John McKeon, Managing Director, Kells Stainless
Kells Stainless, founded in 1988, is celebrating 25 years this year. Looking back, what have been the company’s principal achievements over these decades?
Originally, Kells Stainless was set up to service the food and dairy industries here in Ireland, which accounted for 90% of our initial business. However, over the past 25 years, we have also transformed into a partner of choice for the pharmaceutical sector. We have upscaled, and we have attained new standards. Regulators like the FDA set out very strict guidelines that are constantly being revised, and we have had to respond accordingly. We have been on a journey of constant development that continues year over year.
It is an exciting time for Kells, and the more experience we gain with the larger companies, the more exposure we get for our business. While we started out on the local Irish market, we then entered the export business, and that has been a huge success for the organization. We have expanded within Europe and Asia.
The engineering houses that service the pharmaceutical industry form a close-knit community, and the same service providers—the same project management companies, the same sub-contractors, etc.—will show up on project after project, so we get the opportunity to work together and learn each other’s standards. This is how we have structured our development as a company: by forming long-term relationships with an eye toward problem solving.
At the end of the day,Kells is selling technology, knowledge, and manufacturing. We take steel and manipulate it, delivering an augmented, bespoke version of what started out as a standard tank or a vessel. We are adding value by implementing various processes to develop units that are known within the business as ‘plug and play:’ you can plug these products in in your cleanroom or manufacturing suite, and you are ready to go.
Kells doesn’t have a standard product—that’s the interesting thing about our company. We are a bespoke manufacturing organization. We fabricate precisely what the client asks for and we work closely with them to ensure it meets all respective codes and standards.
Indeed, a 2005 article by the Irish Times noted, “For John McKeon, the managing director of Kells Stainless, supply-chain management is crucial. The firm designs stainless steel vessels for the pharmaceutical, biotech and soft drinks industries, so no two jobs are the same.” The article went on to quote you: “This means we can’t enter into long-term contracts and look for volume discounts from suppliers.” Is that still true today? What can you tell our readers about this challenge, and about Kells’ approach to supply chain management?
Kells still operate on the basis of one-off projects. However, these projects tend to be much larger today than they were in 2005. We find ourselves in a considerably more mature phase of development, and that gives us more purchasing strength. As our volume and our turnover grows, we have greater client power as well. However, we have continued to focus on our supply chain: making sure that all of our suppliers are ISO-approved, and very carefully selecting the people we choose to work with.
A lot of the components that are used by Kells in manufacturing our products are standardized, so they tend to be manufactured all over the world. We work with agents in Ireland to procure these components. Some of the larger pharmaceutical companies form deals with wholesale suppliers for items like mixers or valves, and we can work in on their discounting, which gives us a bit of an edge.
Have you kept abreast of the biotech wave and the inherent demands on equipment complexity and compliance?
Absolutely! As I have said, we are constantly upgrading, and keeping abreast of what is happening from a regulatory point of view.
It takes a long time to achieve the standards demanded by the biotech industry. It is a very conservative sector, and rightly so, because of the constraints involved. As an equipment provider, you will generally get your first business from some of the ‘less risky’ divisions of the industry and then develop gradually from there: so you would start, perhaps, by providing equipment to API manufacturing operations and then gradually work your way up to producing compounding vessels for the biotechs.
We have taken a long route to get here—but, again, that mirrors the conservatism of the pharma industry itself. When serving clients in this field, rather than jumping too many rungs in the ladder, it is wiser to take your steps slowly.
What percentage of your business is generated by the pharmaceutical industry today?
Pharma currently accounts for 70% of our business. It is a hot spot for us at the moment! Kells pharma exports have been booming, and have held steady even through the economic challenges of the last five years.
However, stainless steel has a lot of uses, and we are active in other areas as well. For instance, the food and drink industry is again becoming crucial for us. Standards in the sector are really rising—what was once done via atmospheric manufacturing is now done via aseptic techniques. That means that the standards in food and drink production are almost as high as in pharma, and that makes it an attractive industry for a company like Kells. We often say, “If pharma and biotech switch off their plants, what do we do?” We head for other markets. We are agile enough to do that.
You mention that pharma exports have held steady over the last five years—you haven’t been much affected by the recession?
No, the recession has not had a major affect on our business. The government, for one, has been very proactive, which has meant a lot for us. At the same time, we have had to be keenly aware of the financial macroenvironment and the pool that we are working in, and adapt accordingly.
Enterprise Ireland’s Frank Ryan has told us much about the agency’s efforts to help internationalize Irish companies. Can you tell us about your own experiences going abroad in partnership with EI?
Enterprise Ireland are very good at their work. They are highly focused, and conduct a great deal of due diligence. They consider all the factors before going after any particular market or any particular industry—and then it’s all about capturing the moment from the first try.
All of the projects that we have won with Enterprise Ireland’s assistance have come through trade missions that were complimented by exhibitions or trade shows. In Singapore, for instance, Enterprise Ireland organized a trade mission on the back of the Interfex Exhibition. The agency took a stand at the exhibition, and selected 10 or 12 indigenous companies to join them.
Of course, we had to do the hard work ourselves—meeting prospective clients, creating interest, generating sales. But Enterprise Ireland is very proactive in helping indigenous Irish companies develop networks. They facilitate relationships through their offices abroad: they offer meeting spaces, do research for us on the ground, and help us find partners.
In Singapore, we have now established a sales and design office, and we are doing real business there. We have already worked closely with a number of engineering companies in the region. Many of the same companies that we deal with in Ireland are in Singapore, so that has made things easier for Kells.
On another trade mission, we recently formed a partnership in Turkey with a local company called Umde. We have put the market on a slow burner, as the country is still developing—but we recognize that it is already a success story. The pharma and biotech industries are looking very seriously at the Turkish market, and at Turkey as a regional springboard. There are a number of neighboring countries that companies can develop into and work with from Turkey, and that is why Enterprise Ireland identified the country as a potential growth area.
It is rather brave for a smaller Irish business that is just starting to internationalize to enter an emerging market like Turkey!
Kells entered the market by working with somebody already on the ground—so the approach was different from the strategy we took in Singapore. We went to great lengths to identify an organization that we could work with, and after thinking long and hard about the opportunities in the indigenous pharma and biotech market, we decided to move forward. Things will move a little slower there for us, but it is good to have the pieces in place. We feel we are working with a very like-minded engineering company in Turkey.
Like-minded in what way?
Likeminded because they share our ethos as a company—to develop in a conservative fashion within what is a very complex industry, without taking huge risks.
In 2008, approximately 40% of your revenues were generated by international sales. Has that number further risen?
It has. Last year, about 50% of our sales were export-driven, and while Ireland remains a very important market, we think our future growth will come from exports. We have had huge success in geographies that we are able to handle from our office in Ireland, particularly Belgium and Holland. Kells have large projects in those markets with all the leading Pharma/Biotec companies.
Kells also has a very strong network in the UK, which is another very important market for us. We set up an office in the UK in the early days of the company, and it has served us very well in our development. However, the UK market is not as aggressive in biopharmaceuticals as some other markets—Ireland in particular has its fair share of biotech operations, and it looks like Belgium and Singapore are following suit.
What do you think differentiates you when you’re competing?
Kells provide a very good service, we are very passionate about what we do, we have highly skilled people with a lot of experience, and we don’t have a huge turnover of staff. Our staff and our knowledge base and our way of doing things brings us a lot of praise from our clients. Working closely with them, they audit our facilities, and they examine our processes—that forms very close partnerships. We welcome everybody to come our plant, because we have built something that we are proud of.
Ultimately, do you want to be an Irish organization with an international presence, or an international organization with Irish headquarters?
We prefer to emphasize our Irish base. It has served us well, and I think Ireland is definitely ‘punching above its weight’—along with Enterprise Ireland we are able to open a lot of doors, and we have a certain way of exploiting opportunities. Although we are in difficult waters at the moment from an economic point of view, I think the country have a lot of great prospects. Once it sorts out its difficulties, Ireland can really come back stronger than ever.
As the head of this organization, what are you most proud of achieving in the last 25 years?
I am proud that we are still in business, and performing well in difficult climate. My fellow directors and I had a vision for this company, and we have remained on course thus far. We are very proud of our workforce, our output, and the ethos that we bring to the way we do business.
It is not just about the entrepreneur—it is about each of the people behind the company. We are a team, and everybody gives a name to that team” Kells Stainless”
Do you have a final message for our readers worldwide?
Kells Stainless is open for business and ready to serve you.