Spirax-Sarco Engineering: The Power of Direct Sales | In Practise

Spirax-Sarco Engineering: The Power of Direct Sales

Former General Manager at Spirax Sarco Engineering

Learning outcomes

  • How Spirax organize the direct sales team
  • Why Gestra, Spirax and all subsidiaries have separate direct sales teams
  • How Spirax's value proposition compares to large competitors
  • The value add and returns of exploiting unrecognized needs for customers
  • What large customers like Nestlé really care about
  • The potential for Spirax to increase direct sales as a proportion of total sales
  • How the OEM channel operates like a direct sales channel
  • Potential risk and pressure on Spirax's operating margin

Executive profile

Maike Nielsen

Former General Manager at Spirax Sarco Engineering

Maike has nearly 30 years experience selling steam machinery for Spirax Sarco. In 1988, Maike joined Hygromatik, a Spirax-owned German humidification sales and manufacturing company, where she spent 21 years scaling the business globally. Maike was then promoted to run 8 sales companies within Spirax before focusign entirely on the OEM business where she was responsible for designing the commercial and pricing strategy and globally. Maike retired from the company in 2019. Read more

How would you describe the culture of the business at Spirax?

When I moved to England, it was my first experience of corporate life. It was a challenge going from managing a mid-sized German company to being a regional general manager, responsible for seven or eight operating companies with frequent travel. Today Spirax-Sarco are on the FTSE100; right now, they are at 59, but recently were as low as 52nd largest company on FTSE.

They have annual revenue of £1.3 billion with an operating profit of 23%, which is high for an engineering company. I can speak for Spirax, which is one of three very successful legs Spirax Sarco stands on. One of them is the steam specialty business, which is Spirax-Sarco and Gestra, a competitor they acquired several years ago. They do steam systems, condensate management, controls and thermal energy management. So what does that mean?

Mars Bars are covered in chocolate, which needs to be melted at some point in the process. Enormous vats of chocolate have to be heated in a very controlled fashion; too hot the chocolate burns, not hot enough the chocolate cannot flow. The best way to heat it is steam. Not the steam that comes out of your coffee cup, but the steam which is under pressure. If you heat water under pressure, it gets hotter than 100 degrees, which you guide to a big vat of chocolate. That steam goes into the chocolate in a controlled manner and becomes condensate.

It changes from gas to water and is boiling hot so you have to handle it properly. It has to be guided while simultaneously utilizing its energy with heat exchanges. The hot water runs into condensate traps which are drained when full. Spirax-Sarco Gestra have a worldwide annual revenue of £755 million at a profit of 23.6%, if I'm not entirely wrong, which is again extremely high for an engineering company.

Engineering is very often lower, which is why they are in the FTSE 100. The second leg is electrical thermal solutions, which I am not too familiar with. It is basically the same thing as steam but with electrics. If you are in Alaska and drilling for oil, the oil will not flow if it is too cold, so you have electrical hoses or wires which run along the pipeline ensuring the oil is heated. That is a very crude explanation of what they do, and they are called Chromalox in the US and Thermocoax in France.

The third leg is Watson-Marlow.

They also have that leg, which is very successful with pumps and tubes.

How is the direct sales team at Spirax organized?

The companies have synergies for IT and HR but the sales teams are separate. Each entity’s knowledge is highly specialized and they remain segregated where possible. Within Spirax, for example, there are both food and beverage and pharmaceutical industry specialists in identical areas, because they use different appliances.

Do sales staff cross sectors for Spirax and Gestra in Germany?

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Spirax-Sarco Engineering: The Power of Direct Sales

September 9, 2020

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