Episode 16: The Secret of Maintaining a Lasting Business with Steve Kingeter of VC99

Transcript

Adam Honig: Hello and welcome to Make it. Move it. Sell it. On this podcast, I talk with company leaders about how they’re modernizing the business of making, moving, and selling products, and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing AI software for companies in the supply chain, but we are not talking about that today. Instead, today we’re talking with Steve Kingeter, the CEO of VC999, probably the best manufacturer of vacuum packaging machines in the world. Welcome to the show, Steve.

Steve Kingeter: Thank you for having me, and thank you for the generous introduction.

Adam Honig: Of course. Let’s just kind of jump into VC999. There are not many companies that have three numbers like that in their name. Why three nines?

Steve Kingeter: Well, this goes back to the beginning of the company. We are a Swiss-owned company, and the founders were looking for a unique name at the time, and VC stands for vacuum compression, 99.9%. So there is a reason behind the sometimes confusing name, but it’s something we’re very proud of and it’s something that we still adhere to to this day.

Adam Honig: So it’s all about being able to achieve that level of perfection and packaging, I guess.

Steve Kingeter: Yes, absolutely. 51 years ago when the company was founded, that was quite an achievement. And to this day, it’s still something that we live to do every day and all machines can achieve that number so we’re very proud of that.

Adam Honig: And so when I think about getting to 99.9% vacuum suction in packaging, this application is really for food and things that can go bad with air. Is that correct?

Steve Kingeter: That’s correct. Our primary applications are center of the plate proteins. And by that I mean meats, fishes and cheeses are very common, although this type of technology has a very wide spectrum of applications. There’s medical applications, there’s industrial applications, and so we have customers in a wide range of fields that rely on our machines every day. And so we’re quite proud of the diversity that we bring to the marketplace.

Adam Honig: Now tell us a little bit about these machines, are they desktop size, are they room size? How big are they?

Steve Kingeter: No, all of our machines are industrial capacity. We have machines that are entry-level machines where customers transition from one type of packaging to our type of packaging. They’re bringing a new product to market, and they wanna get into their grocery stores and their distribution outlets. And they want a package that mirrors what the competitors are doing. And so we can provide that to them at a reasonable entry point. Those machines tend to be anywhere between 10 and 13 feet long. And then we have the other side of the spectrum where we’re doing industrial applications for large beef applications and also sandwich applications that are putting out 55 million sandwiches a year on three of our machines so that it can be a vast number. A lot of the machines are operated a few hours a day depending on their needs and some of the machines are operated 24 hours a day every day.

Adam Honig: So is this like when I’m at the airport and I don’t have time to get a custom-made sandwich, I can just get one off the shelf and it’s all kind of wrapped up in plastic? Is that the kind of output?

Steve Kingeter: Absolutely, it can be. Ready-to-eat applications is one of our fastest-growing segments because more and more consumers demand convenience. Their lifestyle isn’t such where they’re cooking at home and time is of the essence. So we have a lot of customers that are using our machines to make ready-to-eat on-the-go packages for their customers. Think of it in the old days when you would go and get the bologna off the shelf and you take it home and open up, make a sandwich. Our machines make that package. And all of our machines, no matter what size, no matter what applications, are custom made and custom designed to that particular customer’s needs. So there is no off-the-shelf product for us, we have a pretty extensive engineering team where we can design the machine to fit the exact specifications of our customers, and there are no two machines that are alike. And so we thrive on that diversity and our ability to adapt to our ever-changing customers’ expectations.

Adam Honig: Gotcha, that’s awesome. Now I’m kind of hearing a little bit of something in the background. Is your office here based right next to the factory and stuff like that?

Steve Kingeter: Our headquarter is in Kansas City where we build our machines. And literally about five feet outside of this door is a lot of activity with forklifts, C&Cs, lathes and cutting metal and so there’s a lot going on. So as long as nobody crashes through the door, it shouldn’t be too bad, but you may hear some background noise and for that, I apologize.

Adam Honig: Well, that would be a really exciting podcast, I think if we actually did have somebody crashing through the door. So maybe we’ll see if we could kind of get that on later.

Steve Kingeter: Yeah, we could probably arrange that or it might just happen organically. You never know.

Adam Honig: You know, if we did that, then people would accuse us of layering those sounds later in post-production. I’m sure they’d be like oh, that’s a fake forklift sound, you know?

Steve Kingeter: Yeah, I think the authenticity would probably be determined by the volume of my screen if something came running through the door.

Adam Honig: I hear you on that. So you mentioned the business has been around for 50 plus years, what would you ascribe to the success? What’s the secret of that?

Steve Kingeter: I think the long-term secret is a willingness to adapt to an understanding that change is the only constant and it doesn’t really matter what you did yesterday, it only matters what you can do tomorrow. I think at VC999, we don’t rest on our laurels and our past successes. We’re always looking for the next turn of events that will make sure that we continue that position with our customers of relevancy. We strive to be relevant as the market changes, as our customers change, and as their expectations change. So that through relevancy, we know that we have a forward-looking angle that we’re gonna maintain in business, continue our financial strength, and still look for ways to grow our top line and our bottom line.

Adam Honig: That makes a lot of sense. So what I’m hearing is that really understanding the customer and trying to see when things are changing for them and how you can continue to support them, is that a big part of it?

Steve Kingeter: It’s both being current with the customer, understanding their expectations, but also looking at the market ourselves and kind of forecasting our product development needs and what our machine abilities are, and what’s coming in the future. So it’s a balance of information because we have vendors and suppliers that come to us and say hey, we have these innovations that we can incorporate into your machines. And then understanding where those incorporations of new and cutting-edge technology can be beneficial to our customers. Will they see a value and will they in turn be willing to pay for that value? It’s one thing to have that value, but unless you can convince them to pay for that value, it’s just nothing but a talking point. And so that’s the balance we always try to maintain because these machines continue to be able to do more and more and more, but they also continue to cost more and more and more. And you need to make sure that they return the investment that our customers expect over a reasonable timeframe. And we always try to understand their perspective and make sure we’re maximizing the value that our customers are paying for and the technology that we offer them.

Adam Honig: Now do you have a standard process for trying to collect that insight from customers? Like we do a lot of face-to-face meetings, we do a lot of surveying of customers, so what approach do you take to stay current with that?

Steve Kingeter: The process is constant, and by that I mean everybody throughout the organization, all the way from myself, our sales team, our engineering people, our service technicians, we try to be in front of the customer as much as possible. And so from that we get to understand the problems from their perspective, the challenges that they face every day. And then you incorporate that by going out to trade shows, discussing with suppliers, vendors, and having an open eye and an open mind to what is developing out there. And then trying to mesh the two. You know, we have a lot of suppliers that come up with new ideas, and some of them are relevant and some are not. And we try to look at those openly and understand, does it help the machine’s performance? Does it help the machine’s durability? What other ways can it provide value to the customer? Is it speed? Is it uptime? So that we can then craft an argument that does a couple things. One, it keeps us a step ahead of our competition because we have a lot of respect for the other people in this world that do what we do. And then also so we can articulate and evaluate these benefits and features in front of our customers so that we can really make it pertinent to what they do every day and make sure they understand that.

Adam Honig: Yeah, that makes perfect sense to me. I mean, it’s super interesting the idea of also taking feedback from your suppliers, right? When we think about manufacturing, often we think about well we’re gonna get a bunch of metal and we’re gonna just form it all the way through to the end product or whatever. But in your case, of course, there’s many different components that go into the machine, so you’ll get ideas from the suppliers. Is there something that comes to mind, or a good idea that came up?

Steve Kingeter: Well, there’s literally thousands of parts on our machines, which means we deal with, in many cases, dozens of different suppliers. So all those suppliers have their own internal product development apparatus that they’re going through. So they’re introducing new innovations to their products, and then those innovations come to us, and then we pick and choose which one we wanna incorporate. And sometimes they ask us for feedback just like we ask our customers. And of course, as usual, we have different strengths and weaknesses with our suppliers, and we wanna make sure that we incorporate them and really give them accurate feedback on what works and what doesn’t. And so they understand what our needs are. And so that type of dialogue is not just price driven, it’s an entire package holistic that they bring to the table so that we can pick and choose what’s best for us, put it into our machines, and then we go and have that same type of dialogue with our customers farther down the line. And so it’s very similar, it’s just on a smaller scale. And for us, it’s about making sure that the thousands of components that go into our machines work in harmony so that we can produce the end package that the customer wants at the end of the day.

Adam Honig: Gotcha. You know, just from my own casual observation of packaging as a consumer, I feel like the marketing aspect of it has really become a lot bigger. So are you seeing a lot of innovations and sort of the printing and branding that goes along with this?

Steve Kingeter: Absolutely, that’s an ever changing landscape, and customers are trying to figure out more and more ways to put their brand and put their mark on the package. And that trickles all the way down to us as well. How do we label the package, the film that we use with the package? Can we basically mold their logo into the plastic so that every time the customer sees it, they can feel it, the tactile of their logo and see how colors blend together. And some of those things we bring to the customer and they didn’t understand that we could do that, and then other times we’re being challenged by the customer. He says hey, I wanna do this, can you help me figure it out? And in most cases, we can if the customer’s willing to pay for that solution. But it depends on what the customer’s selling, their ability to differentiate their product and the value that they’re willing to invest in that package to give them that differentiation in front of the consumer. We help them do that and some of the times we lead them and some of the times they lead us and so we’re comfortable in either role. We want that envelope to be pushed, and also we wanna be that kind of mentor to our customers saying hey, do you realize that you could do this and it’ll look this way? It’s a great dialogue that we continue to have and it really strengthens our bond with our customers and gives us a leg up on our competition because we have that type of relationship with them.

Adam Honig: So part of what I’m hearing, I know we veered off of the secret of the 50 year success a little bit, but part of that secret is also about really being more than just a supplier to the customer,  is really being a partner to them and helping them achieving their goal with what they need. 

Steve Kingeter: You know, it’s funny, we try. I just met with a customer this morning and we were joking about using the term partner because it’s so overused these days. But from our perspective, I think the simplest way to explain it is that our first instinct is to listen and then talk rather than talk and then listen. And I think that helps us because it gives us a better understanding of what the customer really wants. And since all these solutions are customized, we’re not trying to put them into any type of box. We’re trying to build a box around what they want to do. And so that’s what we bring to the market and we are a little less risk-averse than all of our customers, but we’re willing to take that risk and try to do something completely different and make sure we can mechanically do it. And be able to repeat it over and over and over thousands of times like our customers expect us to.

Adam Honig: Gotcha. And so if your solutions are sort of tailored to the customer, does that make the sourcing part of your business more complicated because you have to go find all these different things. Or they’re custom to customers, but they’re more made of standard components?

Steve Kingeter: So what we try and do, we have a very large modern machine shop here, and so we’re able to do a lot of the customization on our own. We have a big and extensive and quite gifted engineering staff that helps fuel our creativity and our ability to present that creativity to our customers. So sometimes we require special components but we try to stay at least on the component side as standardized as possible. And then we offer the customization ourselves through our own creative craftsmanship that we bring to the party. And in combination with our quite cutting edge abilities to machine metal and to form metal the way we wanna do that. We’re very vertically integrated. We don’t outsource a lot of that.

Adam Honig: Right and I know you said that they’re excellent and expensive, so maybe we’ll just focus on the first part of that when we talk to them at some point here.

Steve Kingeter: Yeah, we do take pride in our end user product that we present and this creative solutions that we present, but we are not bashful about charging the appropriate market value for our machines.

Adam Honig: That’s awesome. Yeah, I’ve always come from the philosophy of providing high quality and charging high prices for it, and if it’s not worth it to somebody, hey, that’s okay. You know?

Steve Kingeter: The hardest word that we teach our salespeople is the word no. And there are things as risky as we’re willing to go, and one of the things that separates us from our competition is our willingness to try new things where they don’t wanna do that. But there are situations where we hate to do it, but we actually have to say no to a customer.

Adam Honig: So you mentioned was it center plate protein? What was the term that you used? I love that term, I just can’t come up with it.

Steve Kingeter: It’s the center of the plate protein, basically when you’re served a meal, the center of the plate is the protein, whether it’s beef or chicken or pork or fish or cheese. And that’s kind of the core of what our customers package. We do a lot of nonfood applications as well, but food is still the driving force behind our growth.

Adam Honig: Gotcha, so center of the plate protein. So just thinking from an experimental perspective, what’s the most kind of left-field application that you guys have been doing then? Is it medical stuff then?

Steve Kingeter: No medical actually isn’t that out of the norm. I would say we’ve had some crazy applications that we do. If anybody ever goes to high school or college and has to dissect an animal in biology. We have customers that ship dead animals to high schools and colleges, and they’re done in our machine. So they’re put in a pocket, they’re vacuumed for preservation, and they’re shipped to the end destination. That’s kind of a strange one. We have had applications where a gentleman wanted to send live fish, like aquarium fish, very expensive aquarium fish across the country in our package that was injected with a high level of oxygen, so the fish would continue to live for an extended period of time. You just never know the applications that you’re gonna come up against and we’re open minded for all of them because you never know when the next big thing’s gonna be. And if they have parameters that we believe that we can meet, we will strive to meet them because those are the fun ones as well. I mean, those are the out-of-the-box creative things that everyone enjoys. And the customer’s just thrilled at the end of the day when he had an idea and you’re able to see that idea all the way through to its success point. And those are what we really like to do, we take a lot of value out of that.

Adam Honig: Yeah, that’s amazing, I can just see the frogs rolling off the assembly line, sealed up in the packaging, ready to go to squeamish high school seniors, taking those things apart.

Steve Kingeter: And it’s a lot more diverse than frogs, trust me. It’s pigs and all kinda cats and dogs and you name it, they get packaged.

Adam Honig: Wow, that’s amazing. That’s something I would’ve never thought of. Now you’ve worked a lot of your career in the food industry, servicing the food industry, helping people in the space. Is that correct?

Steve Kingeter: Right, so I’ve been in this space of packaging of different items and also a little bit on the processing side of this industry since 1997. So I’ve seen a lot of changes come and go. I’ve been very fortunate in my career to have the ability to work here at VC999. I was previously the CEO of another company that I had some outstanding experiences with as well. So it’s been a nice run, I’m not signaling that I’m at the end of the run, but I’m not getting any younger. And it’s been fun to see some of the innovations that have happened to this industry and some of the innovations that are happening here at VC999, which we’re quite proud of.

Adam Honig: Now are you guys working with…I’m not quite sure what to call it, but the Impossible Burger and people who are making synthetic meat kind of products as well?

Steve Kingeter: Yeah, absolutely. So synthetic meat, as you’ll call it, or the Impossible Meat, Impossible is a brand name that has been going on for some time. I mean, the iterations have been countless and it’s gone mainstream now because not only have they perfected the taste, they’ve also perfected the texture. So when you get an Impossible Burger or an Impossible Sausage, and whatever the different products they come up with are, it really does simulate the real thing. And it’s been just a fantastic evolution for those people. And that requires the same level of packaging as your standard center of the plate proteins that we already discussed. So yes, we have been fortunate enough to work with some of those customers, and we think that’s gonna continue to grow and expand.

Adam Honig: Do you feel over the next 20 years, it’s just gonna be a bigger and bigger part of your business then as people move away from traditional protein?

Steve Kingeter: Well, we benefit whether customers move away from traditional proteins or not. I do believe that type of product will continue to evolve and there’ll be a lot more applications for that. I think they’re just scratching the surface of where they’re gonna go and how they present that to customers. But whether meat consumption goes up or down, we still benefit because what other substitute consumers are using, it still needs to be packaged. And so we’re in that lucky position where anything the consumer puts in his mouth and eats, at some point either needs some type of packaging protection, it needs some kind of shelf life enhancement, or it needs to maintain some level of sterility. And we can provide that in whatever form necessary for them. So we’re very lucky in the sense that, I don’t wanna say that our business is recession proof, but as long as people are eating, it tends to be recession resistant. And no matter how that evolves, we get to evolve with that. Sometimes we’re being pushed to evolve to it, and sometimes we’re leading the evolution of it, depending on the application.

Adam Honig: Well, I would say if people aren’t eating, we probably have a whole other problem going on.

Steve Kingeter: That fixes itself, right? And we want that to continue.

Adam Honig: Yeah. So let’s pivot a little bit and think about planning. This has been something that’s been on the minds of a lot of the guests on the podcast recently. And the world that we live in today is a little bit different than it was four years ago, probably different than the way it’ll be in the future, but a lot of people are kind of struggling to plan for the next year at this point. How do you think about planning? Do you feel like from your business perspective, it’s steady as she goes? Or are you seeing changes in the market that you guys are trying to figure out what they mean?

Steve Kingeter: Well we’re paid to solve problems, right? And so it works for our customers as well as ourselves. And I think the key is you have to be adaptive and you have to understand that the conditions both internally and externally, force you to adapt in different ways. You know, there’s been supply chain issues that all of us have had to deal with. There’s issues with tariffs, depending on the different countries that we do business in. There’s political strife, there’s strikes on labor forces, there’s logistical issues, there’s supply chain issues. And yet, through all that, thank goodness for the adaptability and the creativity of our employees. VC999 has continued to maintain its position where one of our competitive advantages is the speed of which we can bring products to market, and the consistency of which we can hit the deadlines that we promise our customers. That’s kind of become a lost art of saying hey, we’ll have that machine for you in 12 weeks or 14 weeks, or whatever it is and then we actually hit that mark. Because right now the tendency is oh, I promised it to you in 12, but it’s really gonna take 18. And a lot of our customers base the purchase of this machine around construction, they base it around integration into an entire packaging line and so it’s critical for us that we maintain our credibility and be able to meet the commitments that we give our customers. And fortunately, we’ve been able to do that, and that brings more and more customers to us. And those customers that understand that value are less price sensitive and much more demanding on our ability to execute what we tell them and that’s really a strength for us.

Adam Honig: Oh, right, I mean if they can’t get those frogs off the line to send to the high school seniors in time, they might lose the whole order because they missed the class. But some of the people we’ve been talking to have been taking different strategies to help with that. For example, we spoke with a large maker of fabric who’s been basically buying up a bigger inventory position to try to make sure that they’re always able to satisfy demand. We have other people we’ve been speaking to who’ve been trying to go even more just in time to make sure that they’re not carrying a lot of additional costs. Has there been an approach that you’ve been using to manage that?

Steve Kingeter: Well, we’re always looking for a better way. We have given the long lead time of our machines and the backlog that we carry, we tend to be very forward-looking. And so in order to maintain that, we have strengthened in a lot of key areas, in particular, like electronic components of that nature, our inventory. We’ve had to be very flexible in our design criteria in that this model of product is unavailable, so we’ll have to shift to this model of product. It can be from the same manufacturer or even a different manufacturer, and that’s tied up an unusual amount of engineering resources for us. And so we’ve had to be flexible there and add additional resources so that we can continue to meet that gain. And of course, the logistical challenge is never ending. I mean you get a proposed delivery date from a supplier on a particular component, and then the day of delivery they send you an email and they say by the way, we’re four weeks late on that. And so it’s been a huge challenge. Fortunately, our procurement people have been probably well overworked, unfortunately, trying to make sure they’re juggling all the balls at the same time so that we hit our manufacturing and delivery commitments, which are the core of our business. And so we take it very seriously and it strains our supplier relationships in some instances, but those that do business with us understand that we pay like clockwork, but we expect the same type of clockwork when it comes to delivery and meeting their schedules.

Adam Honig: Gotcha. So it’s sort of like what we were talking about earlier with the relationship that you try to have with your customers, you try to do the same thing with your suppliers to kind of make that whole value chain work.

Steve Kingeter: Right, and I think that’s a great point. And over the last 12 to 18 months, that supplier relationship, especially regarding this component shortage of supply chain, has been as challenging as I can remember it. And so we spent a lot of time trying to understand our suppliers’ problems and trying to figure out changes we can make so that we can bypass their problems. And so I saw the type of investment in an intellectual effort we wanna make, but it’s a necessary evil in order to try and maintain our delivery commitments.

Adam Honig: Yeah, I hear you on that. Well Steve, this has been a great conversation, I really appreciate your joining us. My takeaways from this conversation, I guess it’s not a secret, but like listening well to your customers, working closely with your suppliers, the basic things, of course, that everybody needs to do in this world. Just doing them well can help you move forward; so important. I really love hearing about the applications of the technology, the frogs. I don’t think I’m gonna get that outta my mind today,  actually I’m gonna be thinking about those frogs. So I really appreciate having you on the show. You know, for those of you who are listening, just as a reminder, you can find every episode of the Make it. Move it. Sell it. Podcast at spiro.ai/podcast. Feel free to subscribe and you know, hey, if you thought Steve and I had a good conversation today, why not give us a review or a star or a like, or whatever they’ve got going on over there on your podcast player. Steve, do you think people should do that for us?

Steve Kingeter: Sure, absolutely. And by the way, thank you for the invitation. It’s been an honor to be on here with you, and I’ve enjoyed every minute of it. And let me know if I can ever help you in any way again.

Adam Honig: Right on Steve, likewise. All right, well that’s it for me. Thanks to everybody for tuning in, and we look forward to speaking to you on the next episode!