December 2003: Volume 45, Number 12
Keeping Up with KDF's Al-Kharusy
by Carlos David Mogoll?n, WC&P Executive Editor
It’s been a year of transition for KDF Fluid Treatment. The specialized media maker saw the passing of its founder Don Heskett in October 2002. Shortly before, Issa Al-Kharusy, Has-kett’s son-in-law and son John Heskett were promoted to CEO and president, respectively.
Al-Kharusy served as president since 1996, so the continuum of leadership remains strong. Three other Heskett offspring are part of the business as well. Now, while research into other market niches is ongoing (KDF already dominates the shower filter market, for instance), the company plans broader market penetration first into the point-of-use/point-of-entry (POU/POE) segment. Significant gains there will prompt additional growth.
“If we’re able to accomplish this,” Al-Kharusy said, “then our focus, when it comes to marketing and research, is going to shift to other market segments. And it’s going to shift into introducing new products.” That type of ingenuity started with Don Heskett, he added.
An inventor by nature, Heskett--who started out with Servisoft and Morton Salt--developed an early version of the carbon block filter and non-electric water softener. KDF was founded in 1984, based on the accidental discovery of “bimetal” redox properties of copper and zinc and development of an alloy of granulated blends of the two as a filtration product with oxidative and catalytic properties. Heskett discovered these properties while using a brass-tipped pen to stir a water sample with a DPD tablet in it to measure chlorine. Instead of turning pink to reveal chlorine, the redox reaction caused by the copper and zinc ions in the brass neutralized the disinfectant. From that discovery came KDF 55 and KDF 85. The first is applied largely for municipal uses as a bacterial and scale inhibitor and to remove oxidation agents from water. The second is used toward similar ends in well water and to treat iron and hydrogen sulfide.
Al-Kharusy was born in Kenya. His father, a businessman from Oman, ran a successful overland shipping company, transporting supplies between the Indian Ocean and inland mines. When civil war in Uganda pulled the father’s business under, his family returned to Oman. In 1984, Al-Kharusy got a government scholarship. He went to a private Kansas City college before transferring to Western Michigan University, where he met Denise Heskett, his future wife. He worked in plastic injection molding before joining KDF in 1993 as research director.
Growth in recent years has been only in the single digits, compared to the 15-20 percent KDF enjoyed prior to the economic downturn in late 2000. In addition to how OEMs that might use KDF in their products are affected by recession, commodity prices--which have been more volatile of late--are also a key element of the company’s margin outlook.
“When we take the average of the hills and valleys, we’re pretty much consistent…,” Al-Kharusy said. “We do see recovery, however, and the market heartening up again. Hopefully, we’ll be back in the swing of things and back to our double-digit growth relatively soon.”
Before we get to the interview, here are a few facts about the company:
KDF Fluid Treatment Inc. Staff: 11
1500 KDF Drive
Three Rivers, MI 49093-9287
Tel: (800) 437-2745 or (269) 273-3300
Fax: (269) 273-4400
Management: Issa Al-Kharusy, CWS-VI–CEO; John Heskett, CWS-VI–President; Denise Heskett-Al-Kharusy–Vice President, Marketing; Donna Smith–Controller
Revenues: $5-10 million
Operations: Maker and distributor of KDF media, a copper-zinc alloy filtration media with redox properties that also serves as a bacterial and scale inhibitor. Produced under contract by operations in Pennsylvania and New Jersey.
And now for the interview:
WC&P: How long have you been in the business and how did you get started?
Al-Kharusy: Are you talking about personally or about the business in general?
WC&P: You could do both, if you'd like.
Al-Kharusy: We're celebrating our 18th year. And this business was built, of course, always around the concept of KDF media--high purity copper-zinc alloys for treatment of water. I personally joined the company in 1993. And, when I joined the company, I started in research and development, before moving into the executive branch.
WC&P: What did you do prior to KDF?
Al-Kharusy: Actually, I was in the plastic injection molding business. I was in the production team of custom injection molding dealing mainly with pharmaceutical products and highly sanitized type products.
WC&P: OK. So, how did you get involved with KDF?
Al-Kharusy: Of course, my father-in-law is the one who started the KDF business. And, through his invention and also obtaining patents, he built the business around that.
WC&P: Don Heskett.
Al-Kharusy: Yes. And so, he asked me to join the company initially and that's how I got in.
WC&P: Don passed away about a year ago, so who runs KDF today?
Al-Kharusy: Actually, it's a family business. So, it would be myself, there's Don's offspring--other siblings. Of course, you know John Heskett, you know Denise, his sister and my wife, and we have others that are his kids as well who are involved in the company in one aspect or another.
WC&P: Who all are they, if you want to name them off?
Al-Kharusy: We have Donna Smith, she's also a daughter of Don's--she's the controller. Denise heads up marketing. And John is the president of the company, but he and I also do most of the sales. Then, we have Mary, who is another of Don's daughters, who is a receptionist here. And his granddaughter is the sales coordinator, Jennifer.
WC&P: She's the daughter of which sibling?
Al-Kharusy: She's the daughter of Donna.
WC&P: Give me some background on how Don got started, please, since there's an interesting story there and we haven't really given detail to it in the magazine per se.
Al-Kharusy: Exactly. Don initially started working in the water treatment business when he was consulting for Morton Salt in Chicago. During that time, he actually came up with the concept of what's now known as a carbon block. He was the first known person to come up with a commercial product that used polyurethane binder with a fine activated carbon powder to form the block. And he extruded that. It started in small amounts and it grew in quantity as mass production went up. After he left Morton Salt, he actually worked in the water treatment business around Chicago. He had his own company that serviced many of the commercial needs of water treatment. He did a lot of photographic labs, etc. And he went on to invent or devise, I should say, a non-electric water treatment softener. This was in cooperation with his friend who came up with the concept and, actually, that water softener was in commercial production for some time. The molds and the patents were sold to Clack Corp. After he moved to Michigan, he essentially stayed in the water treatment industry by remaining a dealer for that non-electric water conditioner. But Don is inventive by nature, so he was also looking for other things in water treatment. And, just through serendipity, he came across the metal couples that are capable of removing or reducing or oxidizing things in water. From there, the concept of KDF was formed.
WC&P: Now, briefly if you could, give us an explanation of what KDF is and what it does?
Al-Kharusy: KDF, in a nutshell, is high purity copper and zinc alloys and these are made in different formulations. When we say formulations, we talk about ratios of high purity copper to high purity zinc. And, in a special process, this material is atomized into granules to allow the water to pass through the granules, of course, and also to offer the maximum surface area available to treat water. It is actually a bimetal couple. When we say a couple, there's always a connotation about oxidation and reduction. That's what KDF is. It's essentially a product that, once it's in direct contact with aqueous solutions like water, you have immediate availability of exchange of electrons. The media is capable of either donating electrons or accepting electrons from things in the water.
WC&P: So, in that sense, it's sort of a catalytic media?
Al-Kharusy: Well, to a certain extent, it's catalytic--but it's also used up. It's both. It also becomes oxidized…
WC&P: And in the same sense it also functions as a filtration media.
Al-Kharusy: It does. And it's an outstanding filter in terms of physical filtration. Of course, we prefer that it's not used for that purpose, because it does offer greater value in removing other things from water that are typically hard to remove with conventional filtration products.
WC&P: What are typical applications that fall into that?
Al-Kharusy: We have two major formulations that we sell to through business. We have the KDF 55, which is a special formula of the media that is used in treatment of mainly municipally treated water to remove oxidation agents from water--things like chlorine and so on. It also is a very good product in terms of bacteria control. And the media also act as a scale inhibitor to a certain extent. So, those are the main applications for the 55. We also have another formula, the KDF 85. And that special formula is used mainly for treatment of well waters, groundwater, to remove things like iron and hydrogen sulfide. Of course, it also has the ability to control bacteria, inhibit scale and provide an outstanding filtration capability.
WC&P: That's pretty apropos then since we're planning on using this interview in our December issue, which is our "Groundwater" issue.
WC&P: How big is the market for you?
Al-Kharusy: Are you talking in terms of sales or geography?
WC&P: A little of both.
Al-Kharusy: Being a privately held company, I'm not in a position to disclose our annual sales.
WC&P: In that sense, we generally ask people to give a range that might fall in and maybe discuss it in terms of percentage growth per year, etc. You can offer a broad or narrow range that it falls between.
Al-Kharusy: Roughly, we're between $5 million to $10 million in sales per year.
WC&P: What do you do in terms of percentage growth per year?
Al-Kharusy: Percentage growth, in the past--before the recession here lately the last couple of years, we've been growing at a rapid pace. Double-digits is normal. It was between 15 and 20 percent a year. And, in the last three years, I wouldn't say they were flat, but… Over that time, even though we had growth, it wasn't what we were used to in the past. We were in single-digit growth. However, we do see recovery and we do see the market heartening up again. Hopefully, we'll be back in the swing of things and back to our double-digit growth relatively soon.
WC&P: What affects that? What indicators do you look for?
Al-Kharusy: What affect would that indicate in terms of the market?
WC&P: No, what indicators do you look for in surveying the market and where your growth is going to be? In other words, what influences one market vs. another that you're serving and how do you foresee that playing out in the near future?
Al-Kharusy: A big segment of our business are OEMs that manufacture different components and systems in the water treatment industry in one aspect or another. In general, the point-of-use/point-of-entry water treatment market has been a bit soft in the last couple of years. I think I attribute our not up-to-par growth to the soft market conditions. However, when I say we'll experience a swing of growth, I see big activities because we do export a lot of our product overseas.
WC&P: Do you want to switch over to geographical and tell me how far and wide KDF distributes and where your strengths are?
Al-Kharusy: We distribute worldwide, of course, but our main markets outside the United States are the Far East--China, Japan, Korea, Taiwan--the Sub-Indian Continent and, I would say, countries like Malaysia, Indonesia and Singapore; and to a certain extent, Australia. And we're seeing a big presence in Europe. Our growth has been steadily growing in there in Western Europe. We've always had good customers and growth in South America. Brazil and Argentina are strong. We see somewhat active sales in Canada, which I would say is geographically connected to the United States, that could be better.
WC&P: Careful there. Those Canadians are very independent.
WC&P: I assume what you're suggesting is the growth overseas has been what's holding things in positive territory for KDF?
Al-Kharusy: That plus the explosion of the shower filter market. The shower filter market has really grown drastically here in the last few years, even though the rest of the industry has been somewhat flat.
WC&P: Why do you think that is?
Al-Kharusy: It's a great concept. And I think, finally, the manufacturers of shower filters defined exactly what these products are. They're marketed to be personal care and beauty enhancement products. Of course, once you get into that arena, you separate yourself from the plumbing fixture business and, as you know, when it comes to health and beauty and personal care, there's a vast market, whether it's makeup, different types of rejuvenation products, etc. And the shower filter has seen that growth because, finally, the manufacturers identified their niche and also there's good consumer awareness that they're beginning to look for products not just necessarily for drinking but also for bathing.
WC&P: Chlorine removal, etc. Radon is another reason why people might use it in showers. How effective is it with radon?
Al-Kharusy: These products are not marketed for radon. I'm not aware of any shower filter that will do that?
WC&P: I was referring to the fact some products use carbon for radon removal, but you're saying shower filters makers don't market their products that way.
Al-Kharusy: The thing is there are a few things that would prohibit things like carbon from working in this application. I'm not saying it couldn't be done. Just the sheer size of this device, which is very small, and at very high flow rates--the contact time is very short. And, therefore, carbon is going to have a hard time removing things like radon or other organic contaminants. Further to that, you have to remember, this is generally warm to hot water, which is not conducive to the adsorption process.
WC&P: I recall someone suggesting that to me before when we were talking about shower filters. Tell me a little bit about KDF in terms of what's new? What sort of things have you been working on lately?
Al-Kharusy: We've had an active R&D section with the company that has really done a magnificent job looking at different ways to apply the KDF media and, further, to look at different improvement on the product. We've spent a lot of time and money in that regard. However, every time we look at the size of the market and where we are as a manufacturer and a distributor, we come back to the same conclusion. We have a wonderful product. There's big demand for the market segments we're marketing to. There's no sense in coming up with anything new or improving on a product that's wonderful. So, we're focused to just increase our market share and awareness about KDF. Thus, our marketing and sales effort have generally been geared to increase of market share.
WC&P: Tell me about how your market share divvies up. What market are you going after that you'd like to see a greater share or penetration? Shower filters?
Al-Kharusy: Shower filters is a market that we're dominating as a technology. But, of course, if we look at the total size of the POU/POE market, it's vast, it's huge. And we look at our volume of sales into that market--of course, we need to do a lot more. That's why we're focusing on that. No. 2, we also did look at different market segments outside of POU/POE--things like large municipal systems, industrial waste and process water, etc. And, again, we came back to the conclusion that we have a vast market in the POU/POE potable water treatment segment and we need to focus our time, money, energy into that market and grow it to our satisfaction, before we shotgun into other market segments. Of course, that doesn't mean we aren't seeking those markets. But, we're not focusing on them as much as we're trying in the POU/POE market.
WC&P: What sort of targets do you set for that?
Al-Kharusy: Of course, everybody will tell you the sky's the limit.
WC&P: Sure, just write me a blank check…
Al-Kharusy: Definitely. The thing is if we are able to increase our sales as a company as a product, I would probably say, by 300 percent in the next five years--if we're able to accomplish that--then our focus, when it comes to marketing and to research, is going to shift to other market segments. And it is going to shift into introducing new products and things of that kind.
WC&P: Have you looked at acquiring other media-related companies that might complement KDF or introducing other products that might complement KDF 55 and KDF 85?
Al-Kharusy: The answer to both is no. We're not looking to acquire any other company, not as a current strategy anyway. We look at the market as our customers in total. And we've always had a philosophy of being independent manufacturers. And we don't want to be competing with our customers. If we make a decision to buy a company, then we are basically setting ourselves up to be in direct competition with our customers. That's the last thing we want to do.
WC&P: So, if there were such a possibility, it would have to be such that it was non-threatening to your existing customers.
WC&P: OK. Before we go on, tell us a little bit about your personal background. Where are you a native of?
Al-Kharusy: My personal story is a bit interesting. I was born in Kenya, Africa. The reason I was born there is my father was a businessman who established himself in that part of Africa. He had managed to build a large in the transportation industry.
WC&P: What was he doing?
Al-Kharusy: He was basically in the business of transporting goods from the heart of Africa to the coast.
Al-Kharusy: So, he had a fleet of trucks and manpower. And with the poor infrastructure in terms of roads, he had managed to create a very good business for himself to be the person people go to for transporting a lot of the goods, whether it's for agricultural or mining products or other things that need to be transported to the oceanside for transport.
WC&P: Or to the interior, I would assume, too.
Al-Kharusy: And inside, of course. No question. After the Ugandan war, my father had lost everything he'd worked for just because it became a socialist government and they confiscated everything. So, he decided to go back to his native country, which is Oman. That is in the Middle East--the Persian Gulf. And I, of course, went there as far as middle school and high school, before getting a government scholarship to attend college here in the United States. I came here in 1984.
WC&P: Where did you go to school?
Al-Kharusy: Initially, I went to a private college in Kansas City, Mo., before transferring to Western Michigan University, here in Kalamazoo. That's where I met my wife, at Western Michigan University, and the rest is history, of course. We got married and now have four children.
WC&P: I had meant immediately after the Sept. 11 terrorist attacks--trying to find time to write when you're editing two magazines--to contact people in the water treatment industry who might have connections or roots in the Middle East to look at how the shifting perceptions after that date might have affected them, their business or their perceptions of the situation. I never got around to it, but would like to know if you would care to comment on that.
Al-Kharusy: As far as us, here at KDF, we really have not in any way or shape experienced any reduction in business or even mention of the fact that just because I am one of the executives of the country and being of Middle Eastern ancestry…--none of that.
WC&P: That's good to hear.
Al-Kharusy: Actually, there was nothing but outpourings of support. And, of course, our clients are also our friends. We've created that kind of a relationship with our clients. So, they know exactly who we are. They know me in person. And, of course, they knew exactly where I stood on this issue. The thing is it is a sad chapter in our history, to see what happened on Sept. 11, 2001. That is something that will always be engraved in my mind. I would always know where I was that day. And, of course, we have changed the course of history by that criminal act. A lot of things have happened since. But, in my opinion, in the end, the Middle East, in general, the business to the Middle East is definitely going to be extremely positive. Once we have stabilized Iraq, I think that in itself is going to be a vast opportunity for businesses in the water treatment industry and others. I've talked to some friends who are in the Middle East in countries like Saudi Arabia, Kuwait and the U.A.E., and business is booming over there. The reason is that there is a big shortage of water so they rely on desalination as the primary source. And also, they get big contracts from countries like Iraq and others that are experiencing economic hardship that need water infrastructure.
WC&P: That's one of the things that we underscored in our response to the whole tragic event that occurred. That was that, in the fallout, we went into Afghanistan and are currently in Iraq--in both still really--it created as many opportunities going in later and actually playing a role as an industry in helping to rebuild and improve the quality of people's lives by improving the quality of their water and providing better access to safer, cleaner water. That reduces--in essence maybe as a very small factor--the whole pressures that lead to concerns over terrorism, etc.
Al-Kharusy: No question about it. And, further to the same geopolitical issue, when you look at the Middle East conflict and mainly the Palestinian-Israeli issue, you just pray and hope that things would be settled over there. And, in my opinion, you look at the opportunities for all, Israelis, Palestinians and the rest of the Arab population around there. (With) the vast knowledge and technology available and human resources on all sides, we can certainly make that a better place to live. We can make it a much better economic block. (With) the collective power in the Middle East, in terms of the availability of oil and natural resources plus the manpower and knowledge, I think there are opportunities for American businesses for sure.
WC&P: On a less somber note and to add more levity, our next question is: Tell us an interesting anecdote or story about your experience in water treatment?
Al-Kharusy: That's a hard one.
WC&P: We've had a number of odd stories, funny stories or just extraneous, off-on-a-tangent stories that popped up when we asked this question. It can be a simple story. It can be just an inspiring story.
Al-Kharusy: Probably, this is a very good opportunity for me to really pay tribute to a great guy that I loved and admired and remember. That is Don Heskett. After all, he's responsible for bringing me into this wonderful industry and I owe that to him. If I can just tell a story, it would be to tell about the creation of KDF, which was pure serendipity that's somewhat comical. But out of that came an actual company. It was late one night. He was working hard one night to look at different things in water (in a lab). He had been testing water using a chlorine indicator, DPD. With that, the water would turn pink. The intensity would depend on the concentration of chlorine in the water. At the time, they were selling DPD in a tablet form, so it was slow dissolving, unlike the powder that we have nowadays. Knowing Don, he was impetuous and impatient and wanted things to happen right away. So, he reached for the first thing next to him to break up the DPD tablet into that water sample. In doing so, he basically was able to get the color out. That stuck in his mind and he repeated the process, trying to figure out what exactly did that. In the end, he figured out that he was using an old pen that had a brass tip. Brass was actually the cause of that. That's how his thinking was as an inventor. He pursued it further, and in pursuing it, he discovered that redox--oxidation/reduction process--does take shape in water and that's how the concept of KDF came along.
WC&P: And the brass being composed of parts of copper and parts of other metals…
WC&P: What's a major challenge you or your company faced and how did you overcome it?
Al-Kharusy: One of the challenges that we had in the beginning when we started the company was the concept of using metals to treat water was so alien, so unacceptable, that we literally had to fight our way into the industry. And it's understandable, because nobody would have thought that you could take metals and put them in water to treat water for heavy metals and other contaminants. So, we believed in the product. We believed in the process. We believed in the science.
WC&P: It got somewhat equated early on as somewhat of a "magic potion," that wasn't taken seriously. That was a big hump to get over.
Al-Kharusy: Exactly. You know what, all I can say is sticking to your message, sticking to what you believe in, fighting for it and eventually good things happen. And our first initiative was to educate the industry that this could be used in water treatment. And, guess what, most high-profile water companies in water treatment today use KDF. We basically have written the book on the use of metal couples for water treatment and the wonderful things they do to clean up water.
WC&P: OK. From your perspective in the market, where do you see the industry going?
Al-Kharusy: Nowhere but up. I see a few things here lately. And, obviously, this is not documented--it's just a personal observation, but we've had an appetite for consolidation in the '90s where all companies were consolidating and forming larger companies. Here, the first part of this decade, I see those things unraveling. I see companies wanting to get smaller. Companies wanting to get independent again.
WC&P: For example, Vivendi, USFilter, Culligan, Everpure (and Plymouth Products) as well as Suez and Ondeo Nalco.
Al-Kharusy: Yes. And we looked at Waterlink, for instance. They also began to unravel.
WC&P: That's been going on for a while. It's essentially just Barneby Sutcliffe now.
Al-Kharusy: Right. And also it's getting to the point where being independent and having low overhead is essential.
WC&P: It also allows you to respond more quickly to the market or react whenever something is good or bad.
Al-Kharusy: No question about it. Decisions have to be made immediately. And people are not willing to wait for days or weeks to react to a problem that may exist. Based on that, I think the industry is going to rebound strongly. Water is not going to get any cleaner. If anything, we're polluting it more every day worldwide. There's huge development ongoing worldwide, whether we're talking about China, whether we're talking countries in Africa, South America/Latin America… There's just huge developments. With development, you definitely need infrastructure and things like water. And I think it would be a total explosion for the need for things like water treatment devices and technology worldwide. I would probably predict that by 2005, our industry is just going to see massive overhaul (because of this).
WC&P: In what sense?
Al-Kharusy: Well I shouldn't say 'overhaul.' I think there will be an explosion in business in general.
WC&P: Alright. What's the one hot-button issue you see facing water treatment dealers or the industry that will have the most impact in the next few years?
Al-Kharusy: Environmental regulations. I think the American companies are at disadvantage. There are environmental issues arising everyday. And these environmental issues are sometimes miscontrued to fit certain products or industries. And, of course, our industry has suffered enough from environmental issues (related to brine discharge). In most cases, they're unfair. That's my personal opinion. But those issues are going to stay with us and that's where we need the involvement and actions of all members and the WQA to make sure we're always ahead of the curve.
WC&P: Now, you've been very closely involved with the WQA since I've known you. What are some of the things that you see happening there that reflect what you're talking about?
Al-Kharusy: I sense a new life within the WQA as an organization and also the total membership of the WQA. I think the whole organization is gelling together again. We did experience--and I think for the most part because of the consolidation and resulting lack of funds--the WQA was somewhat at a disadvantage for a few years. But I see that change, especially, I would say this year beginning in March during the (Las Vegas) convention. I've see there's some reinvention happening. I see more involvement from members. I see more commitment. Of course, the whole structure is changing and, when you see that type of culture change, in which the whole organization is reacting or positioning itself for change. Because the whole world, the whole economy is changing, so when you position yourself for that change, you're bound to succeed. Because of that, I think the WQA is back in business again. And I think it is going to do wonderful things for this industry.
WC&P: Before we wrap it up, I have a couple of quick questions. One is how many employees does KDF have?
Al-Kharusy: We have 11 full-time.
WC&P: You have just one facility?
Al-Kharusy: We have one facility, but KDF as a product doesn't. This facility is only sales and marketing. That's what we are.
WC&P: Where is KDF made?
Al-Kharusy: We contract our manufacturing to companies. We have two companies that we work with on the East Coast. We have a plant in Pennsylvania and a plant in New Jersey.
WC&P: What do these companies do?
Al-Kharusy: These companies are in the business of mining, purifying, processing and creating metal powder.
WC&P: So, where does the metal come from?
Al-Kharusy: The metals are either bought in the open market--they're a commodity--or mined by the companies themselves and purified and processed. Of course, these companies would also melt them, purify them and create the product that we want.
WC&P: Being so closely associated with that commodities market, is that what may have affected KDF financially in the past?
Al-Kharusy: Well, commodities are something that affect us for sure. All the spikes in the values in the commodity market, in all cases--when there is a spike--we as a company have absorbed a lot of margins. We're really not in the business of changing our pricing frequently. We try to provide the best price, the best value to the customers. And, for the most part, we absorb the spikes. And when there are lucrative returns when the commodities are low, we enjoy that as well. So, we have an average. When we take the average of the hills and valleys, we're pretty much consistent.
WC&P: So, a more stable long-term economy is what benefits KDF the most?
WC&P: That sounds like a good place to stop.