“You have to know your products and your customers’ needs — and bring them together.”
For almost 30 years, Hans Baumann has played a defining role in the story of KSB Chile. In this interview, he explains how the branch became a successful provider of pumps, valves, and services despite long distances and strong local competition. Today, the company is particularly strong in the mining sector and has been on a growth trajectory for many years.
Stream of Stories: Mr Baumann, there is probably no KSB location whose history is as closely linked to a single name as KSB Chile’s story is to yours. You have been General Manager of the company for almost 30 years. How did this story start?
Hans Baumann: In the 1980s, I worked for a dealer that represented KSB here in Chile. I was then sent to Germany to visit the factories and establish closer contact with the company. When I was in Frankenthal, I met the people there, and they treated me very well. That left me with a very positive impression of the company. When KSB decided to establish a branch in Chile in the 1990s, they invited me to help set up the company.
When you took over as General Manager of KSB Chile in 1997, what was the situation like?
At the beginning, it was not easy. The main reason was the distance from the other KSB production facilities. The nearest KSB factory, in Brazil, is more than 2,500 kilometres away. To deliver quickly to our customers, we had to import KSB products in advance from the USA, Germany, India, and Brazil and keep them in stock.
We had to finance this stock, which meant that a lot of working capital was tied up in warehouses and could not be used for other purposes. And a young and growing company like KSB Chile in the 1990s is always short of cash. Then, in 1994, the Mexican peso crisis started, affecting all of South America for several years. The whole economy slowed down. Sales were not easy.
How did you address this situation?
In Chile, logistics makes the difference. We had competitors here that operated local factories. Therefore, delivery time was a major issue, especially when it came to standard pumps. We had to be able to supply products within five days; otherwise, we would lose business to our competitors.
That is why we decided to import only parts and assemble the pumps here in Chile. This allowed us to deliver pumps quickly and in line with our customers’ needs. Even more importantly, it reduced the amount of working capital tied up in stock. If we had kept fully assembled pumps in stock, we would basically have needed three times as much inventory as we have today. That was the main reason for localisation and for having an assembly plant here in Chile.
This approach enabled us to compete with local producers and gave us an edge over other international competitors. Even today, there is no major player here following the same model.
Three decades of commitment: Hans Baumann
Hans Baumann first came into contact with KSB in the 1980s, when he worked for Coditec, KSB’s representative in Chile at the time. In 1994, he joined KSB Chile, initially taking responsibility for sales and marketing. Since 1997, Baumann has been General Manager of KSB Chile, with responsibility for the company’s results and direct reporting to the Regional President. Under his leadership, KSB Chile has grown into a company with over 350 employees across six locations.
Could you give us an overview of the market in Chile?
The total market relevant to KSB is roughly 800 million euros. We have a valve market of around 200 million euros and a service market. But the main market, of course, is pumps. They account for roughly 400 million euros. Of that, about half is mining. The rest is mainly water and wastewater, industry, and energy. In the past, fossil energy was fairly strong, but today it is declining because Chile, like Europe, is moving towards solar and wind power.
How did you win customers’ trust in the Chilean market?
You have to know your products, know what your customers need, and then bring the two together. The mining market was difficult for us because our main competitor has a huge factory here in Chile. They produce locally, while we have to serve the market from a factory in the USA over long distances.
But our advantage is the quality and reliability of our products. For example, at one of our customers’ sites, our pump lasts 4,000 hours, while the competitor’s pump lasts 2,000 hours. Our pumps are more expensive, but customers do not have to stop the mill as often. When you calculate the total cost of ownership of the pump over five or ten years, we are much more competitive.
Another example is the irrigation market. There was one local company that absolutely dominated it. The main issue was that our price was a little higher than theirs, but customers did not believe us when we said our product was better. So we decided on a strategy: we would give customers a warranty in every case. If the mechanical seal broke or if a stone damaged the impeller, they did not have to worry; we would replace it. That is how we built trust. Eventually, all the irrigation installers started to use our pumps. Over the years, we calculated what this strategy actually cost us. It amounted to 0.1 per cent of sales — almost nothing. Today, we have 70 per cent of the irrigation market and are the clear market leader.
“What I am most proud of is the Chilean team. They understood my vision and turned it into reality.”
Hans Baumann
KSB Chile has grown steadily since 2006, even in years when Chile’s GDP declined. How did you achieve this?
You have to look for alternatives when a certain market slows down. Since KSB has a full product portfolio for the entire market, you can always focus on different segments depending on how things are developing. If mining is a little down, you focus on water, agriculture, pulp and paper, and so on.
It is a matter of knowing what is going on and where you should aim your cannons. That is what we have done consistently over the years. And, of course, we had — and still have — a great team here in Chile.
What are your plans for the future of KSB Chile?
We will expand our facility in Antofagasta, the centre of Chile’s mining industry. We need a workshop for servicing large slurry pumps. The trend in mining is that customers no longer want to carry out maintenance inside the mines. They want to subcontract maintenance and bring the pumps to our workshop.
If we think long-term about KSB Chile, I believe we can continue to grow for a few more years with the current business model of buying stock and assembling locally. Eventually, we will reach a point where we will have to think of new ways of doing things. If we want to handle higher volumes, we will need much more stock. But some of this inventory does not turn. If you scale things up, this dead weight becomes too expensive. At some point, we will have to decide whether to build a factory for certain products.
Team spirit at KSB’s Santiago de Chile site: colleagues come together in front of the KSB building.
Next year will mark 30 years since you became General Manager of KSB Chile. Have you never wanted to move into a different position?
They offered me other positions in other countries. But something personal always came up: at the beginning, I wanted to stay until my daughter finished school, and then my grandparents had health problems. So I stayed. Also, I knew that we had good products at KSB Chile, so I was sure that we could grow the company very fast, which we did.
And this is not the same company as it was before. Every five years, we restructured the company because we grew so fast that we had to do new things in order to continue growing.
You were born in Chile, and your mother tongue is Spanish, but you have a very German-sounding name. Could you tell us a bit about the history of your family?
My grandfather was German. He came to Chile in 1910 to teach at a German school in the south of Chile. We have a large German minority in the south of Chile, and every city there has its own German school. Later, I went to the same school.
Looking back, which aspects of KSB Chile’s history are you most proud of?
What I am most proud of is the Chilean team. They understood my vision and turned it into reality. At the beginning, I was just a young guy with crazy ideas, but these people supported me. I believe I was a good leader in that sense. And we had fun, too. Throughout all these years, we have had a good time building up this company as a team. Plenty of fun!
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