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Purified Water Coolers
The BusinessThe MarketThe future Presented By:
Robin HouseholderVice President
Pure Health Solutions Inc.
Are you ready?
Have you started?
How does it fit your business plan?
Can you afford not too?
Setting Course(Establishing a POU strategy)
A Survival Strategy
As a member of the beverage industry commit to providing the drinking water product and method of delivery that the consumers are requesting.
Should your company provide Point-of-Use?
Be competitive
◦ Provide an environmentally friendly alternative to packaged water
◦ Responsibly hydrate your customers workforce with a healthy high quality water beverage
◦ Solve logistical issues
◦ Storage, location, customer needs, security, etc.
Diverse product line
◦ Show your customer you have a diverse product line and can handle all their office service needs
Increase revenue per account
POU only◦ Majority of products on factored lease◦ local to regional based◦ Under capitalized◦ Technology varies with price◦ Sales driven business◦ Some use of coffee as accessary item
OCS◦ Equipment capitalization in house◦ Secondary offering to coffee◦ Mostly carbon filtration technology◦ Little water only accounts◦ Lower rental rate as add on to other business
Bottled Water◦ Used as a defensive tool to save accounts◦ Technology varies with price (usually lower price advantage)◦ National footprint companies have competitive advantage◦ Strong service and support network
Water treatment◦ POU model differs from Residential model◦ Uses good filtration technology◦ Rental rate higher than average◦ Services charges extra◦ Specialize in problematic water
Current business models for POU Companies
Consumer drinking water optionsOption ChallengeBottled Water (HOD) Logistics,
Environmental impactCost
Small package (PET) Logistics, Environmental impactCost
Tap TasteHealthEmployee satisfaction
Point-of-Use QualityServiceinstallation
Who do I target?
o Accounts concerned about their environmental impact (Green organizations)
o High volume accountso Sanitary conditions make it necessaryo Customer requests ito Cost issueso Security needso Storage space issueso Companies concerned about health and Safety
Benefits to your customer:
o Reduces environmental impacto Reduction of vendorso Better tasting coffeeo Service at a level they are accustomed o Securityo Fewer monthly accounts payableo Fixed budgeto Ensures consistency in “Quality People,
Products, and Service”
Your organizational benefit
Capitalize on embedded competencies by entering into a business that
compliments your existing organization
o Route delivery and service teamo Dedicated company sales force o Enhance service to your customer baseo Billing and accounting procedures
Coffee Break!
JK, That is only for your customers
LOL, We have work to do!
Is there a market to sell water?
#getrich #opportunity #goodbusiness #BYA
o Over 1 million POU coolers are installed in the US
o 2014 is estimated to install over 150,00 units in the US
o Market awareness is driving consumer demand for both high quality and low price options
o Increasing market size is now determining the differentiation in business models. Such as Low cost, High quality, Brand etc.
POU should reach 15% of US water cooler sales in 2014
The European market has set a baseline for assumed mature market penetration. The US is still far behind countries such as the Ireland, Denmark, Sweden and the UK.
POU Market Positives• Increasing market growth
potential• Less competition• Room for product
differentiation• High barriers to entry for
high quality competition
Negatives• Varying water sources
require trained technical staff
• Long term profitability model
• Consumer acceptance• No proven residential
model• Price competition from
Bottle and Low cost POU companies
• Large HOD companies offering POU products
Opportunities• Bottled water conversion• Institutional, Medical, hotel
and restaurant accounts• Growing concern for green
alternative• Free media from
threatened water supplies• Residential market
untapped
POU pricing structure
• 12-18 month capitalized in-house payback average monthly rental (Water cooler)• R/O with disinfection $45-$55 (avg cooler cost $450-
$550)• R/O $40-$50 (avg cooler cost $350-$400)• Carbon filtration (economy) $25-$35 (avg cooler cost
$175-$225)• Market price driven by low cost imports and converted
bottle coolers• 80% of coolers placed under a rental agreement• Rental agreement roll over 80-90%• Market is trending from all inclusive service to obligatory
paid service and filter changes
Marketing survey On-line survey, conducted by Amplitude Research
500 respondents, screened for:◦ involved in the purchase and/or management of the
complimentary employee beverage program (water and/or coffee) at their business
◦ business size of at least 10 employees◦ job title Supervisor or higher
Respondent Profile Respondents worked at businesses that employ at least 10
people and were personally involved with their company’s beverage program◦ Most respondents were employed with small to mid-sized businesses:
29% have 10-49 employees (82% of companies with more than 10 employees) 40% have 50-499 employees (17%) 19% have 500-2499 employees (1%) 11% have 2500+ employees (0.3%)
◦ Most respondents were beverage program decision-makers (more than one response permitted): 69% select/ decide a program 40% recommend 34% manage
Respondent Profile 97% had water units on-site:
◦ 41% have 1-4◦ 46% have 5-99◦ 10% have 100+
95% had coffee units on-site:◦ 48% have 1-4◦ 38% have 5-99◦ 9% have 100+
Respondent title levels were evenly divided between Supervisor/Manager (53%) and Director-and-above (47%)
Respondents’ functional roles were in Operations (43%), followed by Office Management (19%):◦ 43% Operations
31% Operations Management 12% Facilities Management
◦ 19% Office Management◦ 12% Finance◦ 11% Purchasing◦ 7% Human Resources◦ 8% other
Placement Environment Primary beverage station placement is in office (45%) and
operations (43%) locations:
In addition to employees, beverage stations often serve customers:
Other; 7%
Healthcare; 5%
Operations; 43%
Office; 45%
[% of respondents]Customers
Employees & customers
Employees
5%
43%
52%
Manufacturing 18%Retail 16%Warehouse 9%
Beverage Program Decision-Making Beverage program decision-making responsibility is most
often in Operations (41%) and Office Management (26%)
[% of respondents]
Other; 4% Human Re-sources; 7%
Finance; 9%
Purchasing; 13%
Office Mgt; 26%
Operations; 41%
Operations Mgt 25%Facilities Mgt 16%
Path to Purchase One-third of respondents switched to a new beverage
program in the last three years
After price, customers are most motivated to drop a program due to dissatisfaction with service and equipment quality:
Other
Environmental concerns
Time-consuming program management / difficult to manage
Inappropriate / unattractive contract terms
Unsatisfactory beverage quality
Equipment not quality / not reliable
Ineffective service / problem resolution
Pricing too high
4%
14%
21%
25%
29%
40%
49%
55%
[% of respondents; more than one response]
Path to Purchase Customers learn about new beverage program suppliers
primarily through peers, on-line search and sales rep contact:
Other
Trade magazine advertising
On-line advertising
On-line search / Google
1%
21%
22%
25%
31%
43%
46%
57%
[% of respondents; more than one response]
Path to Purchase When switching, customers are most motivated by the
equipment and service quality offered by the new supplier (after price):
Other
Better for the environment
Easy program to manage
Appropriate / better contract terms
Great beverages / better quality beverages
Timely and effective service and problem resolution
Quality and reliable beverage equipment
Appropriate / better pricing
1%
19%
30%
43%
44%
52%
54%
63%
[% of respondents; more than one response]
Beverage Program Benefits- Total Sample Respondents do not identify a singular need they are
seeking a beverage program to satisfy. Many different benefits are important – “morale,” “cost,” “great beverages,” “quick issue resolution” and “enjoyable work break” were all rated comparably:
Reduce environmental impact
Reduce employee safety risk
Reduce workplace interruption
Foster an enjoyable work break for employees
Provide great beverages for employees
Improve employee morale
51%63%66%67%70%71%72%74%74%75%75%
[% very/extremely important]
Not significantly different (95% confidence)
Beverage Program Benefits-Total Sample In identifying the one benefit most important to their
decision, respondents selected a cluster of four (after cost): “morale,” “performance,” “enjoyable break” and “better health”:
Reduce employee safety risk
Reduce workplace interruption
Reduce on-going time & effort required to manage the beverage program
Enable better health for employees
Help employees perform their best
Reduce company beverage cost
2%2%3%
4%5%
11%11%
13%13%
15%22%
[% chosen as most important]
Not significantly different (95% confidence)
Benefits Importance By Size of Company
Enable better health
Foster enjoyable work break
Help employees perform their best
Improve employee morale
Provide great beverages
Resolution of equipment issues
Reduce beverage cost
Reduce employee safety risk
Reduce environmental impact
Reduce on-going program mgt time & effort
Reduce workplace interruption
2500+500-249950-49910-49Ttl
[% claimed as most important]
Beverage Product Attributes Consistent across segments (and consistent with a “health”
benefit), customers most seek delivered beverages that are “clean & safe/ free from contaminants”:
Relaxing beverages
Energizing beverages, to help re-fuel
Natural beverages
Popular brand(s) of purified water / water purification
Popular brand(s) of coffee
Healthy beverage choices
Beverages to help re-hydrate
Refreshing beverages
Delicious, great-tasting beverages
Great quality beverages
Fresh-tasting beverages
Clean and safe beverages, free from contaminants
44%47%48%50%53%
62%64%
68%71%
74%75%
81%
[% very/extremely important]
Not significantly different (95% confidence)
Significantly different (95% confidence)
Beverage Program Features After price, equipment (clean, reliable) and service are
most important program features, followed closely by quick replenishment, great beverages and easy usage. Technology (filtration and electronics) are least important program features [complete ranking in Appendix]:
Electronic displays & controls on equipmentReverse osmosis water system
Ozone disinfection of waterUV disinfection of waterCup dispense capability
Equipment dispenses beverages easilyGreat beverages
Quick replenishment of beverage suppliesNo / minimal equipment breakdowns
Prompt service call timingQuality and reliable equipment
Clean beverage equipmentReasonable pricing
42%44%45%
48%49%
75%76%
79%79%80%82%83%85%
[% very/extremely important]
Not significantly
different (95%
confidence)
Beverage Program Features-Equipment Most desired equipment capabilities include clean, reliable
and easy dispense, followed closely by capacity and warranty protection:
Electronic displays & controls on equipmentReverse osmosis water system
Ozone disinfection of waterUV disinfection of waterCup dispense capability
Carbon filtered water systemChoice of beverage equipment brands
Certified equipmentMinimal equipment noise
Quality equipment appearanceEquipment warranty
Sufficient beverage capacityEquipment dispenses beverages easily
No / minimal equipment breakdownsQuality and reliable equipment
Clean beverage equipment
42%44%45%
48%49%
56%56%
59%61%
65%71%71%
75%79%
82%83%
[% very/extremely important]
Beverage Program Benefits Large company customers (500+ employees) exhibit a
strong interest in “enabling better health” for employees:
Enable better health
Help employees perform their best
Provide great beverages
Reduce beverage cost
Reduce environmental impact
Reduce workplace interruption
0% 5% 10% 15% 20% 25%
2500+500-2499
# employees at company
[% rated as most important]
Beverage Program Features
Electronic displays & controls on equipmentReverse osmosis water system
Ozone disinfection of waterUV disinfection of waterCup dispense capability
Carbon filtered water systemChoice of beverage equipment brands
Demonstrated beverage purity (analysis test data)Certified equipment
Minimal equipment noiseEquipment service provided by certified technicians
Specific hot or cold beverage temperaturesPreventative maintenance program
Quality equipment appearanceEasy on-line order/re-order for products and service
Equipment warrantySimple invoicing
Sufficient beverage capacityEquipment dispenses beverages easily
Great beveragesQuick replenishment of beverage supplies
No / minimal equipment breakdownsPrompt service call timing
Quality and reliable equipmentClean beverage equipment
Reasonable pricing
42%44%45%
48%49%
56%56%58%59%61%62%63%65%65%
69%71%71%71%
75%76%
79%79%80%82%83%85%
[% very/extremely important]
Summary 500 respondents, involved in the purchase or management of their
company’s water and/or coffee beverage program Beverage programs are typically implemented in offices and
operations facilities, and the program decision-maker’s functional area is most often operations-related
After price, service and equipment issues are greatest customer dis-satisfiers in the industry today
Larger organizations (500+ employees) prioritize “enable better employee health” as a desired benefit of a beverage program. Smaller organizations are more price-focused and do not appear to base purchase decisions on end-consumer benefits.
Customers universally place greatest importance on several program features:◦ Clean/safe beverages & clean equipment◦ Fresh beverages◦ Reliable equipment◦ Quick service & replenishment
Coffee Break!
JK, Not Yet
LOL, We need to know where we are going
#Future #downtheriver #yourbusiness #tappedout
Advanced technology will drive consumer confidence
Market maturity will drive consolidation POU market share of drinking water industry
will grow substantially through 2017 Increased concerns over water quality will
drive usage from commercial to residential Product technology will increase value to
performance options for consumers
POU Future State
15% market share to mature at 35-45% 1,00,000 POU coolers to 2,450,000-3,150,000 at
maturity. Residential solution will increase market opportunity Environmental concerns over landfills/recycling
Plastics and non renewable resources Re-occurring revenue from filtration media and service Potable water quality to deteriorate Cost of delivery for packaged water tracking with
increase fuel cost Cost of technology to decrease with volume
What to expect
The POU segment of water industry continues to offer a good business opportunity for: Entrepreneurs looking to establish a solid
reoccurring revenue on a 5-7 year plan. Businesses looking to expand their product
offerings in Vending, OCS, Water Treatment and Bottle Water.
Companies offering environmental solutions. Companies offering residential services Retail water solution outlets
Summary
Robin HouseholderPHSI
Email: [email protected]