October 2001: Volume 43, Number 10
Chewing the Fat with Atlantic Filter’s Wakem
by Carlos David Mogollón, WC&P Executive Editor
Reduced support for franchise dealer networks in recent years -- whether as a result of corporate consolidations or marketing priority shifts -- has left the door open for independent dealers and alternative retail approaches in the residential drinking water treatment market to be more competitive, according to James W. "Jamie" Wakem II.
He's taking advantage of that in his market, one of the tightest for water treatment products in the country -- South Florida. That's where Atlantic Filter, of West Palm Beach, has been writing its own rules since founded by Wakem's father, Wallace, in 1952 as a small assembler of water treatment equipment for well drillers, plumbers and water conditioning dealers. At the time, the area was somewhat isolated from major manufacturers.
"In those days, we would have people drive in really from all over the Southeast and pick up product," he said. "You'd be amazed. We had people that would drive in here from Jacksonville and Tampa. They’d come in the morning, drive back and install it that evening. In the old days, that was about a 10-hour drive. Now, with interstates, it's about five to six."
Wakem, the 1998-99 Water Quality Association president, notes his full-time involvement began in 1969 after four years in the U.S. Air Force (including a tour in Vietnam). His father retired in 1980, by which time Wakem headed the wholesale sales department. He and brother Peter ran the business until 1988, when Peter, who oversaw retail, left and started Clean Water America in Fort Myers.
In 1997, Wakem launched the first WaterPlex one-stop shop for consumer water treatment needs at Atlantic Filter's headquarters. A second opened in 1998 and a third in 1999. A fourth is expected to open by year-end. He envisions the company's $5 million-plus business, currently 60 percent wholesale and 40 percent retail, to shift to 80 percent retail -- with higher related profit margins -- within five years. He doesn't necessarily see himself as strictly competition for dealers, though, because his advertising helps grow the pie for everyone.
The company does 15 percent of its revenue in commercial/institutional and industrial applications, but Wakem sees that as holding steady since it's not an area he aggressively pursues anymore. He sees the consumer as his main customer and "big box" retail stores like Lowe's, Sam's Club and Home Depot as his primary competition. With overall growth at 10 percent, it should continue in the 8-12 percent range -- very respectable figures considering the high-growth area's competitive nature.
"Every time you turn around, there are new OEMs; so, though the pie is growing, it’s getting split up more every year... For us to have single-digit growth, I’m comfortable with that. It’s just a part of the business here that’s a constant, over-the-shoulder-type marketing philosophy. Who’s chewing on you this week?" he said.
While changes in the POU/POE industry in the last five years were more dramatic than those from the previous 20, Wakem said grooming supplier partnerships will be key for dealers to not just survive but flourish in the future.
Before the interview, here are a few facts about his company:
Atlantic Filter Corp.
3112 45th St.
West Palm Beach, FL 33407
Tel: (561) 683-0101
Fax: (561) 684-1997
Focus: Assembles and wholesales to dealers a complete line of residential, commercial and industrial reverse osmosis, softening and filtration systems under the Hero, Gulfstream, Clearguard and Atlantic Filter brands. In 1997, opened first of three WaterPlex retail centers in South Florida.
Management: Jamie Wakem, CWS-VI, CI, CSR, President
Douglas Haring, CWS-V, Vice President, Operations
Mark E. Kuyawa, MPH, Engineering Systems
Amanda Wakem, Controller
Employees: 22 (10 wholesale/marketing/administrative; 9 retail; 3 manufacturing)
And now on with the interview:
WC&P: Tell me how about how your business got started, how it’s evolved and how you got involved in it, if you could.
Wakem: Well, the company was founded back in 1952 by my father, Wallace S. Wakem, and it was primarily a small wholesale manufacturer of filtration systems, mainly manual filtration systems along with some water conditioners -- both manual, semi-automatic and automatic models. We incorporated in ’55. We started out as a small quansonhut. And really back in the early ‘50s, we were sort of isolated in the Southeastern United States. There were really not many, if any, other water treatment assemblers in the Southeast. So, we worked closely with Clack Corp.’s Bill Clack and really became an outlet for a lot of the products that Clack manufactured and distributed.
WC&P: Bill is Rich Clack’s dad?
Wakem: Yes. My dad and his dad were real good pals back then. Through the years, as we went into the ‘60s, we became a retailer. We entered the retail market in the mid-‘60s or early-‘60s.
WC&P: Who were your clients?
Wakem: In the ‘50s?
Wakem: We would sell to well drillers. Most of our customers were well drillers, some water conditioning companies and plumbers.
Wakem: In those days, we would have people drive in really from all over the Southeast and pick up product. And we would ship them out daily. We would put them on the truck lines. We would put them on the Greyhound Bus lines or however to ship products to people.
WC&P: Trailways was still around back then, too.
Wakem: You’d be amazed. We had people that would drive in here from Jacksonville and from Tampa to pick product up. They’d come in in the morning, drive back and install it that afternoon.
WC&P: And most people may not realize that to get from Jacksonville or Tampa to your neck of the woods is a pretty hefty drive because of the length of Florida.
Wakem: Well, in the old days, it was about a 10 hour drive. Now, with the interstates, it’s about five to six hours.
WC&P: I just recall, when I lived in Pensacola, it was up to 16 hours from there to Miami by car.
Wakem: It’s a long, long haul. But you didn’t have suppliers of water treatment products that were located in the Southeast. So, unless somebody had something shipped from one of the Midwest manufacturers, you know it was to their advantage to get in the car, drive over, pick it up and then take it back and install it. We would have that. It would happen all the time. And as time went on and the interstates were built, truck lines became more competitive and it became more popular with everyone -- people wound up having product shipped to them. Then UPS and everything else came about which weren’t available back then. So, delivery of product to everybody became much more simple. In turn, we had to be more competitive because they could buy product elsewhere.
WC&P: Is that why you got into retail?
Wakem: No, when we got into retail, it was locally. My father entered the retail market with a couple salesmen who convinced him that we should be in retail as well. And we’ve really been in retail ever since. That, again, was in the early ‘60s. We’ve always been, since that point, both retail and wholesale.
WC&P: Your retail is in what location though?
Wakem: It’s in Palm Beach County. It’s been maintained there up to this point, which is important. We’ve always been able to walk that retail/wholesale thin line locally without upsetting our dealer network, which people are quite amazed at. But, we’ve been very careful not to step on our dealers toes and to be able to work alongside them.
WC&P: How big a dealer network do you have?
Wakem: Well, our dealer network today has shrunk compared to what it was at one time.
WC&P: What was the peak?
Wakem: I think the peak was like everybody else. We built the retail from the early ‘60s, David, where we were aggressively seeking out dealers anywhere in the U.S. We were advertising nationally through the trade publications and we were pulling in dealers from the Northeast and some of the Western markets, Texas, and some of the Southeastern states, Louisiana and Alabama, in that area. Some came out of the Midwest. But what we found as time went on was that it became very difficult to manage for a small manufacturer to be able to support dealers in all those various locations.
WC&P: What was the heyday for when you had the most dealers?
Wakem: Our peak times were the late ‘70s, I’d say. Then up to the early ‘80s was when we peaked with our dealers, but we felt at that point that it was becoming very difficult to manage. And at the same time, we were being confronted with a lot of state regulations that were impacting our dealers and it was difficult to address them on so many different fronts. So, we started to pull our reins in, so to speak. We narrowed our market focus really to where it is today, which is basically east of the Mississippi up into the New England states. That’s really where we try to focus ourselves. We’ve gone from a peak of well over 1,000 accounts to… I hate to say specific numbers because of competition…
WC&P: A range would be?
Wakem: A range would be 200 to 300.
WC&P: And these are the ones that you can work most efficiently with and who are moving your product most effectively.
Wakem: Yes. We have shifted our emphasis though from trying to develop the dealer base as our primary focus to trying to develop “retail water centers” as our primary focus, with those water centers being either owned and operated by us corporately -- as corporate/investor-owned stores -- or individually owned by either Atlantic Filter employees or some of our dealers.
WC&P: What is corporate/investor owned mean?
Wakem: Well, corporate or investor owned. Corporate is us. Investor-owned is we’ve got investors, people who have spoken to us, small investors or investor groups that might want to own six or eight or 10 stores. Nothings actually transpired yet on that, but it’s in the development stages…
WC&P: In this, are you again starting at your base in Florida and expanding or…?
Wakem: No, our primary focus right now is Florida, really South Florida -- not southeast, but South Florida.
WC&P: And how many are there out there?
Wakem: We have two corporate-owned and one individual-owned. But we have one more that we probably will have possibly by the end of this year. So, we have another one that’s just about to come online.
WC&P: Is that investor-owned?
Wakem: No, that’s corporate.
WC&P: Where are these at?
Wakem: One’s right here. I’m sitting in it, which is our corporate office. They’re in Palm Beach County. Our goal is to open up six or eight in Palm Beach County that will all be corporate-owned and go from there.
WC&P: Where’s the individual-owned and who owns that?
Wakem: We have one outside of Palm Beach County.
WC&P: What’s his name?
WC&P: Do you want to give him any publicity?
Wakem: No, I’d rather keep him low-key at this point. What we’re doing at this point is fine tuning everything here and we’re fine tuning it on the outside with the individual. We want to make sure we have everything in place before we have everybody coming in there and inundating them, trying to find out what they’re doing right and wrong. It’s really just sort of a quiet thing we have going on out there, to be frank with you.
WC&P: Let’s go back -- and you and I have spoken about this before -- but tell me how you got into the business and some of the changes that you’ve observed since then.
Wakem: OK, well, I used to work in the business as a summer job. There was always a need for somebody to unload the trucks, drive the forklift, unload the salt, help with manufacturing, building filters, etc. So, I always sort of had the opportunity to come in on weekends and after school, etc., sometimes during the summer, and work some of the different assembly jobs or service type positions. My father’s philosophy was -- and this is kind of contrary to what you find today -- “It’s not who you know; it’s what you know.” He believed that you should learn everything from the groundfloor up. I spent years as an assembler, many years as a service man and then eventually got into sales, where I found sales was where I felt more comfortable and where I was able to be more effective.
WC&P: When was this?
Wakem: That was in, again, the late-‘70s. I came to work for the company full-time after I was discharged from the Air Force in ’69, and I’ve been there ever since. I took over the sales department in the late-‘70s. We grew quite rapidly at that point, to be honest with you. My father retired in ’80. And my brother and I, at that time, took over the business, with my brother overseeing mainly the retail side of the business and I oversaw the wholesale side of it.
WC&P: I haven’t met your brother. What’s his name?
Wakem: Peter. We split up at the end of the ‘80s, like in ’87 or ’88, and relocated to the west coast of Florida and he has two water stores over there called Clean Water America that both do very well. There in the Anita Springs and Fort Myers area.
WC&P: I almost moved to Fort Myers once for a job.
Wakem: It’s nice down there. It’s about 20 years behind where things are in this place (development-wise) so he’s starting to go through all the things we went through here 20 years ago. It’s sort of neat because he’s got a good vision of where to buy real estate since the same things are happening. He’s made some pretty good investments and is doing alright.
WC&P: In talking with Scott Brane, who we’ve interviewed for this column and also is on Florida’s west coast, he mentioned similar issues.
Wakem: It’s nice for my brother. We worked together and then we split up. I’ve basically just worked through all the facets of the business and have always been able to theoretically fix whatever we’ve sold or make whatever we sell. It’s helped in managing the business. I’ve been active on the R&D side of it. We got into the RO business, manufacturing reverse osmosis systems, starting back in the early-‘80s and we came out with a product, our HeRO product line, which we’ve sold since then. It’s a good part of our business. We still sell to the same type of distribution. The distribution system still goes to water treatment dealers, plumbers and well drillers, etc. However, we have been focusing more of our efforts on our own retail side because we believe -- and this is important -- that to be able to deliver our products to the consumer in a consistent manner requires us to be in the distribution loop, so to speak.
WC&P: Describe for me, if you could, how that works? Effectively, customers can come in off the street and buy product directly in your store?
Wakem: Uh-huh. Our water stores have a full array of products.
WC&P: And that also incorporates all the service, deliveries and installation as well?
WC&P: So, it’s kind of like a traditional water treatment dealership?
Wakem: From a traditional water treatment dealership, the difference would be that we have large, well-stocked showrooms. We display a multitude of products.
WC&P: Not just RO and softeners?
WC&P: What’s the range?
Wakem: Everything really from, I would say, small, countertop water filters all the way to offerings of commercial systems… Well, not commercial through our water centers. Rather, it’s everything that treats your water at the home level, small filters, replacement cartridges, housings, chemicals to clean…
WC&P: Anything and everything, in other words -- a one-stop shop related to water treatment for the home.
WC&P: What about commercial/industrial?
Wakem: Really our commercial/industrial side of the business (is) mainly commercial. We don’t do a lot of industrial work, but we do do commercial and, you know, institutional work. That means hospitals, condominiums, etc. Primarily, we're marketing the consumer for drinking water and for home point-of-entry water treatment systems. That’s our focus. Years ago, we were trying to do more commercial/industrial. We were going after all of those things. But really, David, we respond to that when an inquiry comes in for an application like that, but we’re not aggressively attacking those markets anymore. We used to, but now we’re very focused on the consumer.
WC&P: What are things that are affecting that market for you? There’s always turmoil when you go to some of the WQA events: What’s the future of the dealer? Is the dealer going to be overshadowed? Is everyone going to “Big Box”? How is the Internet going to affect things? You’ve been somewhat outspoken about many of these issues.
Wakem: Well, I feel the industry is changing. I feel it’s changing very, very rapidly. And the changes that we’ve seen have been dramatic. We’ve probably seen more changes in the last five or six years than we saw in 20 years. And I think probably in the next five years, we’re going to see many more changes, though I don’t think they’ll be as dramatic as we’ve seen in the last five years. I think you’re going to have more consolidations. I think you’re going to see a narrowing of the dealer base.
WC&P: You’ve already seen that in the last few years. I mean Texas Water Quality Association has brought that up as an issue in some of the problems it’s had, where there’s fewer small dealers and more big dealers buying up multiple dealerships.
Wakem: That is true. You’re going to see that happening. You’re going to have more of this mega-dealer than the smaller ones or the mid-size ones. It’s almost as if you’re going to have the mega-dealers and the very small dealers, the real mom-and-pop operations. The mid-sized dealer -- that’s been there historically -- is the one that’s going to be suffering.
WC&P: They’re either going to be buying or being bought?
Wakem: They’re either going to sell out and get out of the business or the larger dealer who is looking for more market share is going to buy out that person. They’re going to find it tougher to compete.
WC&P: They also could be buying up other dealerships and turning into a mega-dealership.
Wakem: Yes. But you’re going to find that you’re going to have the very, very small and then the much larger dealership.
WC&P: Why is that?
Wakem: Why? It’s because I think the key is you don’t have, from a manufacturer/supplier standpoint, the commitment that was there 20 years ago to build a strong national dealer network. I don’t see it.
WC&P: How has your experience either been reflected in or reflective of that?
Wakem: From a competitive standpoint, I have found that where historically you had the large franchisee network out there that you were competing with -- who really was your competitor -- that’s not the strong competitor anymore in the way that it used to be. That’s probably a poor way to phrase it, but the Culligan’s, the ServiSoft, the Rainsoft, the Lindsay -- now the EcoWater -- dealer that, before, really was your competitor don’t have the edge they used to have. There was advertising, there were commitments that were made, public relations and things, you ran into these people everywhere you went to talk water -- now, you don’t see them as much at all. And you don’t really see, if you watch television or listen to the radio and things, where are all these ads for franchisors? Where are they? I don’t see the effort. And the reason I don’t see it is it’s not there. The commitment’s not there. Well, if he commitment’s not there to build it, it won’t grow.
WC&P: Things affecting that are rising costs, competitive channels to market…
Wakem: I think the thing that affects it is, personally, a lack of commitment at that level, at the corporate levels that build those kinds of networks, dealer networks.
Click here to view a followup article:
Part 2, Chewing the Fat with Atlantic Filter’s Wakem