Heidelberg acquisition paves digital future at Gallus

Ferdinand Rüesch IV, widely known as Ferdi, has retired after a long and storied career leading his family business, the press manufacturer Gallus.

Winner of the R Stanton Avery Special Recognition Award at Labelexpo Americas last year, he will spend this year visiting and bidding farewell to long-standing customers. It’s an opportune moment to look back, with vindication, on perhaps the most important decision of his 45-year career: the sale of Gallus, the family business founded by his grandfather in 1923 and previously run by his father, Ferdinand Rüesch III, to Heidelberg in 2014. With Ferdi’s retirement, Rüesch family involvement in the company is no more.

‘There is some sadness about that aspect,’ he admits, ‘as there was in 1999 when we sold Heidelberg the initial 30 percent stake in Gallus. But you have a head and a heart, and, in the end, it was a decision of the head. At the time, my father and I decided that it was the best path for the future. It took a while to digest, but I look back, and I know that it was the right decision.’

It is instructive to look at today’s digital printing landscape. Can any major press manufacturer in the sector claim to be a medium-sized, independent, family-run business? All are either major multinational manufacturing corporations themselves or have partnered with one for technology development. Gallus was seeking investment and resources for the development of digital printing technology when it sold an initial stake to Heidelberg in 1999 before completing the sale in 2014.

Global growth

Ferdi Rüesch took over from his father in 1990 and set about accelerating Gallus’ global growth by opening subsidiaries in the US, UK, Germany, Australia and Denmark. Toward the end of that decade, sheet-fed offset press manufacturer Heidelberg, which was keen to diversify into the flexo industry, approached Rüesch about the possibility of an acquisition.

Heidelberg, says Rüesch, was attracted not only by Gallus’ flexo technology but also by its experience in combination printing, where the company would routinely employ different systems such as flexo, UV flexo, offset and screen on its presses.

“I look back, and I know that it was the right decision”

‘We are at home in the roll-to-roll market; their expertise was in sheet-to-sheet. Our technology would complement the Heidelberg portfolio.’

Having not run the company long, Rüesch was reluctant to endorse a full sale. ‘But I knew there was a need for digital printing in the industry and recognized that Gallus needed support in order to develop it,’ he says. Gallus had attempted previous forays into digital press development, including with Benny Landa in the mid-1990s.

Heidelberg offered to acquire a 30 percent stake in a deal that included an option to buy the remaining 70 percent in the future. ‘I spoke with my father about it. We decided it was a good offer to enter this kind of partnership,’ says Rüesch.

The partnership quickly bore fruit, with the joint development of the Labelfire hybrid press and a digital finishing module for the Gallus ECS flexo machine. ‘It was an advantage for customers to have one supplier for these different printing technologies. And Gallus benefited hugely from Heidelberg’s technology expertise. We wouldn’t have been able to do it without Heidelberg’s support,’ says Rüesch.

Following 15 years of collaboration, Rüesch says it was then the right time for both parties to complete the deal. ‘It was complicated to divide the R&D costs. Heidelberg had a greater reach worldwide, they could open doors for us at big companies which we otherwise couldn’t enter.’

The full acquisition was finalized in 2014. Rüesch became Heidelberg’s largest individual shareholder at the time and focused on managing key accounts before becoming a supervisory board member in 2018.

A low point came in 2021 when an attempted acquisition of Gallus by Benpac failed. ‘It was the toughest year of my career. We lost some credibility among the converter market and had to spend all our energy regaining trust from our customers. The fact that my team and I were still in place helped this. It was a lost year and a hard time. But we got through it, and now it is not an issue.’

The high points, in contrast, are many. ‘My proudest achievements are continuing the work of my father and moving Gallus into the digital printing world with Heidelberg,’ says Rüesch. ‘We have a place in the digital arena with products that suit the demands of different profiles of label converters. Heidelberg was looking for growth markets, and the digital label market was one of the biggest areas of growth, so our digital technology development with them was a hugely important achievement.’

Rüesch sees Gallus’ legacy as a series of pioneering presses in different technology areas. ‘Our T180 press set the world standard in combination printing. We were also a pioneer in UV flexo technology, with the industry’s first fully servo-driven flexo press. The RCS330 set a benchmark in roll-to-roll label printing. And our Labelfire hybrid press was launched in 2014. Ten years later, hybrid technology is in fashion. So, we set many benchmarks. My father traveled around the world, so Gallus was early in establishing a global network of customers.

‘The label industry allows a very close relationship between supplier and customer. I see this with Gallus but also with our competitors. There is something special about the industry.’

Gallus CEO Dario Urbinati is clear that Heidelberg’s acquisition of the company in 2014 has been ‘hugely beneficial’. Urbinati joined Gallus in 2007, when Heidelberg was a minority shareholder, and spent nine years with the company before stints at Omet and Actega. He rejoined Gallus as head of sales and service in 2021 before becoming CEO in 2022.

‘We had attempted several times as a smaller company to enter the digital space,’ he recalls. ‘Gallus had shown great ambition and determination to enter the sector. But the timing was not quite right, and the technology was not quite there.

‘Developing digital technology is a different game. It’s not the same as conventional press development. The language is different. It is less mechatronic and requires a better understanding of chemistry and software. It is a challenging, expensive and long-term venture. Partnering with Heidelberg — and then later becoming fully owned by the company — was absolutely the correct decision. Gallus is an important pillar in the Heidelberg Group’s packaging business, which offers long-term growth potential.’

Strategy

Urbinati’s return to Gallus as CEO took place a year after the failed acquisition. ‘It had been a difficult time. But it was the catalyst for a rethinking of our strategy. We spoke to our customers and listened to their challenges. They cited labor, input costs, sustainability and industry consolidation. We drilled down to how we could really address these concerns, and it became the starting point for a new development cycle focusing on smart, connected printing technology. We started designing products together with the customer, for the customer.

‘Previously, we primarily designed machines; now, we primarily design modules. If you have a modular framework, it is easier and cheaper for customers to adjust to an ever-changing production environment, and it provides greater investment security. A customer once asked me: “How can I buy a machine which depreciates over 10 years, when I don’t know what I’m going to print in five years?” I decided to address that challenge.

“We provide the instruments to the customer, and they compose their own symphony”

‘The primary task was reducing the TCO barrier to profitable digital labels, which we tacked with the Gallus One. But ensuring long-term success is about more than just machinery. Modularity and flexibility by design must incorporate all the other elements, such as software, service and overall business model and strategy. By incorporating modules such as inkjet, flexo, screen, converting options, it allows standardization of the production environment while allowing flexibility of application, because you can add or remove modules as you please. We call it “System to Compose”: we provide the instruments to the customer, and they compose their own symphony.

‘In the last couple of years, this new strategy has been put into reality, so I believe that out of a challenging situation came a very positive outcome. The teams at both Gallus and Heidelberg worked together better than ever to adjust to our customers’ challenges.

‘Our success since the new strategy was implemented shows it’s the right path. We want System to Compose to set a new industry standard. It’s an open system designed for collaboration. We have more than 20 industry partners showing their technology in our Experience Center in St Gallen: Esko, Martin Automatic, Actega, Prati and many more.

‘We have some tremendous products in our pipeline. System to Compose will continue to be updated with new technologies and options for our customers. We have a drive to automate our industry to bring ease of use and flexibility to our products and systems. I am excited by our upcoming technology, and I’m sure the industry will be too.’

A consolidating industry 

Two key factors are driving the continued consolidation of the label industry, according to Ferdi Rüesch: a generation shift among converting businesses and the influx of private equity investment into the sector. ‘In the 1970s, many industry pioneers founded successful businesses. The second generation then took over 25-odd years later, in the mid-1990s. Now another generation change is happening as that second-generation retires,’ he says. ‘Secondly, private equity investors have been moving into the industry. From a private equity point of view, the label sector is still fragmented and ripe for consolidation. So there are two significant drivers.’ Rüesch points out that in the US, the tax system encourages the sale of businesses rather than passing them down to the next generation. ‘This attitude towards business is now coming to Europe through private equity investment.’ It remains important to carve a niche, he believes. ‘Small and niche is good; big and profitable is good. It is the medium-sized companies that are under pressure. The converting industry is still very strong in local and regional markets, but it can be harder to compete in the international market.’