Hansgrohe Ag Business Information, Profile, and History

Company Perspectives:

The spirit of belonging, respect, and mutual support drives Hansgrohe's corporate culture. Open, trust-based and fair cooperation inside the company provide a solid foundation for our international success. We all work for our own company. It must be able to compete if our successful track record is to continue in the second century of Hansgrohe's existence. In other words: Hansgrohe needs the challenge of strong competitors. They keep us on our toes and measure the performance of each and every Hansgrohe employee.

--Klaus Grohe, Chairman of the Board, 2001

History of Hansgrohe Ag

Hansgrohe AG is one of the world's leading manufacturers of upscale bathroom fixtures. The company markets its stylish designer line of bathroom fixtures under the "Axor" brand name and its state-of-the-art shower systems, including shower temples, whirlpools, and steam cabins, under the "Pharo" brand. Hansgrohe also makes plumbing fixtures and water recycling systems. Based in the German Black Forest, the company manufactures its products in five countries, including Germany, the United States, France, the Netherlands, and China. More than 70 percent of Hansgrohe's total output is sold outside of Germany, with the United States being the largest market abroad. The American Masco Corporation owns a majority stake of 64.35 percent in Hansgrohe, while the company founder's son Klaus Grohe and his family own most of the other shares in the company.

Small Metal Workshop Established in 1901

Hansgrohe has its roots in a small family enterprise set up by Hans Grohe in Schiltach, a small German town in the Black Forest. The sixth child of cloth maker Karl Grohe, Hans Grohe, grew up near Berlin and learned the weaving craft himself. In 1890, the 19-year-old Hans hit the road and spent three years working in different places as a traveling journeyman. In the following seven years, Hans Grohe worked as a master weaver in his hometown Luckenwalde, while starting his own family. In May 1899, he and his wife, two daughters, and one son, Hans, moved to Schiltach in the Black Forest. After working as a master weaver at a local textile factory for a few months, Hans Grohe started working at the Schwab & Voigt metal pressing plant, where he acquired the skills and knowledge of the metal pressing trade. Soon after, Grohe, together with Wilhelm Schwab, one of his coworkers, rented a workshop space and launched a small enterprise. In their metal pressing workshop, Grohe and Schwab started making casings for alarm clocks. However, in March 1901, a fire destroyed the small plant and all the machinery. Two months later, Grohe and Schwab ended their business partnership.

In the same year, Hans Grohe started his own metal pressing business. He acquired a wooden shed that used to belong to a metal pressing plant and hired two workers who operated the water-powered machinery. At first, they made metal casings for alarm clocks for the German firm Junghans--at the time the largest watchmaker in the world--followed by stovepipe rings, metal parts for lamps and lanterns, galvanized roofing tips, and other pattern-based metal parts. Soon they also started making metal parts for household plumbing fixtures. In the meantime, Grohe traveled through the Black Forest on his bicycle, drumming up business from plumbers and pipe layers. The growing number of orders enabled Grohe to hire two more workers.

On June 14, 1905, Hans Grohe's new enterprise was officially registered. Over the next decade, the company founder focused on establishing himself as a supplier of plumbing fixtures and expanded his reach beyond Germany's borders. While still participating in the manufacturing process, Grohe oversaw the operations, took care of the bookkeeping, and traveled widely to win over new customers. His wife and oldest daughter packaged the finished goods. New, larger orders rolled in from wholesalers all around Germany, as well as from the Netherlands, Switzerland, and Italy. In 1908, Hans Grohe put out his first catalogue of products, and the following year built a new two-story factory, including a warehouse and shipping department, next to the new family residence. By 1910, Hans Grohe employed twelve workers and one office clerk. Within the next four years, the company's work force doubled.

International Growth Between Two World Wars

With the beginning of World War I, Hansgrohe entered an era of unpredictability and economic volatility that lasted almost four decades. In 1914, half the company's work force was drafted into the military. All of the company's reserves in raw materials and semi-finished and finished goods were seized by the German government. As more valuable metals such as copper and brass became scarce, the company was forced to use less precious materials such as iron and zinc. Finally, the company was required to actively contribute to the war economy and began manufacturing parts for fuses. Luckily, Hansgrohe survived the war without any damage and--after the war ended in late 1918--resumed pre-war operations. Furthermore, just a year later there were almost twice as many workers employed by the company.

However, with the onset of the 1920s, the German market was down and Hans Grohe decided to push exports. He took long sales trips to northern European countries, including Denmark, Sweden, Norway, and Finland, and established new business relationships. He also connected with potential clients in Switzerland and the Netherlands. Rising exports saved the company from severe financial trouble during the galloping inflation years 1922 and 1923. In 1926, Hans Grohe hired a traveling salesman who also became the company's export agent. Between 1924 and 1927, export sales grew by 160 percent. In 1933, the company's catalogue was published in English, French, Italian, and Spanish for the first time. One year later, several sales offices were set up abroad and new business contacts made in North Africa, Palestine, and Syria. By November 1938, there were 21 sales agents drumming up business for Hansgrohe in and outside of Germany.

While business was soaring, production capacity had to be expanded constantly. In 1921, a brass foundry was set up at a new site in nearby Alpirsbach. Seven years later, Hansgrohe moved into a newly built three-story factory. The company manufactured such bathroom fixtures as shower heads, spigots, and faucets, along with other metal products, and employed about 100 people.

The beginning of World War II in September 1939 disrupted the company's development for a second time. Once again, zinc, iron, and other materials had to substitute for copper and brass. Once again, Hans Grohe lost his reserve stockpiles of raw material to the government. Once again, the company started manufacturing fuses. However, rather than losing half its employees to the military, as happened during World War I, the company's work force grew significantly. Male workers lost to military service were replaced by their wives and daughters. In addition, the German military administration assigned foreign slave workers to work at Hansgrohe. By 1944, the company's work force had reached 466. After the war ended in 1945, the French military government ordered the dismantling of half the company's machinery. Remaining reserves of zinc and aluminum were also taken away. At the same time, businesses in the French occupation zone had no access to copper and brass imports. Hansgrohe survived the postwar period that ended with the currency reform in 1948 with only a modest collection of simple kitchenwares such as aluminum cans, bowls, milk containers, ladles, and strainers.

Postwar Boom

In the 1920s, Hans Grohe's two sons joined the family business. In 1921, Hans Grohe, Jr. took over the management of the new facility in Alpirsbach with over 30 workers until it was closed down in 1932. Friedrich Grohe, the company founder's second son from his second marriage, also joined his father's company and introduced new brass die casting technology. However, in 1934, Friedrich left the family business to strike out on his own. Two years later, he took over a business in the Westphalian town Hemer and developed it into another major manufacturer of plumbing fixtures. In August 1934, after Friedrich had left the family business, Hans Grohe, Jr. took over the management of the facilities in Schiltach. At the end of 1936, the company was transformed from a sole proprietorship into a general partnership, with Hans Grohe, Sr. and Hans Grohe, Jr. as general partners. One year later, the legal form was changed into a limited partnership, with Hans Grohe's daughters Helene and Liesel as limited partners. In 1953, Hans Grohe, Jr. took over as Hansgrohe's CEO. Two years later, company founder Hans Grohe, Sr. died.

Both Grohe companies greatly benefited from the postwar construction boom, which significantly increased the demand for kitchen and bathroom fixtures. Since the only problem was how to satisfy the ever-growing demand, the two companies remained on friendly terms. Friedrich Grohe, who had named his company after himself in 1948, and Hans Grohe, Sr.'s third wife, Friedel Grohe, Klaus Grohe's mother, became limited partners in the Hans Grohe company in 1956. Two years later, the two Grohe families and some 2,000 employees celebrated together at a company party in Schiltach. They even began to jointly exhibit their products at major trade shows. However, the sudden death of Hans Grohe, Jr. from a heart attack in September 1960 caused a major change for the original family business.

A few months after Hans Grohe, Jr.'s death, the company was transformed into a limited liability company and partnership. The company was named Hans Grohe GmbH & Co. KG. Friedrich Grohe became CEO of Hans Grohe, while still managing his own company. To prevent potential problems in the future, the product lines of the two firms were adjusted to minimize direct competition. Hans Grohe focused on drains, shower heads, and shower-handrails; Friedrich Grohe on faucets and hot-and-cold-water mixers. In 1968, Hans Grohe's third son from his third marriage, Klaus Grohe, entered the older Grohe family enterprise. He played a major part in introducing electronic data processing into his father's company. In 1969, he became sales manager and chief clerk.

Although merging the two family businesses seemed to be an obvious solution, it did not happen. Instead, Friedrich Grohe sold a 51 percent majority stake in his company to the American telephone giant International Telephone & Telegraph (ITT) in 1968. Despite the fact that Friedrich Grohe kept a 27 percent stake in his brother's firm, the two companies started drifting apart and over time even became competitors. Following Friedrich Grohe's death in 1983, his heirs bought back ITT's majority stake in Friedrich Grohe and sold their 26 percent stake in Hans Grohe to the American Masco Corporation of Indianapolis, an offspring of American faucet maker Delta Faucet. Due to growing competitive pressures, the two companies fought over the rights to the "Grohe" brand for a number of years. The conflict was settled in the early 1990s when Friedrich Grohe agreed to use the brand name "Grohe" while Hansgrohe marketed its products under the "Hansgrohe" label. The company's name had already been changed from Hans Grohe GmbH & Co. KG to Hansgrohe GmbH & Co. KG in 1977.

Redesigning the Shower in the 1970 and 1980s

From 1961 until 1975, Friedrich Grohe functioned as Hans Grohe's CEO, with Klaus Grohe taking on more and more top management responsibilities. In January 1975, Heinz Mathauer, Klaus Grohe's uncle, took over as executive director. Six months later, he was joined by Klaus Grohe, and the two managed the company until Mathauer resigned in mid-1977. During the 1970s and 1980s, Hans Grohe introduced a number of innovations and paid special attention to more cutting-edge designs. At the same time, the company's international distribution network was strengthened.

Since the company had started manufacturing shower heads in 1905, Hans Grohe kept putting out a stream of technical and design innovations in that market segment. In 1928, the company had introduced the first shower head--which in Europe are generally popular in the form of hand-held models--with a handle made from white porcelain. Forty years later, Hans Grohe revolutionized the shower experience by introducing the first hand-held shower with an adjustable spray. In 1970, the company brought more color into the bathroom. Its new SIXTY shower set was available in black, white, and orange. The introduction of plastic molding allowed the launch of even more colorful collections later in the decade. In 1971, the company began to make gold-coated bathroom fixtures upon request. In 1974, the company launched the first hand-held shower with three different spray modes, for which Hans Grohe won its first design prize--later followed by many more, both national and international. Other innovations included the "Mistral" hand shower with a rotor-massage spray, introduced in 1976, and the "Aktiva" hand shower with a "Quickclean" function that prevented the buildup of lime. The company's product range was further extended to include mirrored bathroom cabinets and other bathroom accessories, as well as faucets.

Although exports had been thriving for many decades, the already existing export infrastructure was expanded even more in the 1970s and 1980s. In 1973, Hans Grohe's first foreign subsidiary was established in Spain. Two years later, Interbath, a marketing company, was set up in the United States with another business partner. A French subsidiary was founded in 1979, followed by one in Italy in 1982, in Austria in 1986, and in Denmark in 1987. A second sales office in the United States was set up in California in 1988 to handle customers on the West Coast. One year later, an information center was established in Belgium.

Another major factor in Hans Grohe's success was the company's concerted marketing effort. Intent on forming close relationships with its customers, the company focused on practical demonstrations at national and international trade shows, as well as at customers' locations and on its own premises. As early as in the mid-1960s, the company flew in plumbers from Belgium and France to educate them about Hans Grohe products. In 1971, the company started advertising directly to its clientele, including wholesalers, architects, and plumbing contractors. In 1974, Hans Grohe remodeled a former movie theater in Schiltach into a training center for plumbers. Beginning in 1972, the company took its products on the road, at first with a Volkswagen van with an exhibit of the company's new mirrored bathroom cabinet line. Two years later, a large Mercedes van was converted into a mobile demonstration booth. In 1983, there were three exhibition vans traveling all over Germany. By 1989, 28 such vehicles were visiting Hans Grohe customers in 13 countries. The "Hansgrohe" brand was created in 1977, and the corporate design modernized in 1984.

The results of these combined efforts were impressive. In 1967, Hans Grohe already shipped to 40 countries around the world. By 1978, the company exported its products to 50 countries, with exports accounting for over 40 percent of total sales. The company's work force grew from 441 in 1965 to 700 in 1976, reaching 1,000 in 1989. In 1976, sales passed the DM100 million mark for the first time and more than doubled in the following decade, reaching DM239 million in 1989. In that year, the company acquired a large property in Offenburg, another city in the Black Forest, which provided the basis for further production expansion in the 1990s.

Innovation and Global Focus in the 1990s and Beyond

The reunification of Germany in the early 1990s spurred a construction boom that lasted a few years but dried up towards the middle of the decade. After that, the German market stagnated and even shrunk during the late 1990s. Some export markets had become more unpredictable through volatile exchange rates. In the mid-1990s, cheap plumbing fixtures from Asia flooded the European markets, putting established manufacturers under growing price pressure. Hansgrohe countered by focusing on high-quality, upscale product lines marketed under a new branding strategy, improved customer service, and intensified efforts to break into the eastern European and U.S. markets. In the first half of the 1990s, Hansgrohe introduced the "Axor" and "Pharo" brands. Axor unified an upscale, design-oriented line of bathroom-related "lifestyle products" under its brand name. Pharo stood for pre-assembled shower systems with high design standards and a luxury appeal. The new product strategy was successful. Axor and Pharo products were installed in large and prestigious construction projects, such as the remodeled German Reichstag in Berlin and the Grand Hyatt hotel in Shanghai. Hundreds of Ramada hotel rooms and British Airways lounges were equipped with Hansgrohe bathroom fixtures and shower systems.

Despite stagnating domestic sales, Hansgrohe committed to its German production locations but also established new sales and production subsidiaries abroad. New sales offices were set up in Belgium, the United Kingdom, Switzerland, Hungary, Sweden, Poland, and the Czech Republic. At the same time, the company intensified trade show presentations in other parts of the world, including Asia, the Middle East, Australia, and South America. In mid-1995, Hans Grohe started a production of showers and other products designed for the U.S. market at a leased facility in Atlanta, Georgia. A few months later, the company received a $20 million purchase order for a complete line of shower heads from Delta-Faucet. By mid-1997, a new manufacturing plant in Atlanta with a daily output of 5,000 shower heads accomplished the job. In addition to the acquisitions of Zenio S.A., a French manufacturer of sanitary products, and the Dutch C.P.T. Holding BV, a manufacturer of steam rooms and whirlpools, a production plant was set up in China.

CEO Klaus Grohe not only led the company to renewed growth in an increasingly global market, but also made Hansgrohe into a environmentally friendly manufacturer--from solar-powered, low-pollution production facilities to 100 percent recycling policies to water-saving faucets. At the same time, it became clear that in order to sustain a competitive edge on a global scale the company had to adjust its organizational structure and financial basis to the new environment. Effective with the beginning of 1999, Hansgrohe was transformed into Hansgrohe AG, a family-owned public stock corporation, with the ultimate goal of taking the company public. In 2001, Klaus Grohe, the new chairman of the board, summed up his view on the history of his family's enterprise in A Company Makes History: "There were ups and downs on our road to becoming a leading bathroom amenity supplier. Our focus never faltered--it remained on the goal of manufacturing innovative designer products that are gentle on the environment. Hansgrohe is proud of having played a vital part in turning the bathroom, once regarded a mere utility room, into the center of well-being and relaxation in so many homes." With the approval of the company's shareholders, Masco Corporation bought shares from Grohe family members and raised its stake in Hansgrohe to 64.35 percent. Klaus Grohe, who kept most of the rest of the shares and continued his involvement as the company leader, commented on this step as a necessary measure to ensure Hansgrohe's future. By 2003, the company generated almost three-fourths of its sales outside of Germany.

Principal Subsidiaries: Hansgrohe Deutschland Vertriebs GmbH (Germany); Pontos GmbH (Germany); Hansgrohe International GmbH (Germany); Hansgrohe Inc. (United States); Hansgrohe Sanit'Air L.L.C. (United States); Hansgrohe Ltd. (China); Hansgrohe Wasselonne S.A. (France); Hansgrohe S.A.R.L. (France); Hans Grohe Hdl. Ges. mbH (Austria); Hans Grohe B.V. (Netherlands); C.P.T. Holding B.V. (Netherlands); Hans Grohe AG (Switzerland); Hansgrohe A/S (Denmark); Hansgrohe A.B. (Sweden); Hans Grohe Ltd. (United Kingdom); Hans Grohe S.A. (Belgium); Hansgrohe S.R.L. (Italy); Hansgrohe S.A. (Spain); Hans Grohe Kft (Hungary); Hans Grohe CS s.r.o. (Czech Republic); Hans Grohe Sp. Zo.o. (Poland); Hansgrohe Geberit SAS (France; 50%); Hans Grohe Pte. Ltd. (Singapore).

Principal Competitors: Friedrich Grohe AG & Co. KG; Hansa Metallwerke AG; American Standard Companies Inc.; Kohler Co.; Moen Incorporated; TOTO LTD.

Chronology

• Key Dates:
• 1901: Hans Grohe establishes a metal pressing workshop in Schiltach.
• 1905: Grohe's business is officially registered.
• 1905: The small plant starts making shower heads.
• 1938: The company is transformed into a limited partnership.
• 1953: Hans Grohe, Jr. becomes CEO.
• 1953: The wall-mounted shower holder is introduced.
• 1969: Klaus Grohe joins the top management team.
• 1973: The company's plastic molding plant starts operations.
• 1973: Hans Grohe's first foreign subsidiary opens in Spain.
• 1975: Klaus Grohe becomes second CEO.
• 1985: American Masco Corporation becomes a major shareholder in the company.
• 1995: Hansgrohe's production plant in Atlanta, Georgia, goes into operation.
• 1999: Hansgrohe is transformed into a family-owned public stock corporation.
• 2003: Masco Corporation becomes majority shareholder in Hansgrohe.