June 2001
Volume 43 Number 6
 

Vended Drinking Water: Opportunity for Growth
by Robert Wheeler   Pages: 

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Summary: Recent reports detail the rise in popularity of vended drinking water. Due to lower cost and convenience for consumers, this segment of the water industry allows dealers another practical outlet to promote water quality awareness as well as their business. Additional advantages associated with vended water are given here.

Pollution, population growth and drought all place tough demands on the finite supply of fresh water we need in order to survive. Consumer awareness of these issues has led many to question the traditional sources of our potable water. For an ever-increasing number of consumers, these traditional sources do not instill confidence in the end-user, causing many to seek alternative methods of obtaining their drinking water.

The demand for a safe, dependable source of good, clean water has thus created an abundant supply of water treatment products and bottled water brands. Today's consumers face a dizzying and complex set of choices for their water needs.

Levels of expense
Home reverse osmosis (RO) and cooler rental/bottle delivery are available at the "pricier" and more technologically sophisticated end of the market spectrum for those consumers willing to make an initial investment or to pay extra for the convenience of delivery. For those consumers who prefer less costly options, point-of-use devices such as faucet-mount filters and pour-through pitchers offer the convenience of on-demand usage at a relatively small expense.

Water vending is another less costly drinking water alternative that allows consumers to fill their own containers or one purchased on-site with water that's treated, stored and sold through commercial water treatment and delivery equipment. This equipment may be placed either inside retail settings, outside existing businesses or in stand-alone kiosks. The treatment process, which is usually performed on-site, typically consists of pre-filtration and RO. The delivery equipment -- or water dispenser -- commonly uses post-RO, carbon-adsorption and a form of biological neutralization/sterilization, such as ultraviolet (UV) light exposure or ozonation. Vended water allows consumers to purchase high quality, treated water at a lower price than the majority of bottled products available via retail sales or direct home delivery.

Consumer choices vary greatly in price, product and presentation, all of which are reflected in recent statistics. According to a 2001 Hall Water Report/Beverage Marketing Corp. survey, consumers obtain 33 percent of their drinking water from bottled water, 28 percent from home water treatment equipment and 39 percent from unfiltered tap water. In 1999, consumers purchased 4.3 billion gallons of domestic, non-sparkling bottled water. Of this number, vended water accounted for 550 million gallons, or roughly 12 percent of sales. This share of bottled water sales has consistently remained in the 12-to-15 percent range for the last 15 years, according to Beverage Marketing Corp. For the owner/operator currently in or considering getting into the vended water business, these statistics raise the issue of how to go about gaining a greater share of this ever-growing market.

The three Cs
Cost, convenience and confidence factor into the purchasing decision of most consumers. In most instances, the price per gallon of vended water is lower than the price per gallon of bottled water. This is mainly due to the fact retailers are able to eliminate many of the costs associated with bottled water products (warehouse, shipping, store labor, etc.) and pass these savings on to their consumers.

The proliferation of convenience stores, Internet shopping and other time-saving businesses should send a clear message to the water vendor -- make it fast and easy for your customer to do business with you. For example, make sure the system is able to dispense a minimum of two gallons per minute; anything less than this can prove frustrating for time-pressed customers.

Displaying the product
Convenient placement of the water dispenser ensures customers are able to easily locate and utilize the machine. Clean, well-lit and accessible outdoor locations are obvious choices. Ideal in-store vending locations are ones adjacent to the bottled water section or located prominently at the head of the bottled water aisle (on an "end-cap"). A window banner is a great way to draw customers' attention to a new system; however, no matter where a vending machine is located, maximum visibility and accessibility are essential.

A selection of various refillable containers offers customers different choices. Many indoor water vendors stock and sell bottles ranging from 16-ounce PET bottles to five-gallon bulk containers. For those customers concerned with the well being of the environment, refillable/recyclable containers are important.

Careful consideration and follow-through of convenience-related factors assist in capturing a larger market share and increasing revenue from vending.

Educating the public
Another way to convert bottled water purchasers into water vending machine users includes raising consumer awareness on the quality and safety of a vending operation. Without a doubt, education and marketing are crucial in gaining and retaining this consumer confidence. A description of the treatment process, including any sterilization methods employed, must be posted on the dispensing machine. Posting maintenance summaries can be used as effective communicators of reliable, timely service.

Increasingly, many vending machines utilize advanced technology, such as UV disinfection and water quality monitors, to ensure the quality and safety of product water. If such devices detect a problem, the vending process is immediately disabled. While this is an internal fail-safe measure, it can also be a potential marketing point that helps emphasize safety.

Q&A sessions Some current vendors are active in promoting their product and educating consumers through use of on-site product demonstrations. During the demonstrations, a representative from the vending company is present during a specified time to answer questions, explain more technical aspects of the treatment and vending process, and possibly discount or even give away product as samples. These operators not only generate interest in vending, but also often establish leads for additional sales as people graduate to higher-end markets.

Through cross-merchandising efforts, or linking water to products that require water (tea, coffee, powdered drink mixes, etc.), you can utilize the brand power of another product to promote your product as well. Many of these companies are willing to share marketing expenses for advertising, promotional materials, etc.

Conclusion
In summary, vended water sales have traditionally accounted for 12-to-15 percent of total bottled water sales. As the visibility of this water segment increases and costs associated with handling bottled water continue to rise, current and future vending system operators must recognize the opportunity for growth in the vended water segment. By emphasizing basic strategies in meeting the needs of consumers and backing that up with creative marketing techniques, the water professional will be well prepared to grow and prosper in the vending industry.

About the author
Robert Wheeler is a district manager for Culligan Store Solutions, of Eagan, Minn. Wheeler can be reached at (800) 487-4621 ext. 5091 or email: rwheeler@culligan.com


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