As head of the EDWCA, James was keen to share the associations views on the main priorities for the mains-fed water cooler sector in 2012.
“One of the biggest challenges to businesses operating in this sector is the margin squeeze,” he says. “With the backdrop of economic instability, the industry is faced with eroding revenue streams, increasing costs and less opportunity to balance the deficit with fresh business prospects.
“While some level of margin reduction can be planned for over a contract period, the unique set of economic circumstances has further exacerbated the situation, with a sharp increase in raw materials, exchange rates outside the eurozone and fuel prices.
In an unregulated environment, this would have led to a drop in service standards. Therefore, it’s imperative from an association perspective that members consistently meet or exceed the standards and the annual audit.
“As with many organisations, survival is the key driver, but commercial decisions cannot be allowed to impact on quality, safety or agreed standards. The association is committed to helping its members achieve these grades.
“There is a methodology in favour of improving levels of service and investment at the very heart of the economic and growth issue, especially in the mature water cooler zones, and that is the need to have a clear and robust retention strategy.
“With fewer easy-won natural growth areas, organisations are having to be extremely careful over retaining existing, usually more profitable, accounts. The priority here is exemplary service balanced with good value rather than lowest price, cheapest service option.
“To enable this, it’s imperative that we position the industry in the service sector rather than as commodity provider, as this approach will enable good service to consistently retain business over lower priced competition. The EDWCA can again help reinforce this by promoting the importance of selecting a credible supplier from a progressive association.”
“The third area of consistent priority is to protect the best interests of the industry as a whole by maintaining a constant awareness of the benefits of hydration from a public perception perspective,” says Anderton.”
He believes that the industry is now becoming more price-focused than ever before, with more operators working on thinner margins.
“There’s a continual cycle of mains-fed replacing bottled, with very little movement the other way around,” he says. “However, the big changes are that many mains-fed accounts are being cannibalised by other mains-fed operators. With this cannibalisation, there is the inevitable further erosion of margins and increases in operator costs.
“Growth in certain markets is difficult to come by, with reduced public sector spending. However, there have been significant gains in Eastern Europe as well as an increased demand in the US, especially for mains supply options.”
So, does James Anderton think that mains-fed coolers will continue to take share from bottled water coolers?
“As most distributors compete in both market sectors as part of their balanced portfolio, there can be growth opportunities for both systems,” he says. “It’s important to emphasise that the EDWCA’s outlook is structured to be a bridge between all sectors of the water cooler industry and not just mains-fed coolers.
“It seems that the current trend is for the small to medium enterprise (SME) market to predominately select bottled water, so they can enjoy a flexible system and for mains-fed coolers to be the system of choice for the larger organisations that are more focused on cost certainty.
“It is anticipated that the European market will start to see the same mains-fed growth patterns historically seen in the UK and Ireland, as the Northern European markets are three to four years behind the trend in terms of maturity, and Eastern Europe following on from this.
“It is therefore likely that the research carried out by Zenith International that was reported back in 2009 is likely to materialise, with an even split in share of the market. The key drivers seem to be cost-driven.”
Hannah Oakman is editor of Cooler Innovation magazine. Subscribe here.
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