and Mumm Sekt positions the labels on its bottles of sparkling wine with Boge equipment.

International business is quite new to Boge. When Mr. Meier-Scheuven took over from his father, Wolfgang, in 1994, almost all of the company’s customers were in Germany. Subsidiaries were located only in the neighboring nations of Holland and Belgium. “My father never flew in his professional life, which is why our expansion was limited,” Mr. Meier-Scheuven said.

One of his first official acts was designing a strategy to expand the company abroad, though his initial goals were fairly modest. “I wanted to pass on the company at least as good as I had gotten it,” he said.

He has certainly succeeded. While business in Germany has remained steady, global sales have tripled and are expected to reach €120 million ($152.17 million) this year.

That said, Mr. Meier-Scheuven, a tall, down-to-earth type, has made a point of sticking to the company’s three guiding principles: Independence, profitability and family. Or, more specifically, no non-family shareholders, a profit margin of more than 4.5 percent and a family company culture.

“Long-term success is important to us,” said Mr. Meier-Scheuven. “We don’t make quick decisions.”

Fourteen years ago, for example, when the business entered the U.S., initial sales were weak and the subsidiary was losing money. His co-managing director advocated leaving the American market, but Mr. Meier-Scheuven was committed to staying. “I believed in this important market and carried on, although it was at first not profitable,” he said, adding that staying power is sometimes necessary. “A corporation would have long since given up.” His decision has been proven correct. The U.S. is second only to China in foreign sales.

“Long-term success is important to us. We don’t make quick decisions.”

Wolf Dietrich Meier-Scheuven, Managing director, Boge

Mr. Meier-Scheuven built a plant employing 55 in Shanghai in 2004, the first production facility outside of Bielefeld. The move created a less expensive plant and the strategic advantage of being better acquainted with his Chinese competitors.

Chinese companies are expected to soon target the European compressor market, according to the VDMA, a German engineering association that is one of the largest industrial associations in Europe. “The Chinese competition is now still only active in their homeland,” said Christoph Singrün, of VDMA. But, he adds, those companies will move into the European market within a couple of years and offer significantly lower prices.

Mr. Meier-Scheuven is not alarmed. “We know them,” he says of the Chinese competition. He argues that the newcomers won’t be able to offer the high quality Europe expects. Besides, Boge’s prime market – upscale specialized trade – won’t be affected by the foreign invasion. “You won’t find us in home improvement stores,” he added.

Nonetheless, the managing director is arming himself for any price war with foreign suppliers. He’s greatly expanded the firm’s secondary brand, SolidAir, which was created in 1999 and sells compressors at prices up to 25 percent cheaper than the systems from Boge. The focus of the company, however, will remain on the premium brand.

The managing director is arming himself for any price war with foreign suppliers.

During a tour of the warehouse, Ricarda Fleer, the commercial director for international business, reveals a little about Boge’s culture. She started her career at the company shortly after earning her degree, and was soon made manager in Belgium after her predecessor suddenly quit. Ms. Fleer abandoned her business management textbooks to reassure the employees. “At first I couldn’t sleep at night,” she said. “I was so excited.”

Her performance impressed the boss and Ms. Fleer became the first woman to become a signatory in the company’s history, while still in her early 30s. “That is typical of Boge,” she said, adding that junior executive talent is given a lot of responsibility in the company. The head of purchasing in China, for example, is only 31-years-old.

Mr. Meier-Scheuven’s children highlight this trait. The younger of his two daughters announced at the age of nine that she wanted to take over her father’s job one day. Today, she is 17 and is learning the ropes in the company, just like her 24-year old sister, who works at the firm.

“I would like to see one of the two become managing director,” said Mr. Meier-Scheuven. So, the fifth Boge generation to lead the company may well be female, but only after they have taken the time to learn exactly how the firm works. No quick decisions.

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The author is a business journalist student at the magazine WirtschaftsWoche. To contact the author: m.nowroth@vhb.de

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