What are the major considerations of starting and operating a successful water cooler business?
Yaron Erez: The European home and office delivery (HOD) water cooler market is still relatively immature compared to the US, where the concept was first developed more than 50 years ago. The late 1990s saw the start of a boom in demand for HOD water coolers in Europe, and since then the market has seen a lot of change, with many of the original, smaller independent suppliers being taken over by the larger distributors.
There’s no denying that competition in the industry is fierce, and for a company to survive, it has to stand out from the crowd.
There are three key factors in establishing and operating a successful water cooler business. They are the three three ‘p’s: place, people and product. Although this is a well-tested business model, it applies well to the water cooler industry.
Firstly, place. You need to determine whether the infrastructure is there to be able to serve your customers. A rapid and consistent delivery mechanism to your customers is vital or customer service levels will not be achievable.
Product – you must identify a gap in the market and ensure that you have a fully auditable and quality product. Increasingly, business customers are demanding evidence of the environmental characteristics of products, so you need to be entirely transparent in your production processes.
Finally, but possibly most important, is people. A company will only achieve its goals by recognising that its greatest asset is its people. The management of internal communications can make and break companies. Particularly during periods of change, such as when companies merge or are acquired, it’s vital that the management can lead and motivate people, helping them to move as a group from A to B and doing it together.
How might the water cooler business model differ from other industries?
Erez: The water cooler business model differs from other industries as there is an in-built need for consistent and constant dialogue with customers. This is an opportunity to grow the business and to improve on your product, but it’s also a threat, as the reputation of your company is reliant on every single staff member that interacts with your customers.
Through dialogue with our own customers, we identified an opportunity to widen our product offering to include coffee and hot beverages. Our customers were asking for a full-scale hydration package, so, through a programme of acquisitions, we’re gradually introducing hot chocolate, tea, coffee and soup across our European business divisions.
Listening to your customers – whether they’re small offices or multi-location businesses – is vital to business success.
What are the main pitfalls and challenges in a merger and an acquisition?
Erez: Eden Springs has only achieved its position as Europe’s leading water cooler supplier by implementing an aggressive strategy of organic growth and acquisitions.
However, there are three key pitfalls to be aware of when undertaking an acquisition. The first is time. There is a real danger of the acquiring business taking up a lot of management time on the acquirer and the acquiring business’ side. This will inevitably lead to management taking their eye of the ball on the day-to-day running of both businesses, which can impact on service standards.
There’s also the issue of systems integration. All too often, I have seen examples of mergers and acquisitions where failure to address systems integration has had very serious consequences. You should never underestimate the role that systems, such as IT and billing, have on customer service levels. Get this wrong and the consequences could be long-lasting and have a damaging effect on service delivery and, in turn, customer satisfaction.
Perhaps one of the biggest challenges facing business leaders involved in mergers and acquisitions is that of culture integration. Not enough time is spent on how staff feel about where they fit into the new business. Senior management has to lead from the top, present a clear vision and strategy and strive to develop and strengthen the culture of the ‘new’ business as its own entity.
What do you look for in a potential business merger partner or company to acquire?
Erez: The answer is simple: opportunity. That may be where we as the acquirer can add value or where geographically we see an opportunity to break into a new market. We look for opportunities where we can spread the company’s vision and customer service ethos, delivering benefits to customers and our employees. It’s not just about adding turnover; it’s about looking at performance ratios and where they can be improved.
It’s vital to look at the financial health of a company before an acquisition: its balance sheet, its order book and its level of borrowing (gearing ratio). Any merger or acquisition is a business risk and should never be undertaken without careful planning and in-depth research.
Of course, there will inevitably be occasions when time doesn’t allow you the luxury of these steps, and then we rely on our business instinct and vast, shared experience in this field to make decisions.
Hannah Oakman is editor of Cooler Innovation magazine. Subscribe here.
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