Neuhaus Neotec’s International Endeavours

For Neuhaus Neotec, entering the United States was an exercise in understanding that one business approach does not fit all. The German-based company specialises in setting up full production lines for the coffee industry, all out of one hand. With an already established reputation for quality and reliability in Europe, Managing Director, Gustav Lührs, says that Neuhaus Neotec was keen to establish the same following in the United States. Maintaining their standards in this new market, they quickly learned, would require a change in their approach. This is because, dissimilar to the European work week, Americans believe in running their factories seven days a week – an important detail for a company responsible for the full setup, operation and service of a location. “In the United States, there is a big importance put on this shift work philosophy, they run their machines around the clock,” Lührs says. “We had to prepare some pretty strong support to do this, to ensure to find spare parts when they needed them and emergency support.” Lührs explains that establishing a support network is the first step the company takes in entering foreign markets. Rather than testing the waters before a significant investment, at the level of service they offer, Neuhaus Neotec needs to ensure they are entering the market at full-steam.   “As soon as we get a good foot in the door, we’re also in there giving support,” Lührs says. The philosophy stems from the company’s roots when it was only half its current self as Neuhaus. In 1931, Heinrich Neuhaus founded the company in the German town of Delmenhorst. Back then, Heinrich built machines for the grain milling and compound feeds industry. Neotec came into the picture in 1967, as a licensee of the American manufacturer of roasters, Burns. When Lührs joined Neotec in the early 1980s and the company shifted its activities towards the coffee industry, he decided to develop their own roasting and grinding process before the company eventually merged with Neuhaus in 1987. Today the family-owned company Neuhaus Neotec is an independent member of the KAHL-Group. In bringing these two businesses together – processing and roasting equipment – Neuhaus Neotec became globally renowned as a company offering full plant production services, from green coffee receiving, right up to packaging. “We’re able to offer all these services out of the one hand,” says Lührs. “It’s a big advantage in that companies only have to deal with one supplier… we can coordinate between the architect and the consumer; we can source all the materials and determine what they can purchase locally. We take full responsibility for the complete set-up – from the beginning to the end of production.” One of the first steps Neuhaus Neotec took after the merger was to build a small pilot plant, to not only show their customers what they were capable of producing, but also to provide themselves with a medium for research and development.  From that first “small but beautiful” pilot plant, the company landed some big accounts, including Nespresso in Switzerland, Spar Regio in Austria, Marvelo in the Netherlands, Kraft Foods in the United States, and so forth. Neuhaus Neotec now builds a new plant around every two years, an impressive figure considering the scale of investment a single plant requires. “The growth has been unbelievable,” says Lührs. The push into the Unites States has been one of their most significant moves. In 2011 Neuhaus Neotec opened a new office in Altanta, Georgia, with a large conference room and warehouse. The office allows their American operations to offer business hours in the Unites States time zone. Working with major multinationals has naturally been a big advantage in fuelling their expansion, meeting with European contacts to coordinate American operations. Lührs says that the company has also invested heavily in trade shows and marketing to get their name out into the market. As their brand has gained recognition, and their second headquarters now in place, Neuhaus Neotec has secured contracts with most of the “big names” in the United States, including Kraft, Folgers and Segafredo. In addition to demanding quality and reliability, Lührs says the American market also requires a large amount of flexibility in their production. Unlike certain markets that have a preference of either dark roasted coffee for espresso machines, or lighter roast for filter, or mainly instant and powder mixes, coffee consumption in the United States demands the whole range of production capability. Lührs expects this demand for flexible production will continue to grow as markets change the world over – and companies that are prepared will be the ones who stay on top. “That is the big question everyone is asking: where is the market going?” says Lührs. He points to the single-serve, or coffee capsule, systems as the most evident area for growth. In Europe, the Nespresso system has demonstrated a staggering rise in popularity in the last decade, and demand for the Keurig system in the United States has kept Green Mountain Coffee Roasters’ shares soaring.
Even with at current  success rates, Lührs thinks the single-serve system in the United States still has plenty of room to grow. Different to the expansion of the coffee chain, which originated in the United States with Starbucks, Lührs points out that the single-serve system originates from Europe. As such, he says the American system is still in its infancy, and he expects further growth yet. He also says Americans will likely see an expansion in the whole bean market. To keep ahead of these evolving market trends, Neuhaus Neotec recently invested in a US$1 million pilot plant, demonstrating their capabilities in everything from super-fine grinding to capsule grinding and advanced roasting. One major development the company is leading is in agglomeration: flavour-coating superfine particles which are used in cappuccino powders and other products. The company is also investing heavily into capsule grinding technology to help improve the quality of the final results. For a plant production company to concern itself with the quality of the final product of coffee is a big step forward from 20 years ago, Lührs points out. Decades ago, a company like Neuhaus Neotec would be interested solely in selling equipment, before quickly moving on to the next sale. These days, Neuhaus Neotec invests heavily into supporting the final product. They even employ in-house coffee experts who can help clients in the cupping and blending processes. “It’s no longer about just selling a machine, but focusing on the final product,” says Lührs. “We like to think of our machines like a piano. Just like composers can create their own melody, our roasters can compose their own unique aromas.” In addition to improving the quality and flexibility of their products, the company has invested significantly into minimising the environmental footprint of their plants by limiting energy wastage. For instance, they’ve most recently developed a system which uses the heat from exhaust to preheat their beans. The heat is kept below 90 degrees Celsius so as to not affect the structure of the beans, but the preheating process can reduce the roast time. This can save anywhere from 10 to 20 per cent in energy costs – helping the planet and profit margins alike.  In addition to looking at the most pertinent industry needs, Lührs has maintained a long-term vision of the future of the global coffee scene that he says will develop significantly in the near future.
“I don’t have a glass ball or anything, but I really think we are not at the end of what we’ll see in terms of the European and American markets,” he says. “Specialty coffee is developing to such a degree, it’s become like a wine… I think we’re going to see that in different markets the consumer will really start to appreciate their coffee and learn about the different origins, asking for them by name… People will start to drink different coffees depending on the occasion, maybe saving a really good coffee to appreciate in the evening.” Lührs’ hypothesis is good news not only for consumers, but for producers as well. While many have debated whether current coffee prices are sustainable and awaiting a drop, Lührs interestingly says that he doesn’t think coffee prices are high enough. If tastes for coffee continue to mature towards the lines of a fine wine, then prices should only increase. “There is so much work involved in coffee, from the farming to the production to the barista. From my point of view, coffee is too cheap,” he says. “If you do all that work, then surely the price of coffee will appreciate.”