Currently, the food sector is the largest industrial investor in water and wastewater treatment equipment predicated on safety and purity concerns, associated regulatory forces and environmental demands. Healthy growth rates and segment-specific needs within the food sector are likely to create further multi-faceted market opportunities for suppliers of water and wastewater treatment equipment.
Following extensive interviews with the key water and wastewater treatment plant managers in the food sector, the international marketing consultancy Frost & Sullivan, estimates that
the food sector will account for around 9 per cent of the total market sales of water and wastewater treatment equipment. The share of this sector is expected to grow to double-digit figures by 2005, thus increasing the market value to above $400 million from the estimated $334 million in 2001.
At present, the average annual investment levels remain around a moderate $30,000 per plant.
However, the sheer scope provided by the enormous customer base presents significant sales opportunities within the sector. Moreover, budgets are changed for projects that require larger investments. Significant upgrades and expansions are also made every ten to 20 years. Overall, the current annual investment in the maintenance and replacement of existing installations ranges from a few thousand dollars to nearly half-a-million per customer.
Suppliers are expected to increasingly have to address a gamut of demands from the food sector embracing both service-related factors and product-related benefits.
Analysis reveals a reasonably high level of customer loyalty, which is rated at 3.62 out of five. This, in turn, reflects the bias by the food sector toward past and experienced suppliers. However, with demand reaching saturation point, customers are becoming increasingly selective in choosing suppliers. "With the importance of replacement markets rising and interest in cost-beneficial upgrades and specialised services escalating, suppliers are likely to be put under greater scrutiny. Pressures for improved excellence are thus rising", states Saana Karki, Research Analyst at Frost & Sullivan.
Notably, satisfaction with all product-related factors, which act as key purchase factors, is rated above four. "Product quality, functionality, and reliability thus act as prerequisites for successful supplies, rather than as a source of competitive advantage", adds Ms Karki.
However, the picture is not all rosy. According to customers' evaluations, average supplier rating falls below a satisfactory four. Suppliers still face the uphill task of improving value-added services, which is currently languishing at the bottom of the satisfaction levels. Delivery of services and competitive pricing still fail to meet average levels of satisfaction. An acceptance of lengthier response times notwithstanding, this experience also suggests a potential advantage for suppliers that deliver beyond basic expectations.
While its level of excellence varies across the industry, serviceability is emerging as a key criterion rather than an added competitive benefit. The onus will be on suppliers to meet the demand for good service or risk losing out to the competition.
Apart from serviceability, technological understanding and offers of guarantees are being increasingly regarded as hallmarks of good suppliers.
Regional dominance and market segmentation have worked for many suppliers. Culligan which principally derives its strength from a regional focus, has the highest customer satisfaction ranking 4.67out of five. Other top performers, such as Pall, Krüger, Nijhuis, and Alfa Laval also compete successfully in local or niche technology markets.
"Maturing demand and replacement markets bring about a preference to local and technological specialists. In fact, with competition running high, customer satisfaction is most typically achieved through a more focused strategy. Competitiveness is particularly manageable on a regional level and local suppliers are successfully positioning themselves in this sector", explains Ms Karki.
Moreover, the scope of operations and relatively generic processes across regions and segments in the food sector has allowed some successful large-scale contracting work. According to measurements of customer satisfaction levels, Purac, Degrémont, and OTV demonstrate the potential for quality performance on a more diversified scale of operations.
The Frost & Sullivan study is the sixth part of a Europe-wide customer analysis of the water and wastewater treatment equipment market within the most profitable industrial sectors. The study explores the crucial elements of customer opinions, attitudes and supply expectations, as well as the overall drivers and restraints of demand and purchasing requirements. Other deliverables of this subscription service include the microelectronics, pulp and paper, pharmaceuticals, chemicals, and brewing sectors. The final part of the study, covering the municipal sector, is forthcoming.
Report Code: 6388, Publication Date: January 2002, Price: US$4,000
Background
Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets for trends, market measurements and strategies. This ongoing research is utilised to complement a series of research publications to support industry participants with customised consulting needs. Interviews and free executive summaries are available to the press.
For more information contact:
Kristina Menzefricke, Public Relations Department
Tel. +44 (0) 20 7343 8376 or Fax. +44 (0) 20 7343 8380
(kristina.menzefricke@fs-europe.com)
