The love that I still have for my company after so long is part of the love and care I have for our industry. The deep concern for our industry’s future is the only reason I appeal to all of us.
Back in the early 1990s, I became involved in the home and office delivery (HOD) business in Europe – an exciting period where a handful of entrepreneurs in some countries became the pioneers of HOD in Europe.
People were enthusiastic, full of idealism and energy. They wanted to bring new, fresh ideas to their respective markets, which had never been done before.
Although the global water cooler industry goes back a long way, the European introduction was rather late. Introducing the water cooler industry in Europe brought with it immediate innovation.
Europeans are more health-conscious, are more aesthetically conscious, more quality conscious and of course more hygiene-conscious. As a result, we have almost immediately seen the introduction of new water coolers, far more advanced than those existing in the US and other mature markets.
Europe became a pioneer in a very short period of time for an industry that actually existed for so many years before. All those innovations were not only there because of the need for them, but primarily because the suppliers were willing, ready and able to make the substantial investments that were needed to create new and exciting products.
Without naming any supplier, I can clearly say that these suppliers who have invested money to create those products and services did so by seeing the opportunity in the European market as a whole, and understanding that margins that were available for them would create profit and a reasonable return on investment.
Ladies and gentlemen, profit is the only driver which pushes businesses forward to create new and better products.
As time went by, more and more HOD companies entered into various European countries, competition in each country became more keen, which of course had an immediate effect on the prices companies were able to quote for a bottle of water and rental of a cooler.
In the late 1990s, multinationals such as Culligan, Hutchinson Whampoa and later Nestlé and Danone, saw an opportunity to enter this new and exciting industry in Europe. Headed by Watsons (a Hutchinson Whampoa company) and, to a much lesser degree, by Culligan, a wave of consolidation started.
HOD businesses that were small and totally unprofitable became gold mines to their original entrepreneurs. People became instant millionaires. The industry throughout Europe was buzzing with excitement. The appeal for each company to be taken over by those multinationals was driven in order to create scale and density in the hope that scale and density would eventually produce a very profitable outcome.
The biggest mistake made by the multinationals was to get rid of these entrepreneurs as a measure of cost savings, replacing them with people of little or no experience. Competition drove prices in each country downwards, primarily because the barrier to entry was low at the time. Suppliers (mainly water cooler producers) having had large margins, offered extensive credit terms to newcomers who in turn were able to offer basically the same product as everybody else for a cheaper price.
As time went by, the lo-hanging fruit of potential customers was slowly disappearing, and it didn’t take long before competition became so severe that margins diminished completely.
The need for a HOD company to survive under this harsh environment created a vicious cycle in which companies constantly needed to find cheaper suppliers. And the suppliers, being in the same situation, needed to offer their products and services cheaper and cheaper. This inevitably led to companies needing to cut their costs, and a total lack of appetite to invest in new products, technology and innovation.
There was no financial incentive for companies to do so, and the industry virtually came to a standstill (with very few exceptions here and there). What was once a new and exciting industry had turned, in a relatively short period of time, into an industry that diminished its own value and was heading for doom.
Companies today are trying to survive by the skin of their teeth. Both suppliers and HOD providers are racing blindly to nowhere. Price cutting is the only added value they offered to the market, which of course had a spiral effect, leading us to become an outdated and unattractive industry.
Today’s water coolers are basically the same that we introduced 20 years ago, and of course look much worse than they looked at the time. Maintenance both hygienically and asthetically is at its lowest point, trucks and vehicles carrying bottles are old, rusty and fantastically unappealing.
The gold diggers that started new businesses years ago are today aware that, actually, there’s no buyer for their business. The values of those companies have diminished completely and, in western Europe, if you want to sell the activity of your asset, it’s very likely that it will result in a loss rather than a gain to both entrepreneurs and investors.
Eastern Europe will follow soon. It’s foolish for anybody to believe that doing the same thing will have a different result. No one is willing to invest in this kind of environment. The current economic situation in Europe and around the world brings serious questions from customers whether a water cooler is a necessity.
Companies need to trim expenses and this is felt everywhere. As a result, price cutting is accelerating throughout HOD companies in Europe. I can reveal that, in Belgium, which is a small country with maybe the highest cost of employment (even higher than that of Sweden), is offering ridiculous prices for a bottle of water and a rental price.
It’s not uncommon to see offers of €3.50 for a bottle of water and a rental price of either €0 to €5 a month. What can a HOD company really offer at these prices? How much of its services need to be cut in order for the business to still be sustainable? More importantly, how much money can be spared for R&D and investments for new products and services?
We are in a never-ending spiral which, no doubt, will lead to our total demise. Each one of us needs to open his or her eyes and see the obvious. It’s not only a question of if, but rather when our industry will disappear.
The entire bottled water category, small-pack as well as 19-litre, is under pressure. The product category is being questioned in almost every country throughout Europe. The actual need for bottled water is constantly questioned and being attacked by the media. Our carbon footprint and ecological matters create a negative environment and obviously plumbed-in water coolers are seen as a credible alternative.
I have no intention to downgrade the importance of plumbed-in coolers. Not only does my company offer them to our customers, but I do believe in its value and it needs to be offered side by side with bottled water coolers.
We like to introduce to our customers the services of our company as the total water solution and not as a single product provider. We are conceived as a service provider and as such we need to offer all the services as water providers.
I firmly believe the future is still in our hands. We preach in our company that the best is yet to come, and, yes we can.
If our industry is to survive, we need to make the switch in our heads to understand that unless we bring the changes necessary to our industry and individual businesses, things will become worse tomorrow.
To begin with, we should change direction. We shouldn’t offer our products and services at the cheapest price, but rather at the highest price. You may read this and with irony say, ‘How is it possible?’. My answer is this: ‘Not only is it possible, it’s doable, as Sip-Well is doing it every day’.
Higher prices can be obtained only if we’re able to offer better, newer and more services to our customers. The customer is willing to pay for it, but the customer is unwilling to pay more for the same. As a result, we need to create a new buzz to bring both to the supplier and the HOD service provider, the will to invest!
A company that makes big profits gives back most of it to its customers by providing further new and innovative products. A company that’s very profitable provides a better workplace for its employees, paying fair and good wages, which in turn create company loyalty and most importantly experience.
In our company, I’m proud to say that our executive secretary, Linda Palmer, is still with us after more than 15 years. Most of our management team has been with the company for more than 10 years. Their experience is tremendously valuable. I cannot imagine these people staying with us if they were not well compensated.
New products that bring real added value, and that can differentiate companies from one to another, is the best path any company needs to take. These investments may be large, they may cost a lot initially, but they will ensure the continuity of our business. They will create the difference between you and your competitors as we are experiencing in our market.
They will ensure the sustainability of our business long-term. To do that, we need the courage of the supplier to invest in new products, the courage to have a marketing plan that will provide enough profits that will once again be the engine for them to reinvest again.
Is it possible? Yes. We’re still at the stage in western and eastern Europe where the water cooler ration per person is still low. Further penetration opportunities in the home and office are substantial. It’s up to us to understand that, unless each of us will be willing to make those necessary changes, we will not be able to survive as an industry.
A company that goes bankrupt tomorrow will not only bring a bad reputation to the industry, but may also become a contagious disease.
I don’t want to be a ‘prophet of doom’. There are plenty of bright spots out there, but we need to find more in order to bring back the enthusiasm and the adrenaline that our industry had in Europe not so many years ago.
© FoodBev Media Ltd 2019