Volume 45 Number 5
Taking a Dip with Industrial Test Systems’ Jaunakais
Ivars Jaunakais, whose parents are from Latvia, takes his work very seriously. His wife would say he's rather dry about it, but business for his company, Industrial Test Systems (ITS), is really all wet.
Founded in 1989, ITS is one of four leading analytical test strip companies. Primary markets include the pool and spa, aquarium, drinking water treatment and automotive industries. That's right—automotive. It's actually how the company got its start and where half its business remains.
"I had developed a friendship when I was at Markson Science with the product manager at Cummins Diesel for developing a test product for diesel coolant," Jaunakais said.
The idea is, through test strip analyses, to stretch coolant use longer since replacing it strictly by mileage gets very expensive. Still, automotive is a mature market so sales are relatively flat but steady. By contrast, the water treatment and pool and spa niches are growing at 40 percent a year. That's where ITS expends a lot of effort for innovation, i.e., research and development (R&D)—Jaunakais' true passion.
He started out in R&D with Whitehall Laboratories doing immunoassay kits for blood hormones then went into manufacturing at Miles Laboratories (now part of Bayer) targeting medical diagnostic labs; at Markson, he was in industrial marketing; then, he and a colleague started Diagnostic Systems. Differing management styles prompted him to go solo to start ITS. ITS joined the WQA in 1992 and dove into pool test strips in 1994, breaking a monopoly held at the time in the U.S. market.
"The minute you remove a monopoly, it forces everybody to be much more honest in terms of price and then also be concerned with performance," Jaunakais said. "There are actually four major players in the market in test strips now and we're all trying to outdo each other in terms of whatever niche improvements we can show."
Today, tests in ITS' arsenal are almost too numerous to mention. Many are in multiple generations where advances make them more than competitive with Hach—not to mention LaMotte, Chemetrics and Taylor Technologies. One product Jaunakais has high expectations of is ITS' free chlorine strip, which uses TMB instead of DPD as an indicator and drastically reduces chemical use. It's likely to win USEPA approval this year, he said, excited over possibilities in the municipal market.
ITS also made key advances in its 2-year-old arsenic test strips that now provide results in 14 minutes at levels as sensitive as a $100,000 analysis instrument. Other new tools include immunoassay and soil tests; the latter involves a new analysis for arsenic in soil—something Jaunakais points out is valuable for agricultural areas such as those in Bangladesh where a buildup of arsenic in the soil is proving problematic to public health.
Before getting to the interview itself, here are a few details on 'company name':
President: Ivars Jaunakais
Revenues: $2.5 million with 20% growth each of past three years
Operations: Manufactures test strips and immunoassay tests for a variety of applications including both single and multi-parameter uses at the tap, water well, poolside and more. Single parameter tests include arsenic, free chlorine, iron, hardness, pH, alkalinity, nitrate, etc. New in 2002—H2S, cyanide and arsenic tests. Primary markets—automotive (50%), pools and spas (20%), drinking water treatment (20%) and aquariums (10%)—with 5% international overall.
And now for the interview:
WC&P: How long have you been in the business and how did you get started?
Jaunakais: I've been a member of the WQA since 1992 and how I got started is the product that I manufactured was test strips which have found a perfect match in what's needed in the Water Quality Association area.
WC&P: How so?
Jaunakais: My background actually is in the medical diagnostic business of making blood glucose strips, hepatitis tests and things like that—analytical chemistry. And then, more recently, my analytical chemistry background has focused on how to make sophisticated products simple enough for the average water technology technician to get meaningful and valuable information about the quality of the water they're working with.
WC&P: What did you do before you started Industrial Test Strips?
Jaunakais: Well, my history is analytical chemistry. I began by doing a four-year span of research and development with the Whitehall Laboratories in Radnor, Pa., developing new kinds of test kits called immunoassay kits for blood hormones, which were strictly used internally for testing their analytical information that they needed. Then, following that, I went into manufacturing of similar products for Bayer Laboratories—at that time, it was called Miles Laboratories—in the medical field, where these products were actually used in diagnostic laboratories.
Jaunakais: Now, after my seven years in manufacturing, I went into marketing. Kind of a career change with Markson Science of Phoenix, Ariz. It's a small scientific equipment marketing and sales company. I was the product manager who had the responsibility for bringing in brand new products. This was for all kinds of laboratories, including water quality laboratories, but mostly any analytical type of laboratory.
WC&P: I imagine that was where the transition started toward a water treatment focus?
Jaunakais: Yes. During those five years, I saw a huge gap between the kind of quality test strips that were available in the medical field for analytical purposes and the kind of quality test strips that were available in the industrial marketplace. I saw a market opportunity and I capitalized on it when an old friend of mine who I'd worked with in Miles Laboratories asked me to join his company in South Carolina. And we joined forces together to start off a brand new company in the medical field. From my standpoint, since I brought the industrial market ideas, we actually were going to develop both markets with test strips.
WC&P: This is a different company from Industrial Test Systems?
Jaunakais: Yes. This was called Diagnostic Systems. For two years, we worked very hard to develop new tests both in the medical and industrial markets. After that, we found that our philosophies about how to run a business were so different that it was better for us to split off and I would start a separate company. And I did start out in 1989 with my own company and literally from just one little office, with a vision of what I wanted to do. So, that was the beginning.
WC&P: Tell us a little bit about how your company has developed since then and what's new?
Jaunakais: Originally, when Industrial Test Systems started out, with one market segment. I had developed a friendship when I was with Markson Science with the product manager at Cummins Diesel for developing a test product for testing coolant—diesel coolant. And, specifically, they had three parameters that they were very interested in and that was ethylene glycol, nitrite and molybdate monitoring, which are in the coolant.
WC&P: I take it these affect the performance of diesel engines.
Jaunakais: Exactly. As a comparison, a typical car will put on 10,000-15,000 miles a year, whereas an average truck will put on 15,000 miles every three weeks. As we know at least up until recently, antifreeze needs to be replaced at 30,000-40,000 miles. Well, when you have a coolant system in a truck that's 50 gallons, if you had to replace that coolant in 50,000 miles, that means over twice a year you'd have to replace the coolant. And it would be just very, very expensive.
WC&P: How does that translate back to the water side?
Jaunakais: Well, it is water testing. And, so, this started me off. Once I got going in this market and established myself and income was coming in, then I launched additional R&D efforts to come up with products in the next market I wanted to get into. That was the drinking water market and the swimming pool market. From there, of course, I developed new test strips almost too numerous to mention. For instance, pH, chlorine, total chlorine, ozone, iodine, all the different oxidizers, all the different common parameters including metals—we have a test for. Silver. We have a test for iron, copper, permanganate and many other parameters, as I said, too numerous to mention.
WC&P: Including arsenic…
Jaunakais: Including arsenic. Especially arsenic, our most recent advance.
WC&P: Are there other things you'd like to mention about what's new or what's on the drawing board for you?
Jaunakais: Yes. There are two things that we're excited about with our new product line. One is our new free chlorine strip, which has been patented now for several years. It's based on a brand new indicator called 3,3,6,5-Tetramethylbenzidine…
WC&P: You'll spell that for me later, won't you?
Jaunakais: Oh, you can abbreviate it as TMB. That'll probably be adequate. TMB is a brand new indicator just like DPD, that the industry is more familiar, with. DPD is accepted as an official indicator for chlorine measurement in drinking water. TMB has not been officially approved and there is a liquid system method for that, but we developed a test strip for measuring with TMB. So, we chose to engage the EPA almost five years ago in getting this approved as an official test for drinking water chlorine measurement.
WC&P: What's the status?
Jaunakais: The status is we hope to have a signoff this year so that it eventually will become an official test. It actually takes an act of Congress to make this become an official law. It's very hard to believe that but people probably don't understand that because Congress made a mandate on EPA that any new tests that would be approved actually have to be Congressionally approved before they're actually signed off. But we expect to at least have the EPA written approval hopefully this year. We have one more round of testing to complete this process. And, so far, there's no indications we will not be successful in accomplishing this.
WC&P: What's the market potential for this test?
Jaunakais: It's my understanding that among companies like Hach, LaMotte and Chemetrics, which are very significant players in the drinking water EPA-type tests—chlorine is the one test that made them more successful than anything else. It is the most common test that is done. For instance, a typical water treatment facility for potable water would probably monitor the chlorine level as frequently as every 15 minutes to every hour. So, when you think about all those tests being done with wet chemical methods; and our free chlorine test is very simple, easy test and that requires no instrumentation. The whole kit can fit in your pocket.
WC&P: What are factors that sort of play into your particular market niche? It's a very narrow group of highly specialized players, isn't it?
Jaunakais: Yes. Well, as regards the continued discussion of the free chlorine product, for example, what makes this product very unique is the threshold for the whole testing market, not only for the drinking water business. It has several unique features, No. 1 of which is the product uses very little chemical. Just as a comparison, 100 of my test strips contain less chemical than three of the competitor's wet chemical methods. So, environmentally, we're talking about a fraction—three percent of the chemical in each unit. A second feature is there was a unique legislative mandate that test strips have been exempt by OSHA from hazardous restrictions. This was interesting legislation that took place years ago. For some reason, someone must have had the wisdom to see that test strips were different. First of all, they did have much less chemical; but even if they came in contact with hazardous material, the amount typically left on the test strip is so insignificant that it would still be classified as non-hazardous. So, people would be encouraged to use these test strips to monitor whatever they might be concerned with in terms of safety. Then, another feature of test strips is they are non-toxic, non-hazardous testing methods, as opposed to wet chemical, powder, liquid systems that are accompanied with MSDS (materials safety data sheets)…
WC&P: Could contribute or leach something potentially hazardous into the water?
WC&P: Tell me if you could a little bit about the marketing of your product and where your specific strengths are? By that, I mean offer a few details about your company. For instance, I don't even know how many employees you have.
Jaunakais: At this time, we have 30 employees. We still have a significant market share of the trucking and automotive market, however, that pretty much has flat growth now. Our largest growing markets are the drinking water business and the swimming pool business.
WC&P: Can you break those down by percentage for me?
Jaunakais: I would say 20 percent each. Twenty percent is in the drinking water and 20 percent is in the pool market. Fifty percent is in the trucking market. And then 10 percent is in education, aquarium markets.
WC&P: Which include everything from tropical fish stores down the street to an elementary school ecology class.
Jaunakais: That's right.
WC&P: Geographically, how far and wide are your products sold?
Jaunakais: Worldwide, ever since a little over a year and a half ago when we hired an international sales manager…
WC&P: Who is?
Jaunakais: Fabien LeRoy. His title is not manager; it's really just international sales. He was born in France and speaks fluent French, English and Spanish. With that, armed with those three languages, we now can almost communicate with just about everyone. Ninety percent of the people in the world know one of those languages.
WC&P: How has that affected international sales?
Jaunakais: Significantly. We've already doubled it in the year and a half he's been with us.
WC&P: Are there particular markets that are stronger for you?
Jaunakais: It's surprising, but it's very broad. Certainly, there's a big interest in arsenic—and you know we're real proud of our kits…
WC&P: When were those introduced, by the way?
Jaunakais: Our first kit was actually introduced two years ago, but we've gone through two different product improvement scenarios. About a year after the first introduction, we had one product improvement. Then, just at the beginning of this year, we had a third product improvement. It's our Series II kits.
WC&P: What did these improvements do?
Jaunakais: They have probably two important features. One, the test results can be had in 14 minutes. Second of all, they are as sensitive as a $100,000-instrument systems—atomic absorption systems that are EPA approved. As an example, our Ultra Low 2 Arsenic Test Kit has detection sensitivity of 0.3 parts per billion and a resolution of 0.1 ppb.
WC&P: Just on a test strip?
Jaunakais: Of course, this has a little kit. There is some chemical in it, but it is still test strip based, which is what made me get into this business. Plus, of course, this time around, we were very proactive. Three years ago when you heard discussion starting about arsenic being the next big issue for the EPA, I was very determined not to allow this opportunity to escape my company…
WC&P: There were a lot of people scrambling on it as well. A few went down in flames as I recall…
Jaunakais: Yes, there were quite a few in the hunt. I personally supervised the development of this project. We basically had—off and on—three people full time working on all these improvements. That's how it happens. Even for a small company of 30 people to put so much resources into it—well, I just felt that government regulation can greatly influence how many kits you're going to sell. As an example, seven years ago, I scrambled very diligently trying to do a similar scenario with the lead test strip. I was unsuccessful. I had a product but, because of the false positives that would come with it, I never marketed it as a drinking water test.
WC&P: This is because other things in the water would influence it?
Jaunakais: Yes, other metals in the water would cross-react. Eventually, we marketed an immunoassay test. But, it's not really a test strip. It's an immunoassay test—a little bit more expensive.
WC&P: I would imagine.
Jaunakais: Yes, about 10 times more expensive.
WC&P: When you were talking about the different markets and the international market, it made me curious about what sort of growth you may have seen revenue-wise in recent years?
Jaunakais: Well, our company has been experiencing 20 percent growth annually for the last three years. Even with the economy as it is, we feel that even this year we'll see the same kind of growth.
WC&P: How has international grown in percentage?
Jaunakais: Like I said, it's doubled in the last year and a half.
WC&P: Now, that's for the overall company. You mentioned the two biggest growth markets have been drinking water and pools. How have they done?
Jaunakais: They improved by 40 percent each.
WC&P: Wow, so that's definitely driving your business.
Jaunakais: Yes, that is where our greatest growth rates have been.
WC&P: What are some things particular to the pool market that you might want to mention? After all, this will come out in May when people start thinking more about that.
Jaunakais: The pool market, hmmm.
WC&P: I suppose we should say spas too.
Jaunakais: Well, even though our success in that market has still been relatively modest, I do believe when our company first entered it back in 1994, our challenge in that marketplace, which was at that time dominated by just one company, resulted in significant improvements in the kind of test products that are available in the pool and spa market.
WC&P: Not only your products, but others as well?
Jaunakais: Right. I mean the minute you remove a monopoly, it forces everybody to be much more honest in terms of price and then also be concerned with performance. We're constantly now trying to outdo each other. There's actually four major players in the market in test strips and we're all trying to outdo each other in terms of whatever niche improvements we can show.
WC&P: I take it they are the three previous companies you mentioned and yourself?
Jaunakais: The three companies, if you wanted to know, are Hach, which operates of course under their AquaChek name; then you have Taylor, which is the most recent addition to this market; LaMotte, who've been in the business since about 1996, and then myself since 1994. Hach, which is the original company, they date way back in pools. But, at that time, AquaChek was under Miles Laboratories. I actually worked at Miles, in the environmental division, which included AquaChek. That goes back before 1980 when the first pool test strip was introduced. Miles had been doing reagent dip strips since the 1950s. AquaChek was eventually spun off from the medical company as Environmental Test Systems and then they became part of Hach in 1998.
WC&P: Hach has swallowed up so many companies in recent years, it's hard to keep track.
Jaunakais: It's true also that Hach is not really Hach now. It's Danaher. It bought Hach.
WC&P: Exactly. That was in 1999.
Jaunakais: Danaher is now the driving force there. Danaher's focus is accountability to stockholders and they're more interested now in buying technology rather than developing it. Whereas, at one time, when Hach and ETS were in charge, those folks actually did have significant R&D budgets for improvements in their products. Now, more recently, those budgets—as to my understanding—have been cut back.
WC&P: Are you able to say what your revenue is currently, in rough figures if not specific ones?
Jaunakais: We're listed in D&B [Dun & Bradstreet] and we were just over $2.5 million.
WC&P: And growing fast.
Jaunakais: At 20 percent.
WC&P: Tell me an interesting story or anecdote about your experience in water treatment? This typically would range from the funny to the strange, or otherwise compelling.
Jaunakais: Once, in my enthusiasm to demonstrate to a customer that our test strips are safe, I placed a nitrate/nitrite strip into my mount. To my surprise, when I removed the strip, I found a positive reaction. Later, I learned it is normal that nitrite is present, which is produced by a natural bacteria in our mouths.
WC&P: What's a major challenge that you or your company faced and how did you overcome it?
Jaunakais: It's like with any company—it's money. And how I overcame it is to be frugal, frugal, frugal. One of my most valuable phrases that I live by is: "A penny saved is a penny earned." That also goes to not only being frugal but saving every penny that you can. I think that's what's brought me to this point. I'll have to be real honest with you—I think there was a moment of insanity when I look back at when I decided to start my own company.
WC&P: Why so?
Jaunakais: Well, because I think I underestimated the tremendous challenge when you do your own company.
WC&P: Financially, etc.?
Jaunakais: Financially. Emotionally. I mean being the president of a small company, I live and breathe this company 24 hours a day, seven days a week. And I've done this now for 14 years. My wife has been very patient and kind to me to still be, well, married to me.
WC&P: My wife thinks that about me just working for a magazine.
Jaunakais: Yes, it is—and I tell you—some people might have thought and certainly it's very easy to look back at it now that I've been successful that it's so easy to tell your story. However, when I started this company, money was never a goal in what I wanted to do. And it's still not a goal in what I want to do.
WC&P: Although it helps.
Jaunakais: Well, sure. But a laudable goal is to be doing something that I really have a passion for, and this is what I have my passion for. What carried me through was my background—my work experience at all these different companies: doing R&D analytical chemistry for 4-5 years, then doing manufacturing for just under eight years, then doing marketing for 4-1/2 years at Markson Science, then starting my own company with a colleague, and then eventually doing it all on my own. These experiences were the synthesis. They synthesized in me to allow me to make decisions that were very important. Without them, I don't know if I would have succeeded. It's a very difficult thing to have done.
WC&P: From your perspective in the market, where do you see the industry going—from the vantage of the water treatment industry and your particular niche?
Jaunakais: It's like any other technology. Here's a very interesting anecdote I want to share with you. It actually comes form Science magazine. Some scientist had done a little blurb and he was saying: 'If you take all the scientists that every lived, something like 90 percent of them are alive today.' When I mean scientists, it means engineers, scientists, biologists—you know, the full family of technology advances, even computer science. These are all part of the sciences. And, when you realize that 90 percent of all those people are living right now, it's now understandable the advances made in the past several years.
WC&P: That's what's driving technological change?
Jaunakais: Oh, my gosh, absolutely, when we think about even a computer. When I went to college, there was no computer. Even a battery operated calculator that did multiplication cost $100. Now, what you can buy in electronics or software with $100 is unbelievable.
WC&P: And the advances that translates to in the water industry are such that we're going to continue to see very rapid technological advances in our particular markets?
Jaunakais: In every market, yes, whether it be remediation equipment, whether it be testing equipment—everything is changing. And it is very important for all the people in the drinking water business.
WC&P: If we look at it from the perspective that regulations have driven the growth in this industry, the ability of regulations to be more detailed is due to the power of the ability to test to particular levels. If we look at say MTBE or perchlorate as examples, those would never have even been on the radar screen had it not been for the ability of some chemists in California to test down to parts per trillion levels.
Jaunakais: That's right. And you know this is also a very frightening thing. As we become more cognizant of what is really out there in the world, not that we need to fear it, but we need to respect it and understand it and learn how to control it. As an example, just recently I was in Europe at a conference and there was a presentation done on something that's only starting to break into the news media. That is all the different things that every household flushes down the toilet, where does it go? It goes into the drinking water system somewhere down the line. As an example, if you look at a pharmaceutical drug, first of all, once it's metabolized through our body, it goes into our toilets. It's even a common practice that if you're disposing of household drugs that are outdated or something, what do you do? Flush it down the toilet.
WC&P: And if it's not going into the toilet, it's going into a landfill.
Jaunakais: Right. And we're generating probably billions of pounds of all sorts of pharmaceutical drugs, hormones, everything under the sun. What is it doing to the fish in the rivers and streams? What is it doing to the people that will be drinking that water further downstream from this river?
WC&P: Conversely, we're also seeing a tightening of storm water regulations as well as municipalities are able to have in their waste stream that they discharge after they treat wastewater.
WC&P: This is part of what's driving things in California, but that's primarily with respect to chlorides. They just announced the beginnings of bans again in Santa Clarita. This might segue very well into the last question, which is what's the one hot-button issue facing water treatment dealers or the industry that will have the most impact over the next few years in your opinion. What are your thoughts?
Jaunakais: It's probably arsenic testing.
WC&P: Would you like to provide a little detail on that?
Jaunakais: Yes, as I earlier commented, we put a great deal of effort into developing the best arsenic test kit in the world right now. I feel very confident about that statement. And I anticipated with the new EPA regulation that President Bush finally signed off on of 10 parts per billion, that it's going to be a very important issue. Even area's that normally don't have that as an issue are starting to find it. Let me give you an example, in Wisconsin, I've attended some seminars where the head of the environmental department there spoke. Twenty years ago, arsenic was almost a nonexistent problem anywhere in the state of Wisconsin. More recently, it's become the place where some of the highest readings have been found.
WC&P: Is that because of a change in the amount of arsenic there or the ability to read it?
Jaunakais: No, it's because there have always been these arsenic-laden ores underground. They're approximately 100 feet below ground. And the ores are actually very water insoluble if you have just water and the water has no oxygen in it. What happens is, about 20 years ago, the water table was maybe five to 20 feet below ground in Wisconsin. Because of the population growth and agricultural activity, where you know they upgraded agriculture such that no longer do you rely on Mother Nature. You start pumping out water from the aquifers. Wisconsin was experiencing a tremendous drop in the water table and the water table now, I understand, is in some areas up to 150 feet below ground.
WC&P: As opposed to five to 20.
Jaunakais: Yes. Now, here's what happens. When the water table is so low, the rain comes down, it's well oxygenated and it percolates into the ground. Well, if the water is only at five feet above it, it percolates down, it hits the water table already and it has lots of time to release the oxygen right there. And in no time at all, the water at 100 feet below ground is oxygen deficient. Now, if you have water percolating down all the way to 150 feet—I don't know the timetable; you'd have to ask a geologist—it percolates so rapidly that it carries the oxygen with it. And with water in the presence of oxygen and arsenic-laden ores, it readily dissolves the arsenic. What do you have? Elevated arsenic levels.
WC&P: That's just one example of what you seeing across the country?
Jaunakais: Not only across the country, but across the world. This is the same explanation in Bangladesh that we've been hearing. More or less, this is a very similar scenario that's transpired there. And I wouldn't be surprised if when more detailed geological studies are done that this may even be the explanation for other places. Wherever there might be arsenic ores…
WC&P: It creates opportunities not only for the test systems but the treatment systems themselves. Many people would agree with you that this likely will be one of the biggest boons, if you will, for the water treatment industry—the need to treat for arsenic.
Jaunakais: Yes, it's going to become a very interesting scenario. Just to give you an example, initially, that was the only concern in Bangladesh, the drinking water people were consuming. The most immediate hazard there was that they were drinking arsenic water and started to develop all kinds of lesions and health problems due to that. A secondary thing that's already starting to show up is, after 20 years of irrigating their fields with this same water laden with arsenic, the soil is becoming concentrated with arsenic. And, now, even some of the vegetables that absorb arsenic readily from the soil can become hazardous to eat. So, there's a second whammo that will need to be addressed. And we do have an arsenic soil test kit to address this secondary problem.
WC&P: Wherever there's a problem, there's an opportunity.
WC&P: We need to wrap this up about now. Would you like to make a closing statement?
Jaunakais: My company ever since it's been involved in the drinking water business has been a member of the Water Quality Association and, of course, we're very familiar with your magazine, WC&P. I would say that the quality of the information that both organizations are offering the drinking water business people has much improved and I'm so happy to see the kind of timely articles you folks are presenting to keep the industry informed. And, of course, the trade show keeps people informed as to what's going on in this marketplace. It is just as I indicated—the rapid changes that technologically we're making in the world are accompanied by rapid changes in the environmental impact and the quality of our water. As we're becoming more and more aware, all the drinking water problems will always be there. So, there's always going to be a need for improving the quality drinking water and our industry will always continue to grow.