Kärcher and Brazil – Internationalisation is a result of entrepreneurial spirit: Interview with Johannes Kärcher, shareholder of Alfred Kärcher SE & Co. KG and Honorary Consul of Brazil in Baden-Württemberg. The company operates 170 subsidiaries in 87 countries and employs around 17,000 people worldwide. Johannes Kärcher lived in Brazil for a total of 20 years.
Behind the first steps of internationalisation are usually people who recognised and seized opportunities. What were those very first steps like at Kärcher?
I was actually still almost a little too young at the time to describe it from my own experience with any precision. But I have a very clear picture of how it must have been.
My mother took over the leadership of the company in 1959, after the death of my father. We made our first foreign establishment in 1962 or 1963 in France — not in a German-speaking neighbouring country, but straight away in France. This was roughly nine months before de Gaulle and Adenauer signed the Franco-German Friendship Treaty in Ludwigsburg. We were ahead of our time.
My mother had a brother who had spent his entire career at Daimler in export and sales, eventually becoming head of passenger car sales. He was always her advisor. The willingness to do business abroad and the appetite for risk were already there.
The structural logic was often the following: we had general importers or representative firms in many countries. When one of them dropped out — due to succession issues, competition or whatever reason — we still had customers in those countries who could not simply be left without support. So we established our own local subsidiary. It was not always a purely strategic decision based on per-capita income — it was often an entrepreneurial response to concrete challenges.
One example: in South Africa, the general agent suddenly stopped. The first question was: what on earth do we do with our own subsidiary in South Africa? But we had several thousand customers there with Kärcher equipment. We had to go — and we are still there today. As a child I collected stamps, and we received letters from all corners of the world. We had customers in many countries very early on.
Our investments were entrepreneurial responses to concrete challenges
Brazil is no ordinary country — it is enormous. How did a family business from a small town come to establish itself there of all places?
There were two motivations. The first: at the time we mainly manufactured hot-water high-pressure cleaners for trade, craft and the automotive sector. We measured our market potential by the number of combustion-engine vehicles in a country — cars, lorries, buses, tractors, motorcycles. My mother had undertaken a Latin America trip with our then Managing Director and was naturally impressed by the traffic volumes in the region’s capitals.
She also made contact with German commercial representatives abroad and with former Daimler colleagues, from whom she learned a great deal about Brazil. On this trip, first units were also sold — in Venezuela to the national airline and a brewery, and in Bogotá to a hotel that had recognised how important chimney cleaning was for fire prevention.
The second motivation was political: at the time in Germany, voices within the social-liberal coalition were calling for higher tax burdens on business. My mother reasoned: if conditions here were to become more difficult, it would be good if our specialists could work and live elsewhere in the world. So we founded in Brazil in 1975. Many Baden-Württemberg companies were already there.
We had planned to import gradually and increase production step by step. Then Brazil forced us to reach over 95% local content — by weight and cost — within two years. We had to decide: wind down or triple the investment and produce locally. We managed it. But it was a considerable technological challenge: forced nationalisation made our products more expensive and lower in quality, because Brazilian suppliers had little incentive to perform, given protectionism and lack of competition.
How did you find the right people for such demanding undertakings?
When we started in the early countries — after France came Switzerland and Austria, with Switzerland celebrating its 60th anniversary this year — it took several attempts in all three countries before we had the right leadership. In none of them did the first person fit from the start. When performance was lacking, someone else had to step in — until eventually the right person was found. Finding them was never easy, not even in Brazil.
At that time Kärcher was not yet a corporation. The foreign subsidiaries were directly owned by the same shareholders as the parent company, which meant that the parent’s management could not simply decide who ran things abroad. My mother took care of this personally. She had been in HR at Daimler and had developed an exceptional instinct for people.
Could you sketch a few milestones of Kärcher’s development in Brazil?
An unforgettable milestone: we cleaned the Christ the Redeemer statue above Rio several times — first in 1980 and then for the millennium in 2000, a total of three or four times.
Another memory: Brazil is the only country in our corporate group in which revenues collapsed by half from one year to the next — and this happened twice. We experienced that nowhere else.
It seems a great deal of staying power and entrepreneurial passion are needed to get through something like that.
What helped us especially: from the very beginning, both in Germany and abroad, we followed the principle of reinvesting earnings back into the business. Investing in Brazil with the goal of profits flowing back to Germany as cash — that was never our approach. What was earned there was reinvested there.
I arrived in Brazil in 1980 as a man just under 30, and over three periods I spent a total of 20 years there. I learned an enormous amount about entrepreneurship. We gave work to 500 employees. We helped thousands of customers solve their problems. From a purely financial standpoint, the presence in Brazil was not always clearly worthwhile in many of those years.
We weathered all the highs and lows of economic cycles
We weathered all the highs and lows of economic cycles alongside our staff and customers — including inflation rates of up to 50 per cent per month. After every crisis we were always the first to deliver again — thanks to the incredible trust and determination of our customers and employees.
Brazil is a young country with 210 million inhabitants, a huge domestic market, a single language, currency and culture — similar to the USA. With many challenges stemming from politics and cultural differences, but with a young, eager-to-learn and enthusiastic population. Although Brazil ranks 67th out of 72 in PISA, with 210 million people there are still millions of highly gifted individuals. You just have to find them.
What has changed significantly: today almost everyone with secondary school qualifications speaks English, which has greatly simplified communication. In those days foreign exchange was rationed, so a flight to Germany was unthinkable. Today there is far more exchange — Brazilians come for a few weeks to Germany, Germans go there. Collegial exchange at all levels works well today.
Would you today advise the German industrial Mittelstand to look for opportunities in Brazil despite the difficult times?
My advice: look for young Brazilian executives — people who have studied at German universities, or who already work at large German companies with a Brazil presence, such as Daimler, VW, Mahle or similar. These are young engineers who were well selected there, are gaining experience here and are also learning German.
In Brazil you also absolutely need: a good lawyer, a good tax advisor and auditor, and — this is absolutely critical — a CFO who knows the Brazilian tax system inside out. It is so complex that mistakes can be costly.
And then there are many people of German descent in Brazil who are well suited for management roles and who also understand us. We think and work somewhat differently from a Brazilian from Bahia who loves carnival and is convinced that a good goal can be reached by other paths as well. Brazilians are proud, highly creative people with great ideas. Both approaches have their value.
59 Brazilian start-ups from industrial sectors are coming to Hannover Messe. How do you see their chances? How would you welcome them?
I am not at home in every new technology. I have seen some start-ups that have already founded in Brazil and are now building subsidiaries here — in Bonn and in Böblingen, for example, where there is a centre founded by former HP and IBM programmers.
I take my hat off to the courage of young Brazilian founders
These young companies presented products that combine digital technology, sensor technology and mechanics to rationalise manufacturing and assembly processes. Brazilian intelligence is helping German production facilities become more efficient through digital technology and software.
I am delighted that Brazilian founders are thus sending a clear signal against the de-industrialisation of Germany. They come here — to learn about German production technology and to help improve it. In computer science they can already compete at an excellent level.
Innovation arises through encounter, exchange and competition. Let us drive industrial progress together — and please, also beyond state subsidies.
How can ties with Brazil be deepened? What matters most to you as Honorary Consul in Baden-Württemberg?
One topic that really occupies me: Brazil is today an agricultural superpower that feeds over a billion people. A red flag for the EU agricultural lobby — but it is a fact. I know Danube-Swabian farmers in southern Brazil, in Paraná, who have developed one of the most innovative farming methods on sloping terrain with heavy rainfall: soil regeneration, direct seeding, combined with precision agricultural technology.
Combined with drone surveillance, satellite imagery and soil analysis, one knows today exactly which hectare needs which mineral. In digitalisation and innovation in agriculture, Germany can learn from Brazil. Universities and associations should look more closely in that direction.
Brazil has a clear strategic direction towards reindustrialisation
Its large, young population — eager to learn and curious — needs work. That requires a strong secondary sector. The service sector alone cannot bring so many people into employment. Industry has been and remains a proving ground for young German engineers and managers who go there. Brazil compels you to question your own perspective, to broaden it and to acknowledge that other paths can lead to similar goals. Knowledge of Brazilian Portuguese is more than helpful in this regard.
This relationship above all must be built and maintained for the long term — like a friendship. And on both sides, arrogance and condescension must be avoided. Only those who observe this will truly arrive in Brazil.