January 2004: Volume 46, Number 1
Watts’ White Wins `em Over
by Carlos David Mogollon, WC&P Executive Editor
Stealthily, Watts Industries--renamed Watts Water Technologies Inc. in October--acquired 60 companies since 1987, only catching the point-of-use/point-of-entry industry's attention when it bought reverse osmosis and filter maker Premier Manufactured Systems, of Phoenix, in June 2001. Premier, founded in 1989, had annual revenues of $8 million at the time.
That same week in 2001, Watts hired Doug White as a group vice president to oversee Premier, where he's based, and three other companies. As of November, add another to his responsibilities, Flowmatic Inc., of Dunnellon, Fla. Terms of the sale--to be completed this month--weren’t disclosed, but White said management likely will remain in place long term, which generally reflects Watts' acquisition strategy of buying well-managed companies that complement and broaden its existing operations.
'The Watts strategy, in terms of water treatment, is first to grow our core business that we now have, which is Premier and now Flowmatic,' White said. 'But we've known from the beginning that, to have a meaningful strategy in the water treatment business, we needed a connection to the water treatment dealer. And, obviously, Flowmatic gives us that.'
Founded in 1980, Flowmatic--a maker and distributor of RO and filter housings and components, etc.--has annual sales of $12 million. For more on its background, see our Executive Q&A interview with Flowmatic president Scott Brane in the May 2001 issue of WC&P.
A 128-year-old company, Watts is based in North Andover, Mass., and got its start producing steam regulator valves for the textile industry. With over 5,000 products, it built a reputation serving all the valve control and backflow prevention needs of the plumbing and heating markets and, more recently, has moved to add water quality to that. Of its $600 million a year in sales, about 19 percent of the volume is in water treatment, White said.
White came to Watts from Honeywell Consumer Products Group in Boston where he was executive vice president of marketing. Before that, he was with Broan/Nutone in Hartford, Wis. He also worked for Northland Aluminum in Minneapolis and spent 14 years with Borden Corp. White has served on the manufacturer's board of the National Association of Home Builders, on the Home Center Marketing Council, and as president of the Air Force Academy Parent's Association. A 1966 Texas A&M graduate with a business degree, he’s a native of Dallas.
He didn't come to Watts without experience in water treatment. When he was at Honeywell, it was in the POU/POE market with simple filtration systems while developing its own RO solution. When P&G bought Pür and Brita geared up its pour-through pitcher advertising budget, however, Honeywell bowed out. While with Northland, he also helped develop the first end-of-faucet filter with lead removal as well as a residential drinking water test kit sold at Target, Wal-Mart and Kmart.
White noted Premier has been geared similarly toward retail and OEMs in the past, but new products such as the Zero Waste RO introduced last year have more of a dealer focus. The company is very excited about that as well as a Zero Waste conversion kit for retrofitting ROs and a new RO manifold. It also now produces systems up to 15,000 gallons a day for commercial/light industrial use. Flowmatic brings a reputation among dealers offering advantages for even wider distribution of Watts products.
Before we get to the interview, here's some background on the company:
Watts Water Technologies/Water Filtration Group
1725 W. Williams Dr., #C-20
Phoenix, AZ 85027
Tel: (800) 752-5582
Fax: (623) 931-0191
Doug White, Group Vice President, Watts Water Technologies
• Watts Premier (www.wattspremier.com)
Vice President & General Manager--Matt Sweetman
Vice President of Residential Sales--Bob Maisner
Vice President of Municipal Sales--Shannon Murphy
• Watts Pure Water (www.wattspurewater.com)
Vice President of Commercial Sales--Josh Hanford
• Watts Flowmatic (www.flowmatic.com)
Vice President & General Manager--Scott Brane
• Others in White's portfolio: Watts ACV, Watts Radiant and Watts Spacemaker
Employees: Over 5,000 for all Watts companies
Revenues: Water treatment makes up 19% of volume of Watts' $600 million a year
For the full interview, read on:
WC&P: How long have you been in the business and how did you get started?
White: Watts, first of all, is 128 years old as a company. It started producing valves in New England for the textile industry, steam pressure valves. And over the years, it's become the largest company in the industry dedicated strictly to plumbing valves and plumbing products. It's a New York Stock Exchange company listed under the symbol, WTS. It's headquartered in North Andover, Massachusetts.
WC&P: Pressure valves for the textile industry, that's a market that's gone through changes.
White: At the time, the textile industry was headquartered in Lawrence, Mass., before it moved down to the Carolinas. Most of the companies that are now in the Carolinas started out in Lawrence.
WC&P: Tell me a bit more recently of your experience in the water treatment industry, if you could.
White: Well, in my first experience in the water treatment industry, I was with a company called Northland Aluminum in Minneapolis. Among the many housewares products that we had there, we--and I--developed a faucet-end carbon block filter and a water test kit. That was my first opportunity in the water treatment business. Then, a few years later, I was working with Honeywell's Consumer Products Group. I was vice president of marketing there in Boston. And we had a reverse osmosis product that we were selling primarily at retail. We were a retail company. We were selling to a number of the big box retailers.
WC&P: When would that have been?
White: It was about four years ago--I guess five years ago now. Soon after I got there, we elected to exit that business.
WC&P: I think I recall that.
White: But I was involved for about a year and a half there before being recruited by Watts to join them as a group vice president. Over their history, actually from 1987 to the present, Watts has made almost 60 acquisitions. Most of those have been in the plumbing valve industry, but they'd made a decision to broaden the product offering to a concept we call "Water by Watts." This is a concept that says that it's possible for a contractor, be it commercial or residential, to completely use Watts products for everything in the building from the connection to the water main to the actual faucets and porcelain fixtures they use. We're not in the faucets or porcelain fixture business, but anything behind the wall that attaches to that we are into. And we saw the water treatment industry as being a critical part of completing that process.
WC&P: Is that the reason you were brought on board?
White: Yes, three years ago. Well, I was brought on board as a group vice president, so I have responsibility for other than water treatment products. I was given that responsibility and, for the last three years, have been involved in that and a couple of other areas within the company.
WC&P: So, it's actually been since the acquisition of Watts Premier up in Phoenix, where you're headquartered out of?
White: Yes, they moved me out here from Boston.
WC&P: The weather's a lot nicer.
White: It certainly is.
WC&P: You don't have the fall colors, though, unless you're going up to Flagstaff.
White: We just have the fall colors all year. It's brown here all year.
WC&P: Since then, what's your focus been? How do you talk about the Watts strategy since you just recently made the acquisition of Flowmatic?
White: The Watts strategy, in terms of water treatment, is first to grow our core business that we now have, which is Premier and now Flowmatic. But it's also a very aggressive acquisition strategy. We're a company that, in the history of our acquisitions, have been very careful to make sure we buy businesses in a manner that we could profitably operate them after we've purchased them. So, you won't find Watts buying companies and then two or three years later having to sell them because they paid too much for them in the beginning.
WC&P: Sounds like a swipe on Vivendi there.
White: And we also look for businesses that have a good deal of synergy with our existing businesses. We wouldn't buy a company like Flowmatic without looking at that and what impact it will have on our other businesses. Flowmatic can distribute a lot of product that Watts makes in other segments as well. The strategy has been to broaden our market basis. With Premier, we primarily sell to retail and some OEM commercial business. But we've known from the beginning that, to have a meaningful strategy in the water treatment business, we needed a connection to the water dealers. And, obviously, Flowmatic gives us that. Watts is a company that, in its history, has been strongly dedicated to distribution channels. The great majority of the Watts products are distributed through plumbing distributors across the country. We've carefully avoided direct selling to contractors or even housing companies--anything like that. So, we are strong supporters of distribution and we see the Touch-Flo acquisition as being an important component to that. Obviously, our plumbing distribution doesn't reach to the water dealers.
WC&P: You mean the Flowmatic acquisition?
WC&P: Is Touch-Flo next?
White: Oh, no, I'm sorry. I was working on a Touch-Flo faucet project this morning and can't get it out of my head. So, we see that as a good acquisition. We know that just in the RO business that over 50 percent of the reverse osmosis residential product is sold through dealers and we think that's going to become stronger not weaker even though it's suffered a little bit the last couple of years. We think it will be much stronger and we feel we're in a good position to support that.
WC&P: That's generally been our focus as a magazine in that these are not your normal type of products--appliances--because there's generally some type of value-added service that's required with them.
White: We've actually done a good deal of research that tells us that the consumer looks at the dealer for their expertise in the industry. And these products are complicated enough that most consumers don't feel like they have the expertise to make the proper decisions. But they also look at them (dealers) to maintain the systems and to initially install them as well. So, we think the dealers are an extremely important component in this industry.
WC&P: Now, how much was the Flowmatic acquisition for, anyway? What did that run?
White: How much did we pay for it?
White: I don't think I'm at liberty to say just now.
WC&P: It comes out in your 10Q report (that's filed with the SEC), yes?
White: It will come out in the 10Q, but I think I have to leave it there. The reason I say that is we haven't published the 10Q yet that covers that and, under the new Sarbanes Law, we can't discuss anything that hasn't been released yet. I need to be a little careful there, more careful than I would have been a year ago.
WC&P: This kind of touches back into another aspect of what we've been talking about, but my next question is--tell us a little bit about your company and what's new? Since you've acquired Premier, how has that transition gone, what's new at Premier and what do you anticipate the approach with Flowmatic in integrating it into the company being?
White: At Premier, we've been heavily involved in developing new products here. We just recently introduced our new manifold product, which replaces the type of reverse osmosis system that we were selling in the past. We now have a fully integrated manifold which reduces a lot of leak points and makes the connections using the John Guest connectors, simplifying the installation process. We're very excited about this new manifold as are our customers, mainly because it's easier to install. And, of course, our primary customer here is a consumer that installs it themselves. The dealers that we sell to, however, are also excited about the new manifold because it's easier for them to install, which cuts potential problems downstream.
WC&P: And easier to maintain, too, I imagine.
White: Yes. The other area we've done really well with--and primarily is your dealers--is your Zero Waste product that we introduced this year.
WC&P: My father-in-law bought one of them.
White: Oh, wonderful. We're having good response with that. We have it both in a standalone complete RO system and we also have a kit available that let's you--if you already own an RO system--convert it to Zero Waste. That's being received extremely well and, as I say, primarily it's your dealers.
WC&P: That was just introduced this year, though.
WC&P: My father-in-law bought it at Home Depot, I believe.
White: Yes, it's at a couple of Home Depot stores, but it's not (targeted for them, generally).
WC&P: I don't think he installed it himself. I'm pretty sure he hired a plumber to come in and do it for him.
White: I would say 90 percent of our sales of that product have been through dealers, and that's where we positioned it. We don't really see it long term as a big box product. Then, on the larger size units, we've developed a complete line of units that go up to 15,000 gallons a day. And we're doing very well with those products, selling them primarily to people that use them for process water.
WC&P: Commercial/light industrial?
White: Yes. A lot of hospital applications and that sort of thing--that's kind of the niche that we've gone after there. It's real high-end product with a lot of user-friendly interfaces for hospital that's using it to support sterilizers. So, that's been very good for us here as well.
WC&P: And how do you see the integration occurring with Flowmatic, which is across the country in Florida?
White: Yes. We see a lot of opportunity here to, first of all, market Watts products through Flowmatic. The dealers have to buy a lot of standard plumbing-type products, valves, regulators, that sort of thing. And, now, Flowmatic will be able to offer those to them on acceptable terms to the dealer, rather than having them have to go to a local plumbing distributor, which is a problem for them in terms of timing and logistics and probably cost as well. We see that as an immediate positive. Flowmatic will also be able to benefit from some of the products we've done here, the Zero Waste being a good one that will give us a good distribution arm to put Zero Waste out among a lot more dealers across the country. The biggest thing is the Flowmatic acquisition gives us access to that marketplace--that dealer marketplace--and it's well respected in that marketplace and has the expertise the dealers need.
WC&P: How much of this segment that you're talking about is it in terms of the overall revenues of Watts--which just recently changed its name to Watts Water Technologies from Watts Industries, we should point out? How much is this segment in that overall picture?
White: Well, we calculate the water treatment segment at Watts at about 19 percent of our volume. That goes beyond Premier. That goes to products that are produced by other divisions within Watts that are marketed through the various water treatment channels.
WC&P: Such as?
White: Oh, backflow preventers, a number of things that get installed in water treatment applications and desal plants and that sort of thing.
WC&P: What are you anticipating with Flowmatic? I assume that next year, you're expecting there might be a jump bringing it onboard?
White: Well, with 19 percent of the total Watts business and Flowmatic being about a $12 million business, as indicated in the press release we put out, that will be additive to the volume we're talking about--that's not greatly affected by that small a number. Still, it will certainly move the needle.
WC&P: I assume you're looking at other companies as well, considering you mentioned the acquisition strategy is rather aggressive at this point with Watts.
White: Yes it is.
WC&P: It's good timing with the market, too, I assume?
White: Well, there's been such crazy multiples going around with some of these purchases that I think there may be a cooling off period here before acquisitions become viable in this industry.
WC&P: What kind of things do you look for in a company?
White: Well, we primarily look for companies that will provide synergies to the businesses we are now in.
WC&P: As such, what synergies are you looking for?
White: Well, the same kind of distribution philosophies and complimentary products. Strong management within those companies is good. We're not a company that goes in and buys companies and makes significant changes to the management structure. If you look at Premier, the management structure is completely intact here from when we bought the company, because we bought a company with strong management in place. And we're doing the same thing at Flowmatic.
WC&P: So, Scott Brane and Neal DeLettre will be kept on?
White: Oh, absolutely. We see them as long term Watts people.
WC&P: I was chatting at the WQA Mid-Year conference with Dean Spatz, founder of Osmonics, and GE has somewhat of an opposite perspective. They kind of like to clear things out and bring in a new perspective on things, keeping maybe the mid-level management to move forward with…
White: Well, of the four companies that I'm responsible for before this acquisition at Watts, each of those where the people that were running the company before we bought it are still running the company.
WC&P: What are those companies, by the way?
White: The first one is a company called ACV, which is Automatic Control Valves, down in Houston. And that was one of the early acquisitions. That company has been a Watts company since 1987. The son of the gentleman we bought the company from still runs that division. He was active in the business back then. His father retired and he took over. The second is Watts Radiant, which is located in Springfield, Mo., and is a major producer of radiant floor heating products. We bought that from two brothers, the Chiles brothers, and Mike Chiles is still the president of that company and his brother is a vice president there. And then, Spacemaker is a small division out in Southern California--Santa Ana, Calif.--that does restraining products, seismic restraining products for water heaters and boilers. And the management there is still in place. Then, here at Premier, we've made a couple of additions to the management team, but we've not replaced anyone.
WC&P: Bob Maisner is still there, who's well known by a lot of people in the industry. And you recently added Shannon Murphy, who's obviously known by a lot of people by his previous work with NSF International.
White: Yes, he's been a great addition for us.
WC&P: Who are the upper management at Watts Water Technologies, the parent company?
White: Our CEO is a gentleman named Pat O'Keefe. Pat's had a long history in the water treatment industry and joined Watts a year and a half ago. He replaced Tim Horne, who was the previous CEO and chairman of the board. Tim was the third generation of the Hornes in the business.
WC&P: Is he involved in the business still?
White: He's very active on the board.
WC&P: What are some of the other companies that Watts owns?
White: Watts Regulator is the operating company in the U.S. and we own companies like Anderson-Barrows, which is a major supplier of flexible supply lines. We certainly own the regulator business that build backflow prevention and TNP valves. Watts developed the TNP valve on top of your water heater and has a significant share of that business. We have a significant share in the backflow prevention business. And Regulator makes something like 5,000 different valve products in three different foundries around the world. We have over 100 locations around the world.
WC&P: Wow. I recall when Watts bought Premier, Robert Slovak, whose brother and he started up Water Factory Systems and then sold it to CUNO, mentioned, "That's a big deal. You guys should pay a lot more attention to that." He saw that as telling of a lot of good things coming because of your expertise in the industry and dedication to the market. You may have times where companies come in and may not have a background in water treatment and buy a company moreso maybe as an investment. So, a company like Watts coming in, he saw as having more of a commitment to whatever they were going to acquire.
White: Yes, I would say that we've got a strategic acquisition policy as opposed to just a financial one.
WC&P: What do you anticipate as far as market growth in the water treatment segment next year?
White: I think we're looking at double-digit.
WC&P: As opposed to this last year? How has the economic slowdown of the last few years affected things there?
White: Our business has been very good. We've seen throughout Watts and certainly the Premier business, a double-digit increase.
WC&P: So, it hasn't been affected?
White: Oh, it's been affected. It's hard to put a number on that, but it certainly has been affected.
WC&P: Still, you're looking toward next year with a more positive feeling?
White: Oh, yes.
WC&P: What will be the things you'll be looking for in terms of indicators for your markets?
White: We think on the retail side the indicators are certainly up. The big box people are all talking about increases in their basic departments, plumbing and electrical. That's very positive for us. For example, on our Radiant business, we have an electric product we sell for tile-warming that's become extremely fast growth in the retail segment through tile distributors and the big box retailers. We see those kind of things, comfort- and safety-related products, as being very big at retail. We see the same thing happening on the water treatment business. People are very concerned and moreso all the time about the quality of their water.
WC&P: Tell us an interesting story or anecdote about your experience in water treatment? This could go back to your earlier days or focus more recently.
White: I don't think of many things as humorous anecdotes.
WC&P: Doesn't have to be funny so much as fascinating or offbeat even.
White: It's a tough question.
WC&P: It's one that tends to add a little extra insight or levity to the situation when--pardon the pun--some aspects of the water treatment industry can be a bit "dry." This adds a little water to it to keep reader interest growing.
White: I understand that.
WC&P: Your experience with Honeywell might be interesting. Why did it get out?
White: Honeywell got out of the business because their sole reason for entering the business was to go after the retail market. By definition, the division of Honeywell was their retail division, so we weren't looking for any distribution opportunities. And one of the things that we recognized was that water dealers, the distribution side, would always be a very large size of the business. On the other hand, on the retail side of the business, you had people like Procter & Gamble entering the marketplace…
WC&P: Buying Pür, or Recovery Engineering…
White: …who were going to spend vast amounts of money on advertising to grow that side of the business. And we saw that really having an affect on pitchers and faucet-end units, basically driving the consumer to lower-value water treatment products than we anticipated bringing out. We were going after some solutions like reverse osmosis that we thought were right for the consumer and I would still think are right for the consumer. But we saw, on the retail side, the P&G and Brita people driving the consumers to the low end of the marketplace. That wasn't an arena that we wanted to do business in.
WC&P: Kind of cuts the margins and your ability to actually grow your business.
White: Yes, and we didn't think it actually was the right solution for consumers. But, obviously, we were not going to spend $30 million a year to tell them that.
WC&P: That being the advertising budget you'd have to compete with. What about earlier when you were with Northland? How did that compare? When was that by the way?
White: That was back in the late '80s. At Northland, we produced a very nice faucet-end filter. It was a real pioneer in the industry. It was the first product that I'm aware of that could talk about lead removal as a faucet-end filter. The interesting thing was we also developed a water test kit and did a lot more volume with it than we did with the filter, as it turns out.
WC&P: Was it a pool water test kit or a general drinking water one?
White: No, it was a drinking water test kit.
WC&P: There wasn't much on the market then, I don't think.
White: No, I don't know that there was anything on the market at that point, particularly for our customer. We were a housewares company, so our customers were the mass merchandisers. We put the water test kit in Target, Wal-Mart and Kmart. It was a pretty important product.
WC&P: How did they come about doing that type of product?
White: Northland is an interesting company. It's a family owned business and the chairman, the founder of the company, by training was a chemical engineer and became interested in the water treatment category. He was a very bright gentleman who thought there was a better solution to the faucet-end than was currently on the marketplace. We worked with a consultant, Peter Cartwright who's still involved in the industry.
WC&P: He's actually a founding member of our Technical Review Committee.
White: I noticed that. We developed the product with an awful lot of assistance from Peter. He was critical to it.
WC&P: He'll be glad to hear that.
White: I have to admit I haven't talked to Peter in years. I'll have to reacquaint myself with him.
WC&P: I believe he'll be in the area in a month or two. He occasionally enlists the assistance of the University of Arizona's Dr. Chuck Gerba on projects he's working on. I don't know if you were aware, but Dr. Gerba--affectionately known as the "bug man" locally--is considered one of the premier POU/POE device testing gurus. One of his former students, a research scientist at the university also, Dr. Kelly Reynolds, writes our On Tap column and is married to the publisher. That aside, what's a major challenge you or your company faced and how did you overcome it? This could be anything from your experience at Northland, Honeywell or Watts.
White: I think a major challenge in the reverse osmosis business has--and it sounds like a small issue, but if you're into business, you understand it--is how do you make the connection between the home water system and the reverse osmosis unit. One of the advantages we have at Watts is we are a major manufacturer of valves made basically out of any sub-strafe--plastic, brass, bronze, ductile iron, stainless steel. And we knew there had to be a simpler solution. A lot of people were using a saddle-T connector, which doesn't meet code and is very difficult to install if you don't have exposed copper under the sink. Other people were using units that mounted to the bottom side of the regular faucet, which meant you had to reach way up behind the sink and you had to have a faucet wrench to attach them, which now with the new deeper sinks was becoming more and more difficult a proposition. We actually developed a valve that will mount right on the angle-stop. You can pull your water right off of there. The valve--we call it an Adapta Valve--actually will adapt to 3/8ths or ½-inch angle-stops, so it will work with either one. It's very simple to install and, of course, the angle-stop is the easiest place to make that connection. So, that's been a great solution to us. And when we went into the Zero Waste system, where we're connecting to the hot water and cold water, it just doubled that issue. It's been a great solution and an easy one for us to solve because we're basically in the valve business. We knew who to call to design the product that we needed.
WC&P: It sounds like, you know, you come back to the theme of doing things so that they're designed simply and their installation offers a time-saver value that's connected to it.
White: Yes, I think that's very accurate. I guess I would add to that also that they have long term dependability. One of the problems in using a saddle-T, for example, is they tend to be a leak point in a system over time. Whereas, this product is of very high quality, made out of solid brass, does a great job and will last as long as the system or the home plumbing system lasts.
WC&P: As you mentioned, the saddle-Ts are also a big problem for dealers and plumbers alike in the sense that building inspectors hate them and likely will red-tag a system when they're discovered.
White: Oh, yes, they're a clear cut code violation. And that's a good example also of the synergy that we see between Premier and Flowmatic. Those products will become immediately available through Flowmatic and we think dealers will welcome that product rapidly.
WC&P: Save them a lot of grief.
WC&P: From your perspective in the market, where do you see the industry going?
White: I don't see distribution changing a lot from where it is today. I think the dealer, if anything, is going to get stronger. And I think the industry is going to depend on the dealers. I think dealers will become more technically adept than they are today just because the marketplace is going to need that. And I think most good dealers would welcome that. So, I think the dealer side of the business is going to become more important than it is today. And it's extremely important today. A lot of people are concerned that the retail segments are going to damage the dealer. That may have been true in the past, but I think it's pretty well over with. I think the dealer is going to be a very strong part of the marketplace.
WC&P: It's interesting you say that. Maybe there hasn't been a mindset shift toward what you're talking about because you there's still a lot of discussion still even within the WQA over what's the role of the dealer, particularly when they look at things on a U.S. vs. international basis. How much are you doing internationally?
White: At Watts, we do an awful lot internationally. We are very strong in Europe. It's a very significant part of our business. I don't have the number right at hand, but it's a huge part of our business. We're very active in the Pacfic Rim as well. And we have large operations in Canada.
WC&P: And through Flowmatic, I know through our other magazine, Agua Latinoamérica, that they're doing a lot of work down in that region as well.
White: Yes they are.
WC&P: So that offers another synergy for you, I would imagine. What about through Watts Premier or other things in water treatment in the group of companies that you work with?
White: At Premier, we do a significant amount of business in Canada and that's about it. We don't do much internationally. At Radiant, my other business up in Missouri, we do a lot in Canada and quite a bit throughout Mexico and South America. And obviously, they're not cold temperature markets so the need for heating is a little different down there.
WC&P: True. But they like to have those tile floors, which can get quite cold in winter.
White: Yes, they do.
WC&P: What's the one hot-button issue you see facing water treatment dealers or the industry that will have the most impact in the next few years?
White: I think the Safe Drinking Water Act of 1996 is going to have a huge impact.
WC&P: How so?
White: In the ability to use POU/POE equipment to meet the arsenic standard.
WC&P: Ah, OK. How are you positioned on that?
White: We're working hard on that. We're one of the sponsors of a conference held last February down in Orlando that was sponsored jointly by NSF and EPA to solve that problem. We have several case studies going now where we're working with small water districts that are going to be using small point-of-use systems to show our solution to that. And what we've brought to that is a much better cost basis to the utility than they've seen from other manufacturers in terms of their POU solutions. Shannon Murphy is working very hard on that project.
WC&P: Does that change the character of the business at all?
White: I think it does, because if you go to a market that has to use that solution to get to arsenic, the particular dealer that's involved with the installation of those units will pretty well control that market. He will have to be back in the home under EPA regulations every six months or every year to maintain those units. Every consumer in that marketplace will have to utilize his services to do that.
WC&P: Would that be done somewhat similar to a telephone company leasing out a telephone or how would the setup function?
White: That's one possible solution. And I think each individual utility may deal with that differently. In some cases, the consumer will own the product. In other cases, the consumer will lease it or the cost of it'll be contained in their normal water bill. There's a lot of potential solutions there for the water districts, and they'll all be used, I would think.
WC&P: I guess the long range question is seeing how the technological efficacy matches up with the marketing or realities of who handles it best in whatever fashion.
White: Yes. And I think one of the key issues here is the company or local dealer the utility elects to use to meet this standard will have to be a company of long-standing reputation. And we think Watts brings a lot to that equation, because this water utility maintains 100 percent of the liability to make sure they're delivering that reduced arsenic water to each of their hookups. So, they have to have dependable product partners in terms of a supplier of the merchandise who, in our case, will be the same party that guarantees those households will get service on a regular basis and the product will be maintained. It's not just a matter of them buying x number of RO units, installing them and then it's a done deal. It will be a long term service commitment and they're going to need to have that commitment from a company that has long-standing in the marketplace. We think Watts can do that, so the agreement here would be between Watts and the water utility.
WC&P: That brings up another issue related to regulations and that is the radium issue, which seems to be in the upper Midwest mostly, where they've talked about pretty much the same application, i.e., that POU/POE can be used as a test to go in and see about the efficacy of this technology, monitoring and working out the kinks related to the declaration in the SDWA Reauthorization that POU/POE was cited as among the best available technologies (BAT) to solve the problem of non-compliance for small systems to federal drinking water rules. The need being to make the theory a practical reality in the marketplace.
White: That's one of the nice things about it. At the same time as it solves the arsenic problem, it can serve as a model to serve others like the one you mentioned. Perchlorate is becoming a big issue as well.
WC&P: And MTBE.
White: Yes. We're proposing and doing case studies in all of those areas.
WC&P: One of your big markets you mentioned was Canada and then you're on the West Coast with Premier, for which logistics would seem to suggest a strength in California. There are situations regulatory-wise with both areas now that are somewhat telling on challenges to the industry. What's your perspective on those?
White: Tell me a little more, so I know specifically what you're referring to, please.
WC&P: In California, we've got the issue of brine discharge on a couple of levels, which relates primarily to softeners, but recently was applied to concentrate from RO systems. You've got potential bans of equipment there. And then in Canada, you've got them developing drinking water treatment unit standards now, which is somewhat of a more proactive joint stakeholder approach than what's been done in the past. But, it nonetheless is a challenge as well as an opportunity.
White: We're involved with the Canadians and we've got three test cases going on that I know of there where we're looking at reverse osmosis for a solution for exactly the same issues we were just talking about. In addition to that, you talk about brine discharge. Here at Premier, we're not really active in the softener business. The RO business is the issue for us. And we think the Zero Waste is a perfect solution to that problem. There is no water being wasted and there is no discharge from our Zero Waste unit. And that's why we think there's great synergy to the Flowmatic side of the business as well.
WC&P: I have to tell you that I'd been trying to tell my father-in-law for a while that he should get an RO and he didn't want to get one because of the amount of wastewater, not so much the concentrate or brine level as the water wastage, because he lives in north Phoenix. So, when I told him there was a zero discharge unit out, he went and bought one to replace his water filter. It provided the solution he was looking for very well. And I imagine that's another sort of selling point in arid areas like the Southwest.
White: Oh, absolutely. The industry talks about the fact that your wastewater is up to four gallons for every gallon you produce of RO water. The truth is they're all actually much higher than that. Because, if you have a system that's designed to produce one gallon for every four gallons of wastewater, that's with an empty tank. You fill the tank up and pull a couple of cups of water off of that so that it's now refilling the top of that tank--with the back pressure from the tank, your membrane becomes much less efficient. And, at that point, you're producing 18-20 gallons of water for gallon that actually goes into the tank. The wastewater is a constant. It runs at the same volume all the time. Whereas, if you've got back pressure from the tank because it's full or close to full, then the efficiency of the membrane drops dramatically. So, it's not just a matter of four gallons. It's a matter of a much higher number. In fact, we think the average is up somewhere around 15 to 16 the way most people use RO. Most people don't go to their RO system and drain the tank each time they use it.
WC&P: Someone told me about that--Peter Cartwright, to be exact--and I actually try to drain as much off each time I use the RO, when I'm thinking about it, but the general consumer is completely unaware of that fact, I would imagine.
White: Yes, and it's not the way you use it. You don't use 2-1/2 gallons of water a shot. For most people, that's a full days use. That's kind of the average day's use.
WC&P: It takes them back to the mindset of filling up a pitcher and filling your ice trays and filling up whatever else all at the same time.
White: And a large majority of RO users today also are using double-door refrigerators and have their icemaker and chilled water coming through the door…
WC&P: In dribs and drabs making that efficiency worse.
WC&P: Good points.
White: And, of course, the industry has never been real quick to tell people it's not really four gallons going to waste. That's the answer they'll give you if you ask, but the industry--and including Premier, I would have to say, until we developed Zero Waste--was never quick to tell people that number's probably more like 15 or 16 gallons.
WC&P: Are you anticipating that the zero discharge RO will become your flagship product?
White: It is our flagship product today. I don't think it will ever become our largest selling product, simply because it's a good deal more expensive.
WC&P: I don't know if you've got statistics that show how much you'll save in water usage over a certain period of time, but I imagine--like a hybrid car or vehicle--that long term savings might make it more palatable to more consumers cost-wise.
White: No, we don't. What you have to do to market those statistics is almost prohibitive.
WC&P: Those were all my questions. Was there anything you'd like to close with?
White: I hope that the industry realizes that our purchase of Flowmatic is a clear signal that Watts continues to support distribution and believes in the long term viability of distribution (with dealers).
WC&P: I would like to get a couple more background facts from you, if I could. Where are you a native of?
White: I was born and raised in Texas, but I moved to Phoenix from Boston. So, I've lived in a number of places across the country.
WC&P: Where did you grow up in Texas?
WC&P: How long were you in Boston?
White: Four years.
WC&P: And then all over in between?
WC&P: Where did you go to college?
White: Texas A&M.
WC&P: What year did you graduate?
White: Ninety-six--oh, I'm sorry, '66. Don't I wish it was '96?
WC&P: You could be a young guy. And your degree was in?
White: Business--marketing and finance.
WC&P: Did you go to graduate school?
WC&P: Are there any other companies you worked for you'd like to mention?
White: I spent 14 years with the Borden Corp. I was general manger of their Elmer's and Krylon business--Elmer's glue and Krylon spray paint. Of course, today, there isn't a Borden.
WC&P: I can remember a Borden truck, or at least it had a Borden logo on it, that used to deliver stuff in my neighborhood growing up. We used to run up and get handfuls of crushed ice in the summer. And I want to make sure I'm clear on one thing. Did you get hired before or after the Watts acquisition of Premier?
White: Actually, in the same week.
WC&P: Who is the immediate person on top of Watts Premier?
White: I am. Matt Sweetman is our general manager here at Watts Premier.
WC&P: What's your official title?
White: Group vice president of Watts Water Technologies. I just have an office here at Premier. It isn't the largest division I deal with.
Please join us next month for our interview with Jeff Witt, branch manager of Alamo Water Machining, the Barrington, Ill., manufacturing arm of Alamo Water Refiners Inc., which is based in San Antonio, Texas.