The Upside: The water business sells one of the most important, if not the most important, products on earth. It is a product that can be used for thousands of purposes and one that has limited competitive pressures compared to other products (an overseas producer probably won’t take your market share anytime soon).
The Downside: Technology is working against it – innovation and behavior change are constantly putting downward pressure on sales. While water is an essential product, the business is not immune to the impacts of economic conditions – low growth and industrial decline can have a major impact on the bottom line. Regulation and less available supply in many states have forced providers to launch campaigns to sell less of their product. Market entry for new providers, particularly profit seeking companies, can be quite difficult and is often met with public scrutiny.
The Business: In some ways, providing water can more closely resemble a public health service than a commercial business. However, it is a business, and it must have a healthy bottom line to maintain qualified staff and sound infrastructure to ensure the public health benefits of reliable drinking water. For these reasons, the EFC actively studies the bottom line of this essential business. The business woes of many California utilities have been highlighted in the press recently as communities have been asked to cut their sales significantly. How has the business fared over the last ten years of national economic ups and downs and drought induced sales pressures?