By Peter Censky
hat does the future hold for you and your business in the coming year? Is the water industry going to continue to consolidate? Will your business shrink or grow? Will demand taper off or will it boom? What should you be doing now to prepare yourself and your business for what lies ahead? What does all this mean for your company, anyway?
I’m not going to pretend that I know all the answers, but I am certain of some things. First of all, this industry has been in a state of flux for quite a few years. We are ‘in play’ and will continue to be for the foreseeable future. That’s good news for the industry, but it can be bad news for the individual. Why? Because the demands on you and on the company you own or work for are simultaneously growing and morphing. Just when you think you’ve got the market and the competition figured out, everything seems to change. How do you protect yourself? Better yet, how do you take advantage of the opportunities that emerge from this constant disruption? The best way is with information.
First, you have to stop making unfounded assumptions about the present. What is an unfounded assumption? Well in today’s economy, it just might be everything you think you know. That may sound radical, but the point is that when change has become the norm, rather than the exception, you can’t blissfully operate each day as if the market is static. Where do you find this information? The best place is from your competitors. It sounds crazy but collectively your competitors know more about the industry than any one source. How do you go about picking the brains of all these competitors? Join the Water Quality Association (WQA), of course! (That’s the only plug you are going to get from me in this article, but I want to underscore what all the really smart companies in this industry know: by participating in WQA, you are exposed to the very best sources of information on where this industry is going and how you can take advantage of changes to grow your business.)
Now, I want to talk about the trends and influences that are sweeping the industry from the perspective of dealers, manufacturers, the retail and big-box channels and the industrial and international markets. My information comes from many different sources, including members, regulators, related industries, politicians, futurists, academics and various experts.
If you are a dealer, your life has grown much more complicated in the past few years. How do you protect yourself and position your company to take advantage of emerging opportunities? One tried-and-true way is through diversification. Expand your business lines. Train your employees in new skills. Take advantage of light-industrial opportunities in your area. A member tells me that there are at least one or two boilers in every town and many of these are not properly serviced. How can you learn the basics so you can handle this service? Through education programs that are being developed by WQA. This is only one example of many different light- and medium-industrial opportunities that exist everywhere, serving industry, hotels, clinics, pharmaceuticals, metal plating, cooling towers, boilers, swimming pools, hospitals, schools, truck stops and the list goes on.
WQA is beginning to build an industrial education concept that will help members understand this light- and medium-industrial market (include commercial in this terminology). The first thing we are doing is identifying all the educational opportunities that already exist in this area. One thing we learned early on is that there is no centralized education resource and certainly no map of how to find resources. The best way to take advantage of these emerging opportunities is through education. That’s why we’re setting out to create this important tool and partnering with other resources around the world to bring the best of this education to your doorstep.
In the past few years, this channel has really taken off. The competition has become fierce. Consumers are typically introduced to drinking water treatment when they buy low cost, but still sophisticated, pitchers or faucet-mounted treatment devices. The dynamics of this channel are entirely different than the dealer-to-market channel. Companies that compete in this channel must constantly innovate their products just to maintain that critical shelf space. Regulatory issues or bad press can easily upset this innovation cycle.
In November, WQA met with Sandra Shewry, director of the California Department of Health Services, to work out a resolution to a problem that has plagued manufacturers in our industry for several years. In the past few months, the California drinking water product registration bottleneck had grown to the point where it was costing companies millions of dollars in lost sales and overhead. Shewry was sympathetic to the industry and she directed her top staff to work out a solution along the lines of a proposal made by WQA. The resolution of this problem will help every company that does business in California and it demonstrates the wisdom of bringing together the dealer channel and the retail channel to work out mutual problems.
A lot of people bemoan the accelerating trend of globalization and its impact on every industry, but no one can deny that this trend has made many products available to the consumer at lower prices. Dealers also now have lower cost products available to them, which will help their bottom line. From the manufacturer’s perspective, this causes several problems. Low-cost imports undersell their products and strip markets away. Copying and trademark infringement practices steal directly from the bottom line and undercut the manufacturer’s goodwill. New competitors fight for market share, but often do not face the same insurance and labor and regulatory burdens.
At the same time, there are massive new markets opening up to manufacturers worldwide. Demand for our industry’s products has begun to grow along with the economies of India and China. Regardless of where the manufacturer is based, it now has an opportunity to source products from low-cost but highly sophisticated factories in these two countries. Globalization is a double-edged sword, but our customers are the beneficiaries.
The next five years
Here are some of my predictions, based on a fabric of facts, not fiction. That doesn’t mean that they will all come true. WQA is active in each of these major trends. In some cases, we are taking the lead. In others, we are working with others to help protect the industry and ensure that opportunity prevails.
Rural U.S. and Canadian growth. A huge opportunity exists here, where more than half of all new homes are being built on septic systems. This means they are tapping into problem waters and that spells opportunity.1
- WQA is working with the National Onsite Wastewater Recycling Association (NOWRA) to resolve septic system and softener discharge issues.2
Proliferation of new innovations at the retail level. These innovations are driven by everyone involved in the retail channel to market. It’s an intensely competitive market that eats up new entrants. The discount retailers dominate and they aren’t shy about throwing their weight around. A tenth of a cent is a huge number when you are talking about millions of units. The only way to compete is to invent and reinvent.
- WQA intervened in California to resolve the log-jam in the drinking water product certification program.3
Expansion into the light- and medium-industrial market. When we think of ‘industrial water’ we typically think of the big stuff. But there are countless thousands of small application opportunities around the world that the big boys can’t touch. Our industry already has the people on the ground. Many of them are educated in water chemistry and technology. All they need is to understand these light-industrial applications, both the risks and rewards.
- WQA is reinventing its education programs to add focus to industrial education and applications. Our objective is to create new opportunities for our members.4
Growth of WQA Aquatech USA and its evolution to be The Water Opportunity Show™. The industry grew out of the household market. Now, it’s spreading through commercial, light- and medium-industrial markets and finally into small community systems. Previously, there had been no industrial water show in the U.S. and certainly no show that encompassed the sweep of this industry that I just described. WQA Aquatech USA show has reinvented the concept of the dealer-to-market show. This is the place to come and learn what the smart competitors in the industry are doing.
- WQA saw these opportunities emerging 10 years ago and sought out the Amsterdam RAI to form a partnership to create this new water opportunity show.5
Massive growth of the Chinese and Indian markets. We focus on China because that’s where the press focuses, but the Indian market is huge, well educated and rapidly growing as well. Its middle class is well entrenched and larger than the U.S. middle class. Either of these two countries would be a massive new addition to the world market for water treatment equipment. Together, they are the single most dominant trend to hit our industry since its inception.6
- WQA has established contacts with one ministry in China and is seeking to establish a relationship with others. Our objective is to assist in the development of their government product standards. 7
Small systems will get a real boost from aggressive Congressional action. Small communities around the country were left behind in the clean water revolution. But now, the Safe Drinking Water Act says they have to come into compliance. Yet all they are told by the utility-industrial complex is that old-fashioned central treatment is their only option. Well that’s about to change with legislation that is being considered in Congress. Numerous opportunities will soon develop in this market.
- WQA briefed the staff of the chairperson of the Senate Environment and Public Works Committee. This briefing lead to legislation to expedite help for small community systems.
What was the old curse? “May you live in interesting times.” That applies to all of us today—but it’s also an opportunity for everyone.
About the author
Peter J. Censky is executive director of the Water Quality Association, a not-for-profit international trade association representing the household, commercial, industrial and small community water treatment industry. WQA is headquartered in Lisle, Illinois USA. He may be reached at (630) 505-0160. See the following sidebar for references supplementing this article.