Different types of business

# 6 Case study: Schaefer Kalk

Schaefer Kalk is a German-based company that quarries limestone and processes it into a variety of products that are sold to industrial and construction industry customers across the world.

Watch the following video, which introduces the company and is approximately four minutes long.

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Introduction to Schaefer Kalk
Transcript

#### A brief introduction to Schaefer Kalk

(Adapted from Schaefer Kalk, 2010 and pers. comm. current and previous directors of the company)

The second half of the nineteenth century was an important time in the history of German business. The period is called ‘Gründerjahre’ (‘foundation years’), because it was a time when numerous well-known German businesses were founded. Many of these, such as Bosch, Siemens, BASF, Henkel, and many more, still exist and thrive today. The foundation of businesses was fostered by the establishment of the railways and developments in steam technology, among other things. During that period, in 1860, Johann Schaefer, a lawyer from the small town of Diez (located along the river Lahn, a tributary of the Rhine, in the modern German federal state of Rhineland-Palatinate) was on a look-out for new business opportunities. One of the several projects he started, and eventually the most successful one, was the development of a lime works, taking advantage of the excellent limestone stocks that are found in the vicinity. The works at Hahnstätten which he founded are still the productive heart of the company Schaefer Kalk today.

More than 150 years later Schaefer Kalk is still owned and run by the descendants of Johann Schaefer, now in the fifth generation. Schaefer Kalk belongs to what is called the German ‘Mittelstand’, which means a medium-sized, privately – usually family – owned business. Mittelstand describes less a precise company size (it includes businesses larger than those classified as medium-sized by the European Union) and more the general nature of the business. Most Mittelstand companies are orientated towards long-term business and asset building and less towards short-term profit and share price maximisation. They are not usually traded on the stock exchange.

From the modest beginnings in 1860 a much larger, international company has developed. The exceptionally chemically pure limestone stock in Hahnstätten has been the basis for a range of very high-quality limestone products, which are used in a wide variety of production processes and products, including steel production, construction, chemicals, pharmaceuticals, paper manufacturing and plastic production. Hahnstätten is still at the heart of the company’s production but there are now two main production sites in Germany, one in Malaysia and a smaller one in China. There are also several smaller plants for a product called precipitated calcium carbonate (PCC), situated directly on the production sites of major paper manufacturers (therefore called on-site plants) in Finland, Austria, France and the Czech Republic. Today the company employs over 680 people worldwide.

Schaefer Kalk’s most basic production processes include the extraction of the natural resource, limestone, from quarries and the processing (burning) of the stone in kilns. The resulting calcium oxide (quicklime) is sold directly to some customers (for example cement manufacturers and some environmental applications) but for many other applications it is processed further by Schaefer Kalk itself. One of the most important products for the company is precipitated calcium carbonate (PCC), from a process whereby the carbon dioxide (CO2) that is removed from the natural calcium carbonate in the kilns is added again. This results in the product (calcium carbonate) which is chemically exactly like the natural stone but which can be given different physical properties, such as different crystal lengths and structures. It also turns a naturally grey stone into a white product. PCC is used, among others, in paper manufacturing and the production of plastics and pharmaceuticals. Also important is a range of high-quality mortar and plaster products for the construction trade.

Schaefer Kalk today has three managing directors, two of whom – Heike Horn (finance and human resources management (HRM)) and Kai Schaefer (technical) – are the great-great-grandchildren of Johann Schaefer. The third director – Andreas Kinnen (sales and marketing) – has no family connection with the business. Although there is a great preference for having family members as directors, potential directors have to prove themselves through relevant education and previous work experience in order to be appointed. These three directors are supported by a number of middle managers, who include HRM and finance managers, the plant managers and the leader of the laboratory, among others. In 1983 the company appointed an external advisory board, which meets four times a year with the company directors and is consulted on all important business decisions, such as the appointment of directors or major investment decisions. The company is financed through the equity held by the members of the extended family, retained profits and bank loans. There are no outside share or equity holders.

The company prides itself on the high quality of its products and a constant striving for technical improvement and new product development in order to meet the high demands of its customers, particularly in the chemical, pharmaceutical and paper manufacturing sectors. Lime production is a very long-term business: quarries are developed to last for decades and other plant, such as kilns, is expected to continue operating for not much less time. Investment costs are high and need to be recovered over a period of several years. Schaefer Kalk (like many businesses that sell to other businesses rather than to consumers) has a relatively small number of customers who tend to buy large quantities of the products they need on a regular basis. Long-term customer relationships are therefore highly important and Schaefer Kalk prides itself on the fact that many customers have been with it for decades, in some cases since the early years of the company in the 1860s. Schaefer Kalk also prides itself on the care it takes in recruiting, training and developing employees. It has an extensive training programme for apprentices. Many employees stay with the company for decades and some have parents and grandparents who also worked at Schaefer Kalk.

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