Leaving the hazy sunshine and urban fog of the surrounding London streets behind them, visitors to AVEX and The Cooler Show in April had three early morning conferences to choose from, each focusing on a specific market sector.
Water coolers – bottled
Zenith International Research Manager Stuart Foxon presented an overview of the European cooler market. 2006 was a respectable year, characterised by a booming point of use (POU) sector that is driving growth, with the leading countries being the UK, France, Italy, Spain and Germany. The figures showed that a north/south split was evident as Italy, Spain, Portugal and Greece made good gains, while northern European countries struggled.
Last year’s hot weather was good news, particularly for POU as it continued to take market share, proving that water provision is still in demand. But while hydration in the workplace is a key driver for growth, other opportunities such as domestic coolers have displayed limited movement.
Leading firms have continued to buy up smaller operations – for example, Eden Springs acquired 15 companies in 2006 and 2007 in the UK, Denmark, Switzerland, the Netherlands and Germany.
POU is restricting bottled growth, so the industry has to decide how it will respond to that challenge. “Combined bottled water and POU operators are best placed to meet the future needs of customers,” said Foxon.
Angel Springs Managing Director John Dundon said that, although bottled coolers are declining year on year, they still bring in good profitability, while POU only operations yield limited organic growth.
He argued that the industry now has the opportunity to present itself as a total service provider that gives the customer freedom of choice by selling two products – bottled and POU. “Companies should consult with their customers as often as possible to meet their demands and give them the option to switch from bottled to POU. By offering two products without a biased approach, customers will feel that their needs are being best served by one cooler company.
“Although the bottled market has suffered as a result of POU, companies have lost customers through their own service failings and not because of their competitors. They now need to reconnect with market growth by investing in sales and marketing, ensuring that high levels of service are maintained. The future rests with the companies that offer two products – the total service provider.”
During the question and answer session, Foxon and Dundon agreed that the environmental challenge must be tackled. Foxon believed that reducing carbon footprints is a major selling point for companies, while Dundon said it is the question that is most asked by his customers.
Nestlé Waters Powwow Sales and Marketing Director Martin Thorpe began by saying that the UK cooler market is a much harder place to trade than it was three years ago. Companies have taken their eyes off organic growth, which has resulted in a slow down after the acquisitions frenzy of recent years. He pointed out that stealing competitors’ shares instead of targeting new users isn’t sustainable in the long term.
He believed that the emergence of POU is a fantastic opportunity that must be embraced by the industry, citing service, differentiation and innovation as key drivers. Although companies invest time and money in listening to their customers and reacting to them when problems arise, they rarely ask what customers want. What’s more, they are not experienced enough to elicit what is on their minds and ascertain what they need.
When it comes to sanitisation, companies should present robust scientific research that will set the guidelines, instead of hoping that the status quo will continue or waiting for someone else to impose standards. The same could be said for the environmental issue, which requires companies to understand carbon emissions and engage with their customers using the appropriate language and media: “Good market research should be translated into strong product offerings, enabling companies to take responsibility for their own futures.”
Ebac Business Development Manager Dan Kempin examined the emergence of the home cooler. The company had incorporated its WaterTrail technology into its Eddy and SlimCool models, which gives users an easy way of maintaining and servicing their coolers without using chemicals. Custom made panels have also been introduced so that the coolers will blend into any décor, along with a compact design and an in-built Brita Maxtra filter.
The firm is continuing to innovate by developing a POU machine that will fit into the home and by conducting trials with the UK supermarket Asda to provide coolers in store.
In the question and answer session, Thorpe said that the culture of having a cooler in the home has to be established before the market will take off. Kempin agreed that it is a slow burner and not just a case of bolting on an additional service. “Cooler companies have to think about it differently,” he said.
Eden Springs Commercial Director Graeme Carruthers said that customer satisfaction is vital to growth. He believes that companies shouldn’t make excuses if they make mistakes, as there is no excuse for disappointing customers. He pointed out that the presentations had found good common ground, so companies should work together to promote best practice. This could mean saying no to certain clients if service levels are not being met.
“Customers want satisfaction through value for money and flexibility, so companies should respond with marketing that is fit for purpose,” he said.
Injecting some audience participation into his presentation, Water For Work & Home Managing Director Ben McGannan’s water quiz proved how we take water for granted and how little is actually known about its impact on health or the unique properties that it possesses. He said that many myths are prevalent in the media, which create confusion and cloud the issue. As research exists about the effects of dehydration and the benefits of consuming 2 to 3 litres of water a day, awareness should be increased using concrete evidence. This is the main priority of Water for Work & Home.
Water coolers – point of use*
The European POU market’s potential was the subject of Zenith International Research & Development Director Gary Roethenbaugh’s presentation. He described the speed of growth of POU across Europe as “breathtaking”, with companies making cost savings as well as increasing the convenience of their water provision. Up 22% on 2005, he said that the 2006 figures reveal that the market is going from strength to strength.
Almost 90,000 POU units were added in 2006 at the expense of bottled coolers and POU has more than doubled its overall share from 2001 to 2006, making it a force to be reckoned with. However, eastern Europe has displayed a slower POU take up as bottled coolers continue to dominate.
Germany and Spain have shown similar growth to the UK, where bottled has taken a downward turn. Giving POU a unique selling point, carbonation has made strong gains in Austria, Germany and Switzerland. Rental was a prevailing trend in 2006, with its 56% share showing that it is increasingly the preferred medium.
A range of factors are currently affecting the industry including cashflow and margin pressures, a decline in POU rental prices, the need for increasing customer choice and the call to focus on new sites such as small businesses and homes. The latter two factors, combined with innovation and targeting public sector accounts, will lead to plenty of opportunities within the industry. Tapping into health and wellbeing and showing the benefits of POU as a low carbon footprint option are likely to define the industry’s future, which has a potentially strong outlook.
PHS Group Head of Marketing Stuart Price talked about how facilities managers are responsible for one third of the market’s buying power. He described them as “multitaskers” who have little time to spare and therefore require simple solutions and contracts, wanting a guarantee that water won’t run out. There are increasingly more opportunities for offering both water coolers and vending machines in the same locations, such as corridors or meeting rooms, and these should be pursued. As they don’t want any elements of risk, facilities managers are setting trends by favouring POU over bottled coolers. Putting aside details such as taste or whether the water has come from a spring, they just ask themselves the question: will this option make my life easier?
James Anderton, President of the European Point-of-use Drinking Water Association (EPDWA), highlighted the positive and negative aspects of the cooler industry. He said that the benefits of water should be emphasised by companies as they are providing the public with a source of health. Initiatives such as Unison’s [email protected] scheme are certainly beneficial to the industry.
However, bad levels of service and companies “throwing mud” at others should be stamped out: “We can’t move away from the fact that POU has advantages over bottled. It is important that these elements are used to promote hydration and educate consumers, but without inflammatory comments being made. It shouldn’t be about POU or bottled coolers, it should be about water. Companies are all in the same industry, so it makes sense to work together.
”He spoke of the benefits of working together through industry partnerships and creating a common language for establishing practical guidelines that will enable companies to gain customer confidence. In order for these to work, he said that they must be suitable, measurable and meet certain objectives, as well as testable and auditable. Companies should work with the government, instead of waiting until guidelines are already down on paper.
Head of Consumer Strategy at Water UK Nick Ellins said that tap water should be promoted as a way of making a difference to the health and quality of life of every group in society. Most people go through life in a constant state of mild dehydration, which can lead to headaches, irritability, lack of concentration, poor oral health and infections. Despite this, public places such as schools, hospitals and care homes remain drinking water deserts compared to the consumption of other fluids.
Cooler companies should be grasping the opportunity to improve this situation with both hands by acting as professional water specialists for these areas. Instead of focusing on filtration and the technical aspects of their products and services, they should be communicating directly with end users and encouraging them to drink water.
“The cooler industry has an essential and pressing role to play in supporting public health,” he said. “Is it a coincidence that you’re here? Could you be selling iPods or digital cameras? Is there a reason you’re here? Yes, it’s because you care about what you do, which means you have something in common with Water UK.“
He said that the organisation welcomes the work that associations such as the EPDWA are doing in terms of presenting clear codes of conduct and believes that the whole industry should aspire to promote the health benefits of water.
Greencare Managing Director Adam Warren started by saying that although the environment is currently a buzzword, it has been a concern of Greencare’s since the mid 90s. He emphasised the importance of companies working with organisations such as Greenpeace and Friends of the Earth to reduce their environmental impact, then outlined some steps that can be taken to reduce carbon footprints.
“Some of the initiatives are quite obvious. For example, using disposable plastic filters is preposterous. Just make them reusable – it’s not rocket science. The problem with recycling is that it doesn’t always happen and even with bottles constructed from corn starch you need land use for them to compost, so it’s better to reuse items,” he said.
“Going carbon neutral is just the starting point. Companies need to narrow their supply chains and think outside the box.”
“Today we no longer have to apologise for vending,” said Charles Trace Chairman of the Automatic Vending Association, who began by painting a positive picture of the industry. He said that it had shed its low quality reputation, thanks to the advent of increased consumer choice through vending machines that provide anything from Fairtrade produce to leisure accessories and frozen foods. “Vending companies should see themselves as 24/7 retailers, not vending operators,” he said.
He also stated that the industry has a responsibility to take global issues, such as the environment, seriously and respond by thinking outside the box and delivering greener solutions that will meet consumer demands.
European Vending Association President Augusto Garulli gave an overview of the European market, in which there are 3.2 to 3.5 million machines, with a turnover of €26 billion. He highlighted trends that are affecting the industry, such as the rise of the busy, pressed-for-time consumer who favours organic, Fairtrade goods and for whom vending should be presented as an experience. The industry is also facing challenges, such as responding to the needs of end consumers, meeting legislative requirements and preventing fraud. Marketing is needed to boost vending’s reputation by giving it a reliable image.
Bringing a US vending perspective, Richard Geerdes, the President and CEO of the US National Automatic Merchandising Association believes that the solution to the obesity issue is not to ban products, but instead to present a range of healthier “Balanced For Life” items that increase consumer choice. The industry needs a set of nutritional standards to work with, as currently there is not a clear answer to the question: what is a healthy product? Education is also needed among consumers as, even if healthier products are offered, they don’t seem to be selling.
“Vending used to be seen as the villain in the obesity debate, but now we have deflected this and moved to a more rational discussion by showing that we are doing our bit,” he said. “We now need to look in the mirror and find the right ambience with the right product selection.”
Director of the Health Education Trust Joe Harvey also tackled the subject of obesity, by saying that schools are a good way of influencing children when they are young to equip them with food and nutritional skills, which they seem to be lacking. Although there have been frustrating delays when it comes to the School Food Trust and the Department for Education and Skills implementing clear guidelines, Harvey said that the vending industry should see the healthy eating issue as an opportunity to present itself in a more favourable light.
Forum For The Future Director Sally Uren talked about the non-campaign, non-governmental organisation that is made up of over 50 companies including Tetra Pak, Tesco and Waitrose, as well as governmental bodies.
She said that, as the global population is predicted to surge by 2050, issues such as climate change and rising social costs will become even more pressing: “If we continue to live using resources at the current rate, we will need two more planets as we are not living within the limits of one. There is a broad consensus that there is only a 10 to 15 year window to do something about it, so we must act now.
”Over the past 18 months, there has been an unprecedented scale of activity as businesses have realised that consumers are starting to ask questions about sustainability. Marks & Spencer, for example is cutting its carbon emissions by 80% in five years, while Sainbury is reducing them by 50% over the same period.
Various initiatives include cutting down food miles, paying to offset carbon footprints, recycling used good and investing in Fairtrade, energy efficient products. Consumers are likely to edit out “bad” choices in the future and become more ethically minded, so companies must respond now.
Some firms, such as innocent, Walkers and Boots are also displaying how much carbon was emitted to produce their goods, so there is a requirement for consistent pack information that consumers will fully understand.
© FoodBev Media Ltd 2019
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