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Issue Date: Vol. 48, No. 7, July 2008, Posted On: 7/4/2008


Point-Of-Use Water Experts Urge Vendors To Pursue Add-On Profits

— While bottled water consumption continues to reach new highs, growing skepticism about the quality of the water and concern over the impact of its packaging on the environment is driving demand for smaller-footprint alternatives to single-serve PET containers and, increasingly, the classic 5-gal. bulk bottle (which now is plastic, too). Vending and OCS operators, already regarded as experts in providing workplace refreshment, are in a prime position to sell the quality, ease of use, cost savings and reduced carbon footprint that reward the switch to point-of-use water treatment.

 Jim Nelson, sales director for Everpure LLC (Hanover Park, IL), and Cliff Rosen, sales manager for Kool Tek (Tampa, FL), teamed up at the recent National Automatic Merchandising Association Coffee Service Education Summit to explore the profit opportunity awaiting industry professionals who offer point-of-use water treatment.

Everpure is a worldwide leader in water treatment solutions to the foodservice, OCS (which the company now terms “coffee and office water [COW]” to better reflect the integration of the two categories) and residential markets. Kool Tek provides a wide range of POU coolers and filtration systems.

Nelson emphasized that water and coffee are complementary, and increasingly integral to providing workplace refreshment. While the concept of point-of-use water treatment is far from new, it is finally positioned to take hold as never before, and already has made its mark.

He recalled that the first point-of-use water cooler, ahead of its time in the OCS market, was introduced by Oasis in 1979 and was marketed exclusively by dealers affiliated with the Water Quality Association, including the well-known “Culligan Man.” By the early 1990s, more manufacturers had entered the market and a growing network of point-of-use water treatment equipment dealers dedicated themselves to selling the systems. While a few imaginative OCS operators had developed rental programs for inline filters in the early 1970s, the industry as a whole became involved in the opportunity by the end of the decade.

Accelerating POU acceptance was the explosion of single-serve bottled water in the 1990s. Consumers also became more accustomed to the quality and convenience of filtered water dispensed from upscale modern refrigerators.

Increasingly familiar with point-of-use water as an option, workplace decision-makers began requesting this service from their OCS operators; they wanted the convenience of a single invoice. This also encouraged the industry to discover the new opportunity.

Since then, operators have benefited as water treatment providers have continued to raise the bar on the technology available in point-of-use water coolers. These initially dispensed cold water, then advanced to carbon filtration, providing cold, filtered water that removed taste and odor by eliminating chemicals such as chlorine for a superior taste. Filtration technology improved with the advent of 1-micron sediment and particle filters; finer filtration removes suspended lead, cysts and fibers, such as asbestos, for added safety. Further improvements came with appliance-size reverse osmosis equipment for water with high dissolved mineral content; ultraviolet treatment to disinfect water; and ozone treatment and antimicrobial surface protection to ensure cleanliness of the POU system.

“The features and benefits of POU water are fun for your salesmen to sell, they keep small competitors out and they help you make more money – do the math!” emphasized Nelson. “You’re making more per stop, and you’ll enjoy the profit the second year – and long beyond – once you recoup your investment after the first year. Once you educate your customers on the treatment process, and the options that begin with simple carbon filtration all the way up to reverse osmosis when necessary, they’ll often ask you to change filters more frequently than the once a year that’s usually necessary. It’s found money if they tell you that they want it every three or six months.”

He emphasized that operators are not billing customers simply for the filter, but for the service, which also includes the visit to change the filter and clean and sanitize the machine. “They can always get a filter for $10, but it costs you the price of the filter plus the labor and truck time. You are billing for the service of providing, and assuring, clean, safe, premium water at pennies per gallon, just as OCS is a service, not simply coffee and a machine.”

The cost to the client for changing a filter and performing related service on the equipment, according to Everpure’s Nelson, ranges from $19.95 to $100, with an average of $62.50 nationwide. Most commonly, filters are changed annually and the cost generally is built into the lease payment. For customers who opt for a “premium water” program, filters can be changed two, three or four times per year, for as much as $100 per service.

“The bottled water industry drops off the jugs and walks away. With point of use, part of your value is that you sanitize and clean the equipment regularly,” said Rosen. “If you don’t do it professionally, someone else will come in, and you’ll lose that spot.”

He emphasized that operators starting out with a POU program must begin with a quality machine. “You don’t use Mister Coffee brewers, do you?” he asked. “What does one service call cost? How about two? By the third call, you’re losing money. Start with the right machine.”

Of equal importance is expert training on the cooler as well as the filtration system. “Once you understand the features and benefits and you train your people, you need ‘buzz words’ and point-of-sale literature to communicate them to customers,” the speaker noted. “It helps to keep a ‘cheat sheet’ of all the features and benefits handy.”

ENVIRONMENTAL IMPACT

At the top of the list of selling-points, given the current attention being paid to bottled water’s alleged detrimental environmental impact, is relaying to the client that point-of-use treatment eliminates bottles, according to Nelson. This reduces both the energy consumed and pollution created by their production and the solid waste they represent after they’re used, as well as the fuel consumption and emissions resulting from transporting bottled water.

“Point-of-use water should be part of your ‘green’ menu to help reduce your client’s environmental footprint,” he advised.

He added that it’s important for operators to offer a range of options that enable each location to customize a program that speaks to its unique needs. “You shouldn’t have only a Chevette and a Mercedes; you need to be an ‘auto mall,’ with a menu of POU equipment and filtration systems that are ‘good,’ ‘better’ and ‘best,’” the water industry veteran advised. “You’ll find that customers will upsell themselves.”

Rosen added that clients often see value in paying an additional $10 a month for ultraviolet treatment, which disinfects water, or installing an ozone generator to eliminate biofilm and algae – which also reduces the operator’s maintenance requirements – when all the options are presented to them.

In areas where water has an especially high dissolved mineral content, reverse osmosis can be necessary and, although many operators shy away from a process known for being complex, operators should be ready to rise to the challenge. “Don’t run away from reverse osmosis if you can charge $35 more per month for it! Your technicians can be trained to handle it,” urged Nelson.

And as water treatment technology continues to advance, the parameters of “good, better and best” continue to expand. These now include the availability of antimicrobial additives and 0.15-micron filtration that removes bacteria as well as 0.005-micron filtration that traps viruses, in addition to backwashable particle filters and drainless reverse osmosis systems.

The Kool Tek sales executive urged operators not to be hesitant to set a fair price for the equipment lease, because they deserve to be compensated for bringing premium water to the workplace. As a realistic example, he said, a three-year lease at $25 per month, which includes the cost of filter changes, pays for a $250 cooler within a year. “After three years, nine out of 10 clients are not leaving,” he stated. “If it’s a $400 cooler, for $40 per month, think of your revenue in the second and third years. It’s a tremendous business, if you service it and take care of it so you get that ROI with no problems.”

Point-of-use water treatment is poised for dramatic growth, the speakers emphasized, because it is already widely viewed as a “greener” and safer drinking water source than bottled water coolers. This perception reinforces the long-recognized benefit of freeing users from the awkward lifting and extensive storage requirements of bulk-water bottles. “We are seeing a huge influx of POU business from nursing homes and hospitals specifically because it is considered more sanitary than bottles,” said Nelson.

Rosen pointed out that San Francisco and Chicago are the first cities to outlaw the purchase of five-gallon bottles in municipal buildings, and predicted that the trend will continue. “Pure water is a perk they’ve always been offered, so it’s a little too late to take it away,” he pointed out. “The government will provide point-of-use as an alternative; you should be in there to provide it.”

Nelson added that one way in which operators can communicate their support for the environmental efforts of the businesses they serve is to suggest removing PET bottles of water from vending machines and supplying employees with reusable sport bottles and a point-of-use treatment system.

Working greatly to operators’ advantage as they move into the point-of-use market is that the customer has changed, emphasized Everpure’s Nelson. “My yuppie 24-year-old daughter is our customer; my retired father, who used to be our customer, isn’t our customer any more – and he wouldn’t pay for water if he was,” he commented. “There are other opportunities, including high-end demand for under-the-counter water appliances with chillers and heaters. You can also sell carbonated water with point-of-use systems, along with syrups to go with it, which supports consumers’ move towards being ‘greener’ by eliminating beverage containers and brings them refreshing drink choices.” Icemakers also are appliances that make use of point-of-use filtration, and leasing such equipment can further increase operators’ same-location revenue.

“Point-of-use will happen whether we take advantage of it or not,” contributed participant Randy Parks of Prostar Services (Carollton, TX), a leading OCS provider. “We are uniquely positioned to execute it, and it makes so much more sense than hauling five-gallon water. If you have the attitude that water filtration works, you have something to sell. And it works so well with coffee. If you don’t think point-of-use is worth it, it won’t happen.”

The Texas operator said that he realized the full potential of his point-of-use water program when he committed to changing filters on a regular basis, based on a simple test for dissolved solids conducted regularly at the sites he serves. He created a new business model, charging an extra $6 per month for the service – which is negligible to locations, considering the employee benefit they receive – and his service calls were reduced substantially as a result.

Parks added that point-of-use water treatment has added $800,000 in annual revenue for Prostar Services. “Let’s get with it, learn what’s ‘good,’ ‘better’ and ‘best,’ and separate ourselves even more from the ‘big box’ stores,” he urged. “People want it; it’s a low-cost offering. We leave a little card that says ‘I changed the filter today,’ and they value the service behind the program.”

The key to POU success, according to Rosen, is ensuring that the operator’s salespeople are more knowledgeable than the decision-maker to whom they are selling, and that they do not assume the consumers they serve are uneducated on the topic. The operator should also set up and run the point-of-use filtration system in-house to ensure its peak performance before installing it at a location, added Rosen.

An operator in the audience initiated a discussion of marketing approaches under which a prospect can be offered an upgrade from a competitor’s conventional coffee brewer to single-cup if the deal includes installation of a POU water treatment system to replace an existing bottled-water cooler. The lower expense of inline water purification can offset the higher cost of the more advanced coffee brewer.

Everpure’s Nelson added that many vending operators have installed point-of-use water filtration systems in lieu of paying commission.

“Nine times out of 10, if you plumb in a machine, it’s not going to leave that account,” stated Rosen. “Especially if it’s next to a five-gallon bottle that no one will change.”

Coffee equipment expert Steve Hyde of Newco Enterprises reminded operators that quality water is essential to quality coffee, which is another selling point for point-of-use treatment. He asked Nelson to advise operators on the best way to inhibit “scale” buildup in coffee brewers, a problem that plagues industry professionals in many regions of the country.

“It’s science and hit-and-miss trial combined, to work your way to a cost-effective solution in real difficult areas,” replied the Everpure executive. “In some regions, there is no $20 solution. Don’t haphazardly try to figure it out; work with a water treatment company to be reasonably scientific when seeking scale inhibition. And there’s nothing wrong with charging more for difficult installs, because if they’re saving money versus bottled water, they’re usually willing to pay.”


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