Volume 44 Number 12
An Evolving Concept with ECI’s John Borger
Not much is funny when John Borger's equipment doesn't work. That's because his customers rely on the solenoid valves his company, Evolutionary Concepts Inc. (ECI), provides to ensure their equipment works properly. "There's not much of a sense of humor when something goes wrong," Borger says.
The CEO manages to keep a cheerful demeanor, though, because he knows ECI is up to the challenge. Its control valves, actuators and manifolds are used in just about any product that needs "to move air or liquid from point A to point B." To position itself as a serious player, ECI sought third-party validation of product claims and safety assurances from NSF International almost at the outset of its endeavors in the water industry nearly 20 years ago.
The company got started as a supplier to the irrigation/automatic sprinkler market. Bolger, who was an independent manufacturer representative, and his partner, Dennis Sjoquist, who worked at a Los Angeles solenoid valve maker, wanted to produce a lower-cost, non-corrosive plastic valve. Successful at that, they targeted the water treatment market in 1985 to establish more stable income in less seasonal markets. These remain its two biggest markets at 60 (irrigation) and 25 percent (water treatment).
More recently, ECI pursued the natural gas well market with a specialty valve to offset stagnant sales because of the general economic slide, particularly since 9/11. An illustration of this is when, two years ago, ECI employed 91 people. Today, it has 50 people on staff at its San Dimas, Calif.-headquarters near Los Angeles.
Current annual growth is less than 5 percent and, Borger says, it's going to take a broader industrial turnaround to boost that to more comfortable levels experienced earlier. That presents a formidable task in maintaining prices for customers who may be forced to reduce orders as they struggle, waiting for a recovery themselves.
He says, "The only way you can overcome it is by offering prompt delivery, good technical support, good customer service and loyalty. Loyalty to the customer is very important so that, when and if they're having a rough time and their quantities have dropped down, you continue to work with them at a very fair price. And most important would be a reliable product."
That's also his solution for confronting offshore knockoffs, common to his industry niche.
In the meantime, Borger added, ECI continues to advance its production capabilities, taking advantage of new plastic polymers and metal alloys to meet strict requirements of NSF Standard 61 on materials safety and improve the quality of its product.
"Some of the plastics are just incredible now," he says. "And the treating of stainless steels and different alloys that have become available (is amazing)."
They have to be to handle more volatile processes, such as ozone disinfection, which Borger says is likely to become more popular because of microbial concerns -- without chemical degradation. ECI plans to introduce a new series of solenoid piloted diaphragm valves at the Water Quality Association's Las Vegas convention in March, complete with NSF 61 certification.
ECI also pursues foreign markets, which makes up about 20 percent of its business, directly or through the Internet. Seven years ago, the company also opened an assembly facility in Tijuana, Mexico, which employs 12 people who wind coils. Borger noted that Latin America continues to show great growth for his company, which has a number of bilingual employees on staff.
Before getting to the interview itself, here are a few details on ECI:
Management: John Bolger, president
Revenues: $5-7 million a year
Products: General purpose solenoid valves for a variety of applications including irrigation and agricultural equipment, water and air filtration, water and beverage dispensing, vending machines, food handling, scientific/lab equipment, RVs, humidifiers, etc.
And now for the interview:
WC&P: How long have you been in the business and how did you get started?
Borger: We've been in the business for 22 years. When I say we, I mean my partner and I both came out of the solenoid business. I had been in the solenoid business for five years prior.
WC&P: You might want to mention who your partner is?
Borger: My partner is Dennis Sjoquist. He and I recognized a need for a low-cost, non-corrosive plastic valve to be used in any type of application involved in the control of liquids and air.
WC&P: This was when?
Borger: This was in 1980.
WC&P: What had you been doing specifically before that?
Borger: Prior to that, I was an independent sales representative and my partner had worked for a different solenoid valve manufacturer in Los Angeles.
WC&P: Why don't you tell us a little bit about your company since then?
Borger: Well, since then, we have established ourselves. We've established ourselves in the water quality industry as well as about five or six other industries as a reliable manufacturer. We produce solenoid valves of all types and all sizes. We have established a good reputation as being a reliable company with quality products. We're very good at modifying the product to meet a customer's specific needs. A lot of times, the catalog item won't quite do the job for them, so they need modifications. And that's what we do well. Other solenoid manufacturing companies are not as flexible.
WC&P: Now, did you start out covering the water treatment industry also?
Borger: No, we went into the water treatment industry about mid-1980s, about 1985. We were selling mostly to the irrigation/automatic sprinkler industry.
WC&P: They guys that make the RainBird stuff?
Borger: Exactly. Many of them are still our customers.
WC&P: OK. How did you get introduced to the water treatment industry?
Borger: I was trying to find an industry that was not such a seasonal industry. As you can imagine, the irrigation/automatic sprinkler industry is just up and down.
WC&P: Spring and summer.
Borger: Yes, it's a summer industry. Actually, they have certain seasons where they bring the product out, they get busy and then they're flat. And what we love about the water treatment industry is it didn't seem to have that much in the way of seasonal shifts. It's a much more consistent, very steady industry. So, we targeted it.
WC&P: Basically, because everybody needs good water, all the time.
Borger: Exactly. And it's global.
WC&P: Who did you work with first? Give me, if you could, some sort of narrative about how that worked out. Who'd you approach when you first thought about this industry? How did you go about it?
Borger: We started doing the shows. We started going to the shows, attending them and then we had booths in the shows ourselves. We approached the individuals, a lot of our customers, directly. And, then, we had some sales agents that were working for us that were also targeting the water industry.
WC&P: I assume you mean the Water Quality Association trade show, maybe some of the state and regional shows…
Borger: The WQA show, we joined the WQA and, in some cases, we modified some of our existing products so that they would be perfect for the water purification industry.
WC&P: What were some of those that required modification?
Borger: It was mostly some of the materials that we were using for the varied valves. Some of the materials were not as suitable because of contaminants and what have you.
WC&P: It had to be made of food grade materials?
Borger: Yes. What we did was we designed something and then submitted it to NSF. We got out NSF 61 approval and then brought that product into the market.
WC&P: Tell me a little bit about how the transition took place at your company between then and now -- compared to how things were at your company when it first got into water treatment?
Borger: Well, the transition was just strictly people understanding that we had good, quality products -- and cost-effective products. We had already taken the extra steps, unlike some our competitors, to put ourselves out there and get the NSF approvals and whatever else was necessary to make it a good product to offer to the industry.
WC&P: To meet the standards and acceptability of state drinking water officials, etc.?
WC&P: Why don't you tell us something just to give us a little bit of background on solenoid valves, because I'm sure to a lot of people the technical details of how these operate may be kind of Greek to them? How would you explain that to the water treatment dealer or the technician installing and working on his equipment?
Borger: It's a component that takes an electrical signal and does a mechanical job, to oversimplify it. That's basically what it does. It just moves air, water and/or inert gases from Point A to Point B.
WC&P: By transferring that electrical signal into motion using a valve or other mechanism, correct?
Borger: The electrical signal just allows the plunger to lift off of the seat and allows the media to follow.
WC&P: So these are used in the control mechanisms of everything from… this to that?
Borger: Oh, yes, there's no specific industry even. It's used as long as you need to move a liquid or air from, again, Point A to Point B.
WC&P: What are other industries in which you're involved?
Borger: Well, we're involved still in the irrigation industry, which is where we started. And we're involved in the plunger-lift industry, which is a gas well-type of application.
WC&P: The petroleum industry?
Borger: Yes. And we're also in recreational vehicles, humidifiers, welding equipment, vending machines…
WC&P: Including water vending machines?
Borger: Yes, we're in water vending machines. We're in water stores. There's really no limit to the type of companies we sell to because all they have to have is one requirement. And that is to move the water or air, again, from Point A to Point B.
WC&P: I take it then that companies such as Glacier, which is the biggest water vending machine manufacturer/operator…
Borger: We sell to Glacier.
WC&P: …and Aqua Star International here in Tucson would be among your customers.
Borger: We sell to a lot of companies.
WC&P: About how much of what you do is actually in water? Maybe I should say water quality improvement.
Borger: Those are two different things, because we have a lot of water valves that are not in water quality.
WC&P: What would be the breakdown in each?
Borger: I would say, in water quality improvement, we would be about 25 percent. And that would include international. In overall water, it's more like 60 percent.
WC&P: How would you further break that out as far as international?
Borger: The international overall that we do is I would say probably on the same level, about 20 percent of what I gave you.
WC&P: In each category?
Borger: In each category.
WC&P: Are there international markets that are more prominent for you or growing at a faster clip?
Borger: I would say the Latin markets would be growing a little bit better than the others.
WC&P: Even with the world economy?
Borger: Hmm, let me take a look at that one.
WC&P: Get out your economics book.
Borger: OK, what is happening in the industry actually is -- and I like to tell my employees this since we've gone through tough times just like a lot of other people since 9/11 -- we've still got all of our customers; it's just that they're using less. So, it's on the same scale as far as international or national. Almost everybody seems to be slowed down to a certain degree or other.
WC&P: Does Latin America benefit by proximity or… ?
Borger: I don't know.
WC&P: What are other markets that stand out for you?
Borger: We make a specialty valve that is used on gas wells. That's natural gas wells. And that particular industry is booming.
WC&P: Nebraska is very big on that, I understand.
Borger: Oh, it's not just Nebraska. You'd be surprised at how many gas wells there are in so many different states -- including Canada, which is very big on it.
WC&P: Is Mexico bigger or… ?
Borger: Yes, mainland Mexico also does a lot of the gas valves, as well as it has a lot of water quality issues going on there right now.
WC&P: How many employees do you have?
Borger: We've got about 50.
WC&P: Has that been stable?
Borger: No, two years ago, we had 91. We had a slowdown just like any company. We also have a facility in Mexico.
WC&P: Where is that?
Borger: It's in Tijuana. We do our coil winding there.
WC&P: How long has that been there?
Borger: It will be seven years.
WC&P: Would that number be included in the 50?
Borger: No, that's separate. They only have about 12 people down there.
WC&P: Of the 50, who would be your top management.
Borger: My partner, Dennis and I are the top management. He's the president and I'm the CEO.
WC&P: Are there other managers that you depend on a lot?
Borger: Oh, yes, we've got a complete sales staff, three engineers, an accountant, purchasing and planning, everything a manufacturer should have, a production manager.
WC&P: I imagine that, because of the different industries you're involved in, you have to have a pretty diverse level of expertise.
Borger: We do.
WC&P: Do you want to talk about how you've worked to meet that?
Borger: Mostly, it's mechanical engineers that are required for the solenoid valves. Then, we all have a working knowledge as far as electrical goes. It's diverse, but in this industry you have to know about a whole lot.
WC&P: Do you have to have a lot of people with international experience?
Borger: No, not at all. In fact, we do very little international through agents. We have a bilingual staff. Most of the international work we do is direct or it's off the Internet.
WC&P: Bilingual being inclusive of Spanish, I imagine.
Borger: That's correct.
WC&P: What's new at the company? Do you have any new products introduced recently?
Borger: Yes. Hopefully, we'll be able to introduce at the WQA show (in Las Vegas) a new solenoid piloted diaphragm valve, a series of them that will be specifically designed for the water industry. It will have the NSF 61 approval and it's all constructed out of materials that are specifically favorable to that industry.
WC&P: Food grade materials.
WC&P: How long has that been in process?
Borger: About a year.
WC&P: What was the rationale behind the need for it?
Borger: There are idiosyncrasies within the industry that need to be addressed.
WC&P: Such as?
Borger: Such as corrosion. Such as purity in both the seals and the valve body materials. It's very important that we don't provide a product that is being used in conjunction with water filtration equipment that is going to negate all of the good work that those filters are doing.
WC&P: You're referring to the issue of a few years ago regarding materials and components that might leach something inappropriately into the water.
WC&P: So, by meeting the food-grade materials requirements that are set by, I believe, the FDA, that pretty much clears up that whole issue to a large degree.
Borger: Yes, it does. The FDA is a whole other subject, though. I don't know that you want to get into that. But, what it is is that the materials have to pass toxicology tests that are determined, like all these tests, by NSF. And many of the materials suppliers are now supplying their materials as raw materials to NSF and getting them pre-approved. It makes it easier for manufactures like us.
WC&P: I would imagine it would reduce the amount of effort and time that you have to put into getting a product approved.
Borger: Oh, yes, it does in most cases.
WC&P: Can you tell us an interesting story of anecdote about your experience in water treatment?
Borger: I can't think of anything in particular. Because our product -- a lot of times to a lot of our customers -- is the product that makes theirs work or not work, there's not much of a sense of humor when something goes wrong. I really don't have anything to offer you on that.
WC&P: What's a major challenge that you or your company faced and how did you overcome it?
Borger: The major challenge that we have faced, and continue to face, is offshore competition bringing in inferior product and selling them at prices below what we can make them for. This is an ongoing thing and I don't that we'll ever overcome it.
WC&P: We've heard similar issues expressed regarding the pump industry in our market.
Borger: Yes, we almost parallel them as far as that goes, as far as our markets go.
WC&P: Even some RO system manufacturers have been complaining about some Asian product that comes in that seems to undercut their product but doesn’t have the same consistency of quality.
Borger: Exactly. And the only way you can overcome it is by offering prompt delivery, good technical support, good customer service and loyalty. Loyalty to the customer is very important so that, when and if they're having a rough time and their quantities have dropped down, you continue to work with them at a very fair price. And most important would be a reliable product.
WC&P: How do you work with them? Right now, we've been struggling to get out of a recessionary economy, nationally if not globally…
Borger: OK, we run into it all the time. What happens is you have a customer that was buying 10,000 valves a year. And they may have been a customer for three or four years doing that, consistently buying 10,000 a year. And now, all of a sudden, all they buy is 5,000. Well, what you have to do is bite the bullet a little bit too and try and maintain their price or at least not gouge them on the reduced quantity. That's what I say when I say customer loyalty. That's what it is.
WC&P: They want to make sure you're going to be good to them through thick and thin. That keeps them with you. Particularly in Latin America, that's always spoken of as a huge element of doing business there and being successful.
Borger: Yes, I would imagine that it is.
WC&P: From your perspective in the market, where do you see the industry going? Since you're doing business domestically and internationally, I would imagine you could speak to this on a couple different levels.
Borger: The water filtration market itself is just going to continue to grow. It may not grow at the speed it was say five or six years ago. But, it's going to continue to grow. And the fact that it is global just makes it a wonderful industry to be in. Where I see it going as it pertains to our product is I see new materials and technologies constantly being brought to our attention. It allows us to incorporate those into our processes and offer a better product.
WC&P: To make your product cheaper and better?
Borger: With labor and workmen's compensation and insurance and liability insurance and everything involved in operating a manufacturing company, to say cheaper and better doesn't work. You can offer a better product at a fair price.
WC&P: Since you're in solenoids, I would think that the concept of the technology has downsized in the sense that the actual size of the valves is smaller. Would that be true?
Borger: There's been some miniaturization, but the fact is that this is an old science. Some of the books that we refer to were originally published in 1947. You can't do too much with physics to change it. Materials are really the thing that keeps making it better, making the products better.
WC&P: You're speaking about some of the plastics that are used?
Borger: Some of the plastics are just incredible now. And the stainless steel and the treating of the stainless steels and the different alloys that have become available. That's the only changes that we've seen over the years in our business.
WC&P: You were talking a little bit about growth at the company, how have you done recently in terms of the growth at your company in some of these different market categories or overall?
Borger: Well, the percentages have slowed down. Last year, it slowed down almost to a stop. We like to say we're turning a corner. We see growth. Percentages will be low and I don't expect much in the way of growth until we see some turnaround in the economy.
WC&P: When you say low, do you mean 5 percent, 10 percent… ?
Borger: Less than 5 percent.
WC&P: Are there areas of that where you see greater growth?
Borger: Yes, we see greater growth in an industry like the gas well industry. That's because, out of necessity, we began to work gas wells that weren't being touched before.
WC&P: To fill the gap so to speak.
Borger: Yes, so, in that sense, the controls that we're selling to them we see that part of the business growing by at least 10 percent.
WC&P: Are there particular regions of the world or the country where the water segment has done better?
Borger: Not noticeably, no.
WC&P: What sort of things do you look for in assessing that turnaround?
Borger: The most important thing would be for the economy to repair itself really. Other than that, a very, very high percentage of our customers are OEMs -- original equipment manufacturers…
WC&P: And when they start feeling more confident, you will.
Borger: That's right. When the blanket orders go up from 5,000 to 10,000 and they start taking regular releases again, that's when we'll start to feel comfortable again. That's when anyone in our position will begin to feel comfortable.
WC&P: We typically ask a general revenue question that can be answered a couple different ways to meet the comfort level of the company. What would you indicate revenues of the past couple of years or last year be if you were to offer a figure or range, if you will?
Borger: Let's say $5-to-7 million.
WC&P: Lastly, what would you say would be the one hot button issue facing the water treatment industry over the next few years that will have the greatest impact?
Borger: I don't know about the industry. I can answer as far as us, as a manufacturer, how it will directly pertains to the water treatment industry -- and that's having a product that is able to operate with higher content of ozone. Ozone is, as you know, very important to the future of the water purification industry.
WC&P: But it can be very volatile as well.
Borger: Oh, it's very, very difficult through valves as we know them and our type of solenoid valves. What we're trying to do is work with manufacturers to develop seals that not only will handle the ozone, but also are cost effective. There are a couple out there right now where, actually, the seals cost almost twice as much as the valve would.
Borger: So, that's what we and, I think, every other solenoid manufacturer would hope to do -- is be able to offer a product that can work with higher percentages of ozone.
WC&P: Since ozone is so effective at disinfection and oxidation for water treatment.
WC&P: Does UV have similar issues with solenoid valves, seals and materials?
Borger: No, not really.
WC&P: That about wraps it up. Would you like to offer a closing statement?
Borger: We would anticipate a slow but steady growth over the next several years. We hope to be able to bring out a new product every year. It has been our policy for many years to at least make that attempt. I foresee healthy growth once the economy turns around.