February 2002: Volume 44, Number 2
An Exchange with DI Water’s Jim Hunt
by Carlos David Mogollón, WC&P Executive Editor
Jim Hunt, president of DI Water Inc. and managing partner for The Water Group LLC, both of Amesbury, Mass., has learned running a business isn't for the fainthearted.
Until October 1998 when he founded DI Water, Hunt -- a past WC&P Technical Review Committee member -- was a manufacturer's representative for various companies and had worked briefly in real estate development.
In the late-'70s, Hunt worked in solar treatment equipment sales when that industry was booming because of tax incentives spawned by the OPEC oil embargo. As the incentives ended, though, the market died and he moved to Maine, redeveloping old summer camps into housing subdivisions. Because of prior experience with dealers, he was approached by a manufacturer's representative agency in Norwood, Mass., to cover the Northeast for Bruner, working with plumbers and plumbing supply houses. It was 1987. Two years later, Gould's Pumps bought Bruner and let go all the reps. He switched to Marlo, selling ROs, softeners, and filters to dealers in the Northeast. He also was an independent rep for Kinetico. In 1991, he started working for Portasoft Wholesale, which was bought by Alamo Water Refiners in 1993. In 1996, he became Northeast dealer representative for The Duff Co.'s water treatment division.
Nearly three years later, an opportunity arose for Hunt to invest in a portable exchange deionization regeneration facility, DI Water and he took it, working with dealers and specializing in ultrapure applications for the microelectronics and pharmaceuticals industry in New England and New York. With DI Water's Michael Pacek -- a professional engineer with a background in manufacturing and sales at Memtek, Millipore, Ionpure/USFilter and Prosys as a partner -- Hunt opened up The Water Group in 2000 as a manufacturer's rep agency. While separate companies, Hunt stresses, they do share employees and balance each other economically.
DI Water's extensive client list includes Boston Medical Center, Genzyme, Millipore, Texas Instruments and a semiconductor research facility co-sponsored by Intel, Motorola and IBM at the State University of New York-Albany. With dot.coms and tech stocks taking a beating ahead of the recession, though, a number of plants closed or slowed. Thus, DI Water shifted its focus from microelectronics more to pharmaceuticals and pushed to leverage its dealer customers for additional clientele.
"I think when we bought DI Water, it was $10,000 dollars a month in revenue. We just bought the assets. It was called Commercial Water Systems. And at the height before this fall, we were up to $70,000 a month -- or sevenfold growth. But, we’re back down off of that about 20 percent," Hunt said. Recovery, also affected by the slump following the Sept. 11 terrorist attacks, has been slow but steady.
Meanwhile, The Water Group last year also forged alliances to offer a wider spectrum of water treatment products through PureTech (July 1999), R&M Manufacturing (May 2001) and GE Glegg Water Technologies (July 2001). Its dealer base is up to 150 and Hunt expects to spend more time in the next year working in technical support with those dealers and developing additional dealer clients for the products and services they offer, he said.
Before getting to the interview itself, here are a few details on Hunt's companies:
DI Water Inc./The Water Group LLC
25 Oakland St.
Amesbury, MA 01913
(800) 840-0901 or (978) 834-3169
Fax: (978) 834-3169
Staff: 5 (down from 10)
Revenue: $725,000 in 2000; down about 20 percent in 2001
Operations: Portable exchange DI regeneration services, specializing in ultrapure water for pharmaceutical, biomedical, microelectronic and general manufacturing; manufacturer's representative agency with 150 dealer clients, serving PureTech, R&M/Columbia Manufacturing and GE Glegg Water Technologies
And now for the interview:
WC&P: For our readers, give a little background on The Water Group, how it differs from DI Water and how both were formed, please.
Hunt: The Water Group is a manufacturers representative agency. We represent several manufacturers and their sales efforts in the New England/Northeast territory.
WC&P: Such as?
Hunt: Such as R&M Water Group and its sister company, Columbia Manufacturing. And we represent GE Glegg to the pharmaceutical industry and PureTech water coolers to the water treatment dealer market. I’ve been selling wholesale to water treatment dealers since 1987, and this is just a little upgrade. Mike Pacek has joined me in the business. He comes from a manufacturing background with Millipore and USFilter…
WC&P: Memtech and Prosys as well.
WC&P: What’s Prosys?
Hunt: Prosys is a manufacturer of a membrane-based treatment system, microfiltration and reverse osmosis.
WC&P: And there’s another partner in this, Yuri Tatashin?
Hunt: Yuri isn’t a partner but he’s a valuable employee. He’s a chemical engineer.
WC&P: Where’s he from?
Hunt: He’s Russian.
WC&P: So, he just moved here?
Hunt: He immigrated two years ago.
WC&P: What’s his background?
Hunt: His background was chemical engineering, manufacturing for the printed circuit board industry.
WC&P: In Moscow?
Hunt: Actually, in the Ukraine.
WC&P: How did you meet?
Hunt: His brother-in-law was working for us and he wanted to work here. So, we were just lucky. Luck beat science again. He’s a tremendous addition to our skill set here. Mike Pacek, for instance, is a professional registered engineer. Between Mike and Yuri, we have the professional engineering end of the business pretty well covered.
WC&P: Are you working primarily with dealers, end-users or corporations that are soliciting your services?
Hunt: Well, through The Water Group, we represent the companies that I mentioned and, of course, DI Water, which is an exchange tank business. And we also own that business.
WC&P: You got involved with DI Water when?
Hunt: In October of 1998, we founded that company.
WC&P: And prior to that, you’d been a regional sales representative for Duff Water Co.
Hunt: Right. Duff Co. And before that, Alamo (Water Refiners).
WC&P: Give us the picture on how DI Water ties in with the rest of this?
Hunt: Well, DI Water is a regeneration plant, which of course is a huge capital expense. It services end-users direct as well as other water treatment dealers who want to be in the DI business but don’t have their own regeneration plant, so we regenerate for them on a wholesale basis so they can be in the DI exchange tank business.
WC&P: What region do you cover?
Hunt: Typically, New England and New York.
WC&P: And are Pacek and Tatashin also involved in that?
WC&P: Is it all the same company, effectively just split in name for certain functions?
Hunt: Well, the employees are shared, but the companies are definitely separate companies. Two sets of books and two missions as it were.
WC&P: So, there’s been a lot of changes for you in the last few years. How long were you with Duff?
Hunt: Three years.
WC&P: And then with Alamo?
Hunt: Well, Alamo had bought another company that I was with, so that whole arrangement was four years. They bought the wholesale business of Portasoft out of New Jersey. I guess that was actually five years.
WC&P: So, where are things going for you? Since you got into DI Water, I know because of my experience with you being a past member of the WC&P Technical Review Committee, you suddenly got a lot busier. I take it that’s been a good thing.
Hunt: It has. Building a manufacturing company as such is a very time-consuming business. We’ve designed our plant and the regeneration process and continue to make design changes and improvements for quality and efficiency in regenerating. There’s just no end to that. That can absorb as much time as you want to give it. Of course, calling on water treatment dealers, as we do with The Water Group, again can be very time consuming. The needs for support in the field, troubleshooting problems or educating dealers’ employees is a never-ending task.
WC&P: How do you balance these? They sound like completely different markets in one sense.
Hunt: Well, it is. And I think as time goes on now, I’ll probably be doing less and less in the DI Water operation and more just representing DI Water and the other companies to the dealer network.
WC&P: Who are some of your customers under DI Water?
Hunt: We sort of concentrated on the microelectronics manufacturing and the biomedical fields. So, we would have Vishay, Sanmina, SCI and those kind of electronics manufacturers. They’d have companies like Genzyme, Biomed. We service Millipore. And we do some things in the general manufacturing like GE jet engines and the Navy for engine maintenance facilities. And in research and development, we work with Arthur D. Little on fuel cell development… Things like that. It’s a pretty interesting makeup. There’s lots and lots of applications for deionized water but we chose for our particular market niche sort of the more demanding customers that needed the highest quality of water. That fits a small company like ourselves.
WC&P: What’s your title with DI Water and The Water Group?
Hunt: I’m currently the president of DI Water and the managing partner of The Water Group.
WC&P: So, you basically made the jump from working for other people to working for yourself. What prompted that?
Hunt: I think that it was a challenge of doing something on my own. It’s always one thing to sit on the sidelines and try to second guess how some people are running their companies. It’s quite another thing to go and do it yourself.
WC&P: I take it you’ve learned some lessons?
Hunt: Not all of them easy ones either, I might add.
WC&P: What were some of the challenges you faced in making that transition?
Hunt: Well, of course, this business took a lot more capital than I’d anticipated. Every time you get a new customer, you have to buy more tanks and more resin and extend more credit. Your receivables grow.
WC&P: So, you have to have pretty good float with whoever your financiers are?
Hunt: Yes. And financiers are not all that enamored with tanks of resin “stuff.” Around the country, they don’t know what it is. It’s not color TV sets that they can sell to somebody else if you don’t make it. And you need lots of trucks, tools, equipment and employees. It’s certainly not for the fainthearted to open that kind of business, a regeneration facility.
WC&P: How many employees do you have?
Hunt: We had a high of 10 and we’re down to five right now with the current downturn in the microelectronics sector.
WC&P: What have you seen out there in the market in that regard?
Hunt: Well, boy, if you judge the world by the computer and microelectronics market, you would have a pretty grim view of what was happening…
WC&P: We should also point out to readers that the Boston area is very big on microelectronics and software, partly as a result of MIT -- or the Massachusetts Institute of Technology -- being based there.
Hunt: Oh, absolutely.
WC&P: It’s sort of a Silicon Valley East, in that respect.
Hunt: Right. So, we had a number of plant closings -- y’know, complete plant closings -- in which case, that affects our business. Our services are terminated. In slowdowns, you’re not affected quite as much. They still need their deionized water. They still need their reverse osmosis units serviced and cleaned. Things like that. So, even if they’re getting slow, we continue to have revenues. But, when they close the plant, that’s it. That ends the business. And there’ve been quite a few of those around there. I would say our microelectronics business is off maybe as much as 60 percent right now.
WC&P: Are you seeing any indications for turnaround? What’s your prognosis?
Hunt: Well, they’re talking like things are going to pick up. They’re starting to see orders begin to pick up. They haven’t hired people yet and they haven’t added shifts or opened plants. But there’s some guarded optimism in that regard that, within the four- to six-month period, we could definitely see it ramping back up again.
WC&P: What have you done in the interim? Have you pursued other markets?
Hunt: Biomedical fortunately has been busy and has picked up some of the slack. And we’ve sort of redoubled our efforts in working with water treatment dealers because multiple dealerships have multiple contacts to customers. That’s probably the quickest way to find new business in niche markets.
WC&P: i.e., by working with the dealer, you might be able to cross-sell their customers on other things that you offer through DI Water.
Hunt: Yes. And with Mike’s manufacturing background and Yuri’s chemical expertise, we can actually -- through the other companies we represent -- offer some very unique solutions. We’ll have the right product between all the companies to solve a dealer’s problem. Either it comes from DI Water or it comes from Columbia or R&M. We’ve got multiple resources to get the job done.
WC&P: A couple of those alliances were just formed within the last several months. And I assume that’s part of the effort you made when you started to see the downturn -- look over into other avenues to provide additional revenue. Glegg was in July and the first I noticed of R&M was an ad that ran in our August issue. So, I assume it happened a couple months before that.
Hunt: Right. It was in May that we put together the deal with them. But it took them a little while to open their Wisconsin distribution facility to effectively serve the East Coast market.
WC&P: They’re funneling product over from Wisconsin?
Hunt: Yes. It’s sort of a slow ramp up with them. We certainly didn’t want to oversell capabilities or make promises we couldn’t keep. It’s been sort of a step-by-step buildup. As the Wisconsin branch opened and its capacity increased, we’ve increased our customer base.
WC&P: How is working with R&M? They’ve been based mostly in the West, out of Utah.
Hunt: R&M is an interesting company and a pretty exciting company. They’re one of the few independent or non-franchise OEMs that’s undertaking national distribution, national programs. As you realize, most of the OEM or softener assemblers are pretty regional. But R&M is committing itself to proprietary products like the Technetics and the Eliminator series for the plumbing wholesale market.
WC&P: Is the Eliminator a softener as well?
Hunt: Yes, it’s proprietary based on a Fleck valve. The Technetic is a proprietary Autotrol valve. They have a lot of capabilities with the purchase of Columbia Water.
WC&P: When was that?
Hunt: Oh, I would say, the middle of 2000. Columbia Water was in Reno, Nev., but it’s been moved to R&M’s headquarters in Salt Lake City. With that comes a lot of in-house engineering and manufacturing capability. Columbia is a 100 percent commercial/industrial equipment manufacturer-supplier. So, if you need a 10-foot diameter softener or a high purity skid RO/deionization/UV combination recirculating pumps, ultrapure polypropylene piping, or something like that, they have that capability. That fits nicely on the other end of the spectrum since R&M bought PJD and has all the RO manufacturing capabilities.
WC&P: PJD is Pat Dalee’s old company.
Hunt: Correct. R&M makes a ton of “flavors” in reverse osmosis and sells lots of them. This is sort of nice for us out here. On the East Coast, it has not been the mature RO market that the West Coast and Southwest has been. So, they bring that knowledge and expertise and product choices that we’re not used to seeing out here.
WC&P: I was looking down the list of products and services that you do offer and noticed there’s a variety of things on here. For instance, I assume the RO and UF is coming from R&M. What about UV units?
Hunt: R&M stocks WEDECO-Ideal Horizons ultraviolet units and, of course, they’re the largest UV manufacturer in the world. So, the capabilities of WEDECO-Ideal Horizons are enormous and they’re products are top-shelf.
WC&P: Right out of New England, actually.
Hunt: Yes, they’re in Vermont.
WC&P: How’s Jesse Rodriguez? He also used to be on WC&P’s Technical Review Committee when it was still simply Ideal Horizons.
Hunt: It’s a new culture for him. He has to wear a suit and stuff. Do reports. I take it there’s some good and some not so exciting aspects of that merger.
WC&P: I would imagine there always are in any acquisition. Are there other companies that you work with as far as suppliers or is it exclusively through R&M and GE Glegg?
Hunt: R&M and Glegg are the major suppliers and, of course, DI Water is a supplier to the market in terms of its regeneration facility…
WC&P: Do you provide resins through DI Water, too?
Hunt: No, we would supply resins through R&M.
WC&P: And Pure Tech?
Hunt: Pure Tech is an imported point-of-use cooler line. It’s a very exciting new product that’s imported from Korea. You’ll recall that since the Korean War, it’s had better-than-most-favored-nation trading status with the United States. We have a very close relationship with Korea and they manufacture POU coolers with ultrafiltration cartridges, which answers a lot of concerns about POU coolers that many people have. Some coolers use RO but, of course, there are two drawbacks to that: 1) it needs a drain which is not always accessible; and 2) at least in home use, the concern is RO takes out the fluoride in water that many water systems add for the protection of children’s teeth. One of the nice things about UF is it doesn’t need a drain and, in homeowner applications, it doesn’t take the fluoride out. Essentially, it’s the tightest membrane filtration you can have without needing a reject stream.
WC&P: What about Glegg? How does it fit in?
Hunt: GE Glegg has a number of channels to market and they hired us as a representative in a pretty exclusive channel, which would be called the pharmaceutical and other sanitizing applications.
WC&P: By pharmaceutical are they talking about everything from biomedical to pharmacies?
Hunt: Drug manufacturers.
WC&P: Not down to the pharmacy level?
Hunt: No. It’s to the research and manufacturing of drugs. That would be the marketplace. Of course, they’re core product is the e-cell, which is electrodeionization.
WC&P: They’ve written about that for WC&P actually.
Hunt: That’s good. They are the largest EDI -- or electrodeionization -- supplier in the world. And they have the periphery equipment that would go with that of course, which would be RO units and things like that. But their core business is EDI, so typically, we’re talking about the larger users of high purity water, probably 5,000 gallons a day minimum. We’re talking about 5,000 to 100,000 gallons per day water applications. And the reason they would choose somebody like us as their representative is these things work better when there’s somebody in the field that knows how they run -- to keep them running. There is operator training for when it’s sold to the end-user and probably ongoing availability of troubleshooting is very important. Now, it’s a nice match for us because almost everybody that has EDI still polishes their water with exchange tank DI. So, everybody that’s in EDI is sold; DI Water is there to do exchange tank -- or one of our dealers that’s working with us would be there to do exchange tank service if they were in that dealer’s community. That makes a nice fit with our whole program. And, then, of course, anybody that has EDI high purity water has all the other needs. They need periodic sanitizing of their system. They need to buy filter cartridges. They need to have their softeners and carbon filters serviced and rebedded. So, again, either DI Water or our affiliate dealers in the area stand in line to garner this additional business.
WC&P: Looking at where things have gone with the economy, and you being in New England and New York, where I would assume fallout after Sept. 11 was a bit heavier, what’s happened to where you were going revenue-wise? Prior to that, there already was a slowdown in microelectronics that you were balancing with a pickup in biomedical. Give us a little of the picture you’ve seen on that angle of things.
Hunt: After the terrorist attacks on the World Trade Center, everything stopped completely dead for two weeks. It was almost like the phones didn’t ring at all. Everybody was shell shocked and nothing was happening.
WC&P: We’ve heard that from others around the country.
Hunt: We had the worst September in the history of our company. It picked up a little bit after that. But, a lot of project business, new installations or upgrades and things like that, that we were busy discussing, quoting, negotiating -- all of them got shelved. It was across the board in almost every industry. Now, residentially, it came back the fastest. As a matter of fact, it maybe came back stronger than it was before. I don’t know. We’re sort of guessing that people instead of traveling are reinvesting in their homes. Somehow this tragedy spurred on the nesting instinct in people. Home improvement is big.
WC&P: I’ve heard from people in California, Michigan, Ohio and Wisconsin that they are extremely busy with residential. I think you’re right. It may have to do with the whole fears about bioterrorism and a nesting instinct.
Hunt: Yes, affecting the psyche of the nation. Just in the last week or two, commercial business has been shaking loose again. We went from doing a lot of work out in the plant with people to now scrambling to cover the sales calls, service calls, exchange tanks and the rest.
Click here to view a followup article:
Part 2, An Exchange with DI Water’s Jim Hunt