This Plastic-fueled Kibbutz Is Thriving, but Can It Stay That Way?

Flushed with pride and profits from its pioneering plastic toilet tanks, kibbutz Ma'agan Michael is one of Israel’s wealthiest. But will it always have 'enough capitalist money to preserve a socialist way of life'?

At work in the Plasson factory at Kibbutz Ma'agan Michael, September 4, 2019.
\ Eyal Toueg

A kibbutznik and a former kibbutznik went on vacation to a cabin in a remote part of Norway. When they got there they discovered that the pipe that carries water from the local spring to the cabin’s faucet was disconnected and a fitting required replacement. They traveled many kilometers to a godforsaken town, entered a dusty shop and explained to the elderly storekeeper what they needed. To which the man replied in pure Norwegian: “You’re looking for a Plasson.”

“I was amazed,” recalled the kibbutznik, who doesn’t live at Ma'agan Michael, the home of the factory that manufactures the famous pipe fittings. “This is the dream of every marketer: The brand and the product are one name. If an elderly Norwegian uses the word ‘Plasson’ in this tiny town in the mountains, apparently they know what they are doing in Ma'agan Michael.”

CEO Gilad Agmon says has never heard that particular story, but has heard quite a few similar versions. The Israelis perhaps know Plasson best as the company that makes plastic toilet tanks, but around the world it is actually their pipe fittings and equipment for chicken coops that have made it into one of Israel’s best-known industrial concerns.

All the management of the factory, from the CEO to the dozens of assistant managers and two chairpersons, are members of Kibbutz Ma'agan Michael, like most of the members of the board of directors. Until the 1980s all the employees came from the kibbutz, too. That barrier has been broken, but even today the chance of the CEO of the company being an employee is nil. “The kibbutz general assembly would never permit it,” says Agmon.

And so, the boundaries between the factory and the kibbutz are blurry.

Ma'agan Michael is not only one of the largest kibbutzim in Israel, home to more than 2,000 people, among them about 1,000 members but is one of the 10 wealthiest kibbutzim. Founded in 1963, Plasson enables it to maintain its almost completely communal character; Ma'agan Michael never faced the financial pressures that forced other kibbutzim to privatize. On the kibbutz, they explain it in a single sentence: “There’s enough capitalist money to preserve a socialist way of life.”

However, this hasn’t always been the case.

In 1949, a small kibbutz was founded on the Mediterranean coast with an aspiration to bring to life the Israeli fisherman. The collective’s fishing business totaled three fishing boats that went out on long voyages. Male and female fishermen staffed the boats in complete equality. However, the fishing business turned out to be unprofitable and was eventually closed. From there, the kibbutz moved onto fish farms, which exist to this day. However, this was also not enough to keep Ma'agan Michael afloat.

Shattered dreams

At the beginning of the 1960s, like at many other kibbutzim, Ma'agan Michael came to the realization that agriculture was not enough. The older members of the kibbutz still remember the vote on the issue, which didn’t pass easily. Owning and running a factory was not the founders’ dream.

The beginning was modest. In 1963, Plasson’s mythical founder, Itzik Kantor, brought several machines to his small warehouse. “The innovative hit then was injection molding production of plastic products,” says Agmon. “In the beginning, we produced objects for household use – boxes, buckets, waste bins, etc.” The name given the factory was a portmanteau of plastic and “on,” the Hebrew word for strength. Over the next seven years, its grew and developed, and established its impressive research and development unit

One of the original patents Plasson developed was for the plastic toilet tank, a novelty at the time in Israel. The toilet could be emptied according to two different quantities of water depending on what would be going down. It was the pride of its inventors. Today, about 300,000 plastic toilet tanks are sold every year, according to industry estimates. Plasson has an approximately 40% share of the local market. Unlike other products, Plasson’s toilet tanks are sold only to institutional buyers. It’s hardly used in private homes anymore, and sales are in long-term decline.

At the same time, several other patents have been registered by the company over the years, foremost among them automatic watering troughs for chicken coops and pipe fittings. Much water has flowed since in the fishponds, but equipment for chicken coops and pipe fittings, above and beyond the range of new patents on the way, these are still the principle sources of income for the company.

Plasson’s return exceeded 1.2 billion shekels in 2018 ($340 million at current exchange rates), and net profit was 88.4 million. It has more than 20 subsidiaries and factories overseas and is listed on the Tel Aviv Stock Exchange. Plasson employs about 2,000, half in Israel, and among them about 250 people affiliated with the kibbutz.

Despite the global expansion, the company maintains its base in Israel. “Our slogan is ‘global presence, local commitment,’” says Agmon. “We have subsidiaries in different countries throughout the world, which are commercial enterprises with logistical warehouses, marketing, and sales. They hold inventory that enables overnight distribution of products, after thorough quality control. In this way, loyalty is maintained and with it the readiness to pay more than for competing products. We could have established a large logistical center in one place in the world and distributed from there, but we will not do that. Fast service and quality products are more important.”

The reality described by Agmon suggests that the kibbutz factory owes quite a bit of its success to the DNA of the kibbutz to which it belongs. Its prominent characteristics were high individual demands and a type of asceticism.

“We were an average kibbutz, and even one of the more modest in the kibbutz movement,” says Agmon. “When the rest of the kibbutzim had invested in stocks, we didn’t have a penny. In retrospect, this saved us from the crisis in bank shares in the 1980s,” says Agmon.

“All of the income was reinvested in businesses. We lived off what we had, without embarking on adventures. We were the last to install refrigerators or televisions in homes, we didn’t get involved in real estate projects, and there wasn’t even the smallest instance of corruption. The disposition in all fields was conservative,” he says.

According to Agmon, “in every camp within the kibbutz movement, seventh graders knew that if they didn’t return with the first place cup, they shouldn’t return to the kibbutz, because it would be the first time ever. In every rowing championship, we had to win, and all our youth went into elite army units.

“There are kibbutzim in which labor wasn’t the highest value. Here, they worked hard, and the education involved values.” Agmon does not say this explicitly, but apparently the Spartan concept of education of the early decades later helped ensure that Plasson would succeed.

Members worked hard and lived modestly. New patents continued to be developed, but no one was tempted to use the profits on risky new business ventures. The money was reinvested in the company and in production.

However, the story doesn’t end there. With the flow of money came the temptation to use it. Today, Ma'agan Michael is filled with houses resembling those in posh Caesarea. Members receive bonuses, and most the next generation of kibbutzniks choose to stay. “That’s how it is when you’re swimming in cream,” say folks at neighboring kibbutzim.

Not going anywhere

The production lines at Plasson continue running apace. More than 90% of the pipe fittings are still produced at the kibbutz, and the company has no intention of moving it elsewhere. The capacity to continue producing in Israel at price points that allow sales in such a competitive market, is due to Plasson’s having established its own departments for molds and automation. Each is big enough to be a standalone businesses. As a result, most of the pipe fittings, like the toilet tanks, are manufactured in Israel, though a large portion of the chicken coop products are produced abroad, mainly in Brazil.

Despite its proven successes, the company’s challenges are only growing. The number of competitors is widening and the strong shekel versus the euro has made it harder to compete on price in Europe. In 2008, the company absorbed a tough blow with the global sub-prime crisis.

“In 2007, there were huge requests, and we also invested in order to supply them,” says Agmon. “In 2008, the global economic crisis hit, and everything ground to a halt. These were tough days and the solution included an insane diet. Managers cut salaries, workers were laid off, retirees could no longer come work for two hours, the objective was contraction.” The crisis passed, and since then Plasson has recorded meager growth, mainly because of the strong shekel. The crisis taught the kibbutznikim they aren’t eternally immune and shouldn’t be too intoxicated by success.

According to Agmon, the company is far from maximizing its potential and will need to change. “We will need to adapt ourselves to the future world, which will be based on digitization, big data and robotics. It’s reasonable to assume that within a few years, things will need to look different here as well,” he says.

One of the firm’s significant challenges stems from the fact that the young, educated generation that remains on the kibbutz isn’t very interested in actually the factory that made the kibbutz so rich. Pipe fitting don’t have the same cache as high-tech. Additionally, the managers, who have enormous responsibility of keeping the kibbutz financially strong through Plasson, get the same pay and benefits as every other member.

“At a certain point, the kibbutz will also understand that sometimes it’s preferable to bring in an excellent candidate from outside than a mediocre candidate from inside,” says Agmon, who worries that no great local replacement is appearing on the horizon. There is a close connection between the company’s success and the cushy collective life.

“History teaches that collectivism in the kibbutz comes to an end after a crisis, anarchy, or a combination,” says Agmon. “In the meantime, the great commercial success does not enable consideration of long term issues. People enjoy the current condition and worry about privatization, but whoever thinks that change isn’t coming is mistaken. The question is when and how.”