By Evan E. Koslow, PhD
Summary: Consumer water filter products evolved rapidly in the 1990s with the expansion of activated carbon block technology and the creation of new markets and products. Small specialized markets exist for undersink and countertop filtration systems as well as systems to deal with less common water quality problems.
While the North American consumer water filtration market has certainly grown during the past decade, the situation in Europe remains stagnant in many categories and opportunities in Asia are far more dynamic. Regardless of local market conditions, the struggle to grow these markets is an ongoing effort by a variety of companies specializing in various technologies to accomplish the primary goal—improving the quality of drinking water available to consumers.
One example of where consumer water filtration has faced an uphill battle is in Europe. The market hasn’t evolved very rapidly for such products on the continent, where it continues to be dominated by point-of-use (POU) water coolers and gravity-flow carafes. Alternatively, demand is large and growing rapidly in Asia and less-developed regions, where sales of reverse osmosis (RO) systems can sometimes be quite large, i.e., Taiwan and Korea. To fully address the markets in Asia, products need to achieve greatly reduced cost and expanded health claims such as arsenic reduction (India and Bangladesh) and microbiological interception and disinfection. Latin American markets have been impacted by continued economic problems even though the need for water filtration is often compelling. Filters with high dirt capacity and capable of operating at low pressure are a necessity when selling south of the border.
Published market studies have estimated that the U.S. domestic market for consumer water treatment systems is approximately $1 billion. These studies, however, often exclude large and rapidly growing categories. We believe the actual market is perhaps $1.25 billion when such systems as refrigerator filtration are included.
General merchandise retail: Traditional low-cost and high-volume retail water treatment systems consist of gravity-flow carafe and faucet-mounted filter systems, predominantly sold by Brita (Clorox) and Proctor & Gamble (PUR Division). A carafe filter system
Do-It-Yourself (DIY) and hardware: In the United States, a separate retail category is the DIY or hardware segment. Here, products that might involve some significant installation or maintenance complexity are sold to the consumer or contractor. These stores—dominated by Sears, Home Depot, Lowes, Ace Hardware and similar outlets—sell a different kind of product often consisting of higher-priced systems that are installed under the sink or for point-of-entry (POE) applications. These systems, which often include RO, softeners, and heavy duty water filtration systems
Refrigerator filtration: In 1996, a side-by-side refrigerator was introduced by Electrolux Home Products (formerly Frigidaire) that provided high performance filtration for both the ice maker and water dispenser built into the front door of the unit (see Figure 4).
Dealers, plumbing wholesale and distribution: In the 1980s, the consumer water filtration industry was dominated by the local dealer who handled the installation and maintenance of home water treatment systems. These systems were predominantly water softeners, RO systems, and activated carbon units, and remain so. With evolution and growth of “big box” retailers, though, there has been a steady erosion of the local plumbing and water treatment dealer’s position. The major dealer networks of Culligan, Rainsoft, Kinetico, Ecowater and similar franchises now operate in a much more complex retailing environment with significant pressure from large organizations such as GE working in coordination with retailers such as Home Depot. This has forced these organizations to respond to pressure through greater emphasis on direct retail programs such as Ecowater’s support of Sears Kenmore and Culligan/USFilter’s direct sale of products to consumers while bypassing the dealer. It’s likely the traditional water treatment dealer will continue to operate under duress.
There’s an element of “ambulance chasing” in the consumer water treatment market. If a new health threat or environmental contaminant emerges, the water treatment industry then responds to this new threat or consumer concern.
Arsenic: For the United States, the latest threat is arsenic. As the U.S. Environmental Protection Agency (USEPA) has reduced the maximum contaminant level (MCL) for arsenic from 50 parts per billion (ppb) to 10 ppb, the means to achieve this higher degree of control is often expensive and complex to install at the municipal level. Arsenic can occur in chemically complex and difficult to remediate forms and this represents both an opportunity and a problem. Arsenic occurrence often is regional and highly specific to the water source. While a market is now developing to bring water into compliance for arsenic, the consumer hasn’t been highly motivated yet to spend the money and endure the maintenance issues of these generally more costly and complex systems.
Games people play: To differentiate products, consumer water filtration companies often engage in a process that’s called “claim jumping” and “chasing nines.” Claim jumping is the process of adding innumerable additional health claims to an existing product so that the list of chemicals controlled by the product—and that can be certified under NSF standards—constantly increases. It often doesn’t matter if these chemicals don’t occur in household water (for example, how often is mercury found in a consumer’s water?). The chemicals are often selected because of the response evoked in focus groups to the chemical name.
Meanwhile, chasing nines involves using ever more sensitive analytical methods to certify reduction of a chemical. For example, a traditional analytical tool may only be able to certify chemical reduction of 95 percent while an enhanced analytical method may certify to 99 percent. To further escalate, analytical methods are then brought forward to certify to 99.5 percent and then 99.9 percent. The consumer is unaware that none of these claims are significant or even realistic because the means to continuously certify such performance during production doesn’t exist. This is a huge challenge for a manufacturer of consumer products.
Microbiological claims: Another future market opportunity expected to emerge during the next several years is microbiological purifier claims for consumer products. This involves the addition of claims for the comprehensive control of microbiological threats (viral, bacterial and cyst) and incorporating such claims into a broad spectrum of current consumer products. Patents for such devices are currently emerging and products are expected to reach the market this year that will achieve >99.99 percent reduction of virus, >99.9999 percent reduction of bacteria, and >99.95 percent reduction of oocysts (meeting the USEPA Guide Standard for Water Purifiers). Focus groups carried out by several manufacturers indicate a strong interest in consumer water treatment units that can continue to deliver their current capabilities, but are amended with such a microbiological capability. The implications of such technology for sales in less-developed nations are enormous if costs can be very low, and distribution arranged within regions where distribution of products is often problematic.
Problems with development
The consumer water filtration market is small and highly fragmented. This severely restricts R&D investment to a small group of players with modest resources or a modest willingness to invest in the development of major new technologies. While Brita and Procter & Gamble spend heavily on advertising (>$65 million in 2002), the remainder of the industry doesn’t have such resources, and it appears that this degree of advertising hasn’t really stimulated growth in such categories as carafe filtration where there has been essentially zero growth for several years. Both firms are diverting advertising into the faucet-mount arena where growth continues, but the products designed for installation at the faucet face a steady trend of “wand-type” faucets that cannot accept such installation, or refrigerator filters that dispense chilled and purified water from the door. Eventually, faucet-mount devices will face various problems that will severely restrict long-term growth.
Margins for almost all sectors of the industry are under pressure and both new technology and more effective marketing are going to be required. It’s unlikely refrigerator companies will be the source of such marketing as they continue to consider the after-market sale of water filters to be a distraction from their primary focus of selling refrigerators. Meanwhile, organizations such as GE Smartwater have not yet been able to change or improve marketing of products at retail or inspire a major upsurge in consumer excitement within the category.
The evolution of the industry will, therefore, depend upon the introduction of devices well outside the current spectrum of products serving the market that will inspire renewed interest. Otherwise, the industry will need to cash in on “event risk” involving terrorist threats to the water supply or a breakdown in water quality. It doesn’t bode well, though, when you’re hoping for a disaster to save your industry. Some—including NSF International and the WQA—have been positioning for a proactive response to such threats.
On the other hand, the steady stream of news on water-related contaminants—MTBE, perchlorate, radium/radon, arsenic, endocrine disrupters and pharmaceuticals, mold, etc.—may simply continue to raise public awareness and water filter sales on a more gradual basis. Industry’s ability to reduce contaminants in drinking water has improved perhaps tenfold in the past several years while advances in manufacturing processes have made high-performance products more affordable. The consumer can now get a better value for his investment that will promote sales, if the consumer can be educated about the benefits.
This is modified from material originally presented at Filtration 2003, Nov. 18-20, 2003, in Chicago. Copyright held by INDA: Association of the Nonwoven Fabrics Industry, P.O. Box 1288, Cary, NC 27512-1288 USA. Tel: (919) 233-1210, Fax: (919) 233-1282, website: www.inda.org
About the author
Dr. Evan E. Koslow is chief executive officer of KX Industries of Orange, Conn., and a member of the WC&P Technical Review Committee. He’s written over 100 articles and papers and holds over 35 patents. Koslow can be reached at (203) 799-9000, (203) 799-7000 (fax), email: [email protected] or website: www.kxindustries.com