• Increased Public Awareness of Tap Water Contaminants
In a recent PBS program,"Trade Secrets: A Moyer’s Report," Bill Moyers questioned the health effects on human beings of the more than 75,000 chemicals introduced into the environment in the last 50 years since the beginning of the chemical revolution. While only part of the program focused on water quality, the clear theme was that Americans don’t really understand the health impact of these contaminants. Americans know that a number of these contaminants are carcinogenic and/or can cause birth defects but are not certain about safe levels. In fact, many contaminant levels aren’t monitored. Even scientists are concerned that we don’t understand the effects of many of these chemicals in combination with each other.
The Bottom Line:
• We don’t know the full effect on our health of these chemicals that are ingested daily.
• We are not putting forth nearly enough effort to find out.
• Heightened Dangers Related to Terrorism
As the future threat and the reality of past terrorism changes the way Americans live and heightens their awareness of potential dangers, public water systems may very well come into play. The reality could in fact evolve that certain areas across the country face a water crisis created by terrorism. An answer to beefing-up security and responding to a possible need could be the rapid and needed development of a network of purified ice, purified ice and water, and purified water companies prepared to deliver purified water in liquid and frozen form to blighted areas. Top of mind or worse yet, top of need is only one news report away should a single potable water-related terrorist act occur.
Purification capability should be present across the country and be accessible by truck and train transportation to feed the public need. Heightened awareness in this area might bring about real support dollars at the federal level, much as was the case when the aluminum industry supported the war effort. The post war effect was an established pattern of use and high brand recognition for the major players in the war effort.
The Bottom Line:
• As an industry, do we want to be ready or will we wait until a tragic need motivates us?
• Code of Federal Regulations: Purification is the Only Acceptable Answer
To address all these water contaminants on a peacetime or wartime basis, a form of water purification must be used. Mere filtering systems address some contaminants and suspended solids in the water, but they do not address contaminants such as herbicides, pesticides, arsenic and many others that will not be eliminated by mere filtering. The method of purification used by the leading bottled purified waters, both PepsiCo’s Aquafina® and Coca-Cola’s DASANI®, is reverse osmosis.
In order to maintain a consistent quality everywhere, each ice plant’s input water would need to be evaluated in order to prescribe a system that properly ensures a finished product free of detectable dissolved solids or, in other words, a system that can consistently meet the Code of Federal Regulations purification standard. Depending on the quality of the input water, the amount of filtering required before the reverse osmosis purification process will differ. If the input water has very high levels of dissolved solids, then more pre-filtering would be required than for input water with much lower levels.
The Bottom Line:
Our objective must be to achieve a consistent purified water standard throughout the network.
• Using the highest standard initially and throughout the network produces a positive safeguard against a higher quality, aggressively
competitive move against the network.
• Using the highest standard also allows the network to maximize product claims: You cannot make claims aggressively and honestly,
unless a true purification method is used. Anything less than a true purification method prohibits any and all claims that you have
addressed virtually all contaminant risks and that your product is consistent throughout the network.
• Purified Ice Stops Taste Distortion, Is Visually Clearer, Cleaner Looking
Consumers can and will notice differences in the appearance and taste, or lack thereof, of the ice. Their purified water and other beverages will taste as they were intended, unchanged by the ice added to them. There is no chlorine or metal taste to affect the taste of beverages in which the ice is used. When all dissolved solids are removed from water prior to freezing, the ice produced is extremely bright and clear. Consumers don’t realize that they pick up “off” tastes from the ice in their beverages until they try the same beverages with purified ice. With purified ice, consumers can enjoy the true taste of the beverages that they are drinking.
• Moving to a CFR/US Pharmacopeia Purified Standard
Based on our experience with using purified water to make our ice, we believe strongly that the ice industry should adopt a purified water standard for ice. Our company has used a reverse osmosis purification system since1996. Most of the water lines in our town were almost 90 years old at the time, and we were getting a great amount of suspended solids in the water, particularly when the fire department used a hydrant. Even without hydrant use, the water often did not look good. In the past we used one simple set of 25-micron filters to make the water look a little better, but it still often contained visible residue. At times we could look at two different pallets of ice and notice a difference in color. This was unacceptable to us. Sometimes we would have to dump an entire bin of ice.
We were looking for a solution to this problem when we attended the1995 International Packaged Ice Exposition in Las Vegas. There, we met Mason Finks, who was demonstrating a system of water purification that included reverse osmosis. Mason had a great deal of experience in the bottled water industry. At first, we were going to purchase only a multimedia filter and perhaps an activated carbon filter. However, the more we thought about our options and our problems, the more we believed that we should deal not only with water contaminants that we could see (suspended solids), but also water contaminants that we could not see. We knew at the time that there was talk of a national ice company. Our belief was that they would certainly address water quality. In line with that belief, we also believed that we should fully address the issue before we were too far behind to catch up.
Mason Finks analyzed our input water and prescribed a system for us that would remove virtually all water contaminants and dissolved solids. Today, our system includes a set of 25-micron filters, two multimedia filters, two activated carbon filters, two water softeners, a set of 5-micron filters, the reverse osmosis system in which water is sent through the RO membranes at high pressure, a storage tank for the finished purified water, and an ultraviolet system through which the finished water is circulated. The water used in our ice is a very consistent, high quality finished water that contains no detectable dissolved solids.
Many people throw around the word “purified” inaccurately. The Code of Federal Regulations recognizes water as “purified” only if a true purification process has been employed: primarily, reverse osmosis, distillation or deionization. Water that has only been filtered does not meet the standards of quality for bottled purified waters as defined by Title 21 of the Code of Federal Regulations. We decided to meet that standard and have. As for the national ice company, water quality has not been addressed as far as we know. Therefore, we believe that if the ice industry is to represent water quality through a purification standard, it will have to be formed by a purified ice network of companies.
• MOVING TO IMPROVE: The Cost is Low with Short- and Long-Term Positive In-Plant Outcomes
The total cost of the water purification system prescribed for us, including the piping and the storage tank for finished water, was approximately $500/ton. I recently asked our systems supplier for a quote on the same type of system today, and it was almost the same. The variable cost difference per bag has been very small, less than half a cent per seven-pound equivalent bag of ice. Water cost has been virtually identical since the RO reject water is offset by the reduction in blow-down water from the icemaker. The electrical cost has been virtually identical. The additional electricity required to run the high-pressure pump for the RO machine is more than offset by electrical savings from the more efficient operation of the icemakers using purified water. There is virtually no scaling on the icemaker tubes so that the capacity is actually slightly increased.
We have seen a very visible difference in the appearance of the tubes on our icemaker. Using the unpurified water, the tubes appeared greenish and brownish due to buildup of suspended solids. Now the plates look practically new. In fact, when the Morris service technician came recently to work on one of our Morris Ice-Makers, he thought that we had just purchased the machine because the tubes looked so new. Actually, we had operated that machine for almost two years. The tubes on the older Morris Ice-Maker, which we had operated for almost nine years, looked as new as the tubes on the newer machine.
• Promotion Benefits
We hired an advertising agency to develop a brand and packaging design for us. Our brand, OSMOTIC AQUATIC, THE PURIFIED ICE, is now a registered trademark. Our ad agency tested various potential brand and packaging names in focus groups. We wanted a unique name that would help consumers recognize the ice as different. Believing at the time that large, brand-based companies would soon show a commitment to bottled drinking water, we wanted to be able to back up the movement to purity as an alternative to chlorine-ridden, taste-defective water and ice and in doing so to make a clear distinction with our package between purified water and ice and merely filtered water or ice. The result was to use a name that reflected the reverse osmosis purification technology that we use. The agency tested a number of brand names and OSMOTIC AQUATIC, THE PURIFIED ICE tested very well for quick recognition. Keep in mind that this was at the very beginning of the bottled purified water boom supported by DASANI® and Aquafina®; there was no strong identification for purified bottled water at the time. With that recognition now in place, we have a correlating product and package that are clearly promotable to an aware market.
• Ice Producers Today Must Offer Quality and a Seamless Delivery Opportunity with the Quality
The effects of retailer consolidation on the packaged ice industry have been enormous in many parts of the country. I recently learned of an independent ice company that had gone to incredible lengths to help the area stores of a large chain supermarket survive the effects of three hurricanes over the years. It would be hard to imagine any retailer getting better service and dedication than was received from this independent ice company. Yet, several weeks after a new buyer had been hired at the chain’s headquarters, the owner of the independent ice company was told that he would lose all the stores of this chain that he worked, representing a loss of several hundred thousand dollars in sales annually.
Apparently, the primary reason for the change was not price or service, but rather “buyer convenience” dealing with one large ice company that could handle all the stores in a particular state or region. Quality of service and product appears to no longer be the decision-maker. What is particularly troubling about this is that independent, community based ice companies often provide superior service to their customers, especially in difficult situations such as natural disasters.
The Bottom Line:
The desire of chain retailers to deal as much as possible with one seamless entity for all their store locations appears to be paramount to service or relationships. Since chains are now dominating the grocery industry in many places, independent ice companies are being squeezed out.
As a small, independent ice company with service, quality and customer relationships paramount, we have been greatly affected by chain-store retailer consolidations in our market. Since our state, Virginia, is one of the most dominant states for Reddy Ice, we are not being given the opportunity to do business with the national and most of the regional chains in our chain-dominated market. Reddy Ice’s unique ability in Virginia to be the “seamless” supplier trumps all other issues, including price, service and quality of product.
The Bottom Line:
Since only one ice choice is offered in these retail stores, the consumer’s right to choose between brands or to opt for quality/purification is taken completely out of the equation.
Even over the objections of local store managers and district managers who preferred to keep our company’s purified ice as their packaged ice product offering, our company lost the Wal-Mart® Super Centers due to a corporate decision in their Arkansas headquarters to use only one ice vendor in our state a non-purified product but a “seamless” supplier.
One very positive outcome from this experience for us was that we received a number of calls from consumers in the Richmond, Virginia area wanting to know why our ice was no longer in the Wal-Marts and where they might go to get our ice. Some consumers said that they had been driving 15 or 20 miles to a Wal-Mart to get our ice.
Although our ad agency developed some marketing materials, we did not execute significant advertising levels in that market. The consumers who responded to the loss were clearly responding to the packaging and product, both of which demonstrated quality.
We’ve also received positive comments from people locally who say that they use only our ice in iced tea, lemonade, etc., and that they definitely notice a difference because the ice made from their well or town water has an off taste that they hadn’t even noticed before. Some have turned off their automatic icemakers and, instead, use our ice through the refrigerator dispenser. Some have commented that they are more sensitive to the off-tastes given by other ice to the various beverages that they drink.
The Bottom Line:
• Consumers know the differences that purification makes and object to the loss of that choice.
• Our experience has been that chain store management does not respond to that objection.
• Ice Industry Analysis Without the Value of Purification
An analysis of an industry’s barriers to entry is a method often used to determine the relative strength or weakness of a particular industry. Based on an analysis of barriers to entry, the ice industry leaves much to be desired. Since there is generally no distinction in a consumer’s mind between ice from an ice plant and ice made at home, the barrier to entry can be as low as the cost of a plastic ice tray. Currently, consumers do not distinguish one company’s ice from that of another, nor do they distinguish an ice company’s ice from ice made in an icemaker on the store, restaurant, or hotel premises. The many available substitutes for an ice company’s ice make our industry particularly vulnerable. In the February 12, 2001 edition of The New Yorker, an article about Packaged Ice, Inc. observed that because there is no brand loyalty, “a person could take over the entire ice industry without unsettling a single ice user, without a single consumer even noticing.”
An observation:
Millions of the same people who conscientiously buy
bottled water to avoid tap water put ice made from the same tap water they refuse to
consume into all their favorite beverages including the purified or filtered water in their bottled water purchases.
Numerous times we have observed customers in restaurants order bottled water rather than accepting the restaurant’s tap water, and then pour it over the
restaurant’s tap water ice!
We’ve also listened to stories about people who travel to other countries where the water can make you truly sick on a regular basis.
They know to boil water before they drink it or even cook with it, but unknowingly, they consume ice made from this same water and become ill. What happens when major purified bottled water
companies begin to open and expand markets outside the U.S. where water quality has always been an issue. Will ice become a
consideration in these
markets as well?
Will the U.S. packaged ice industry be prepared to
carry it’s purification and freezing technologies to these markets or will we lose another expansion opportunity?
An observation on branding:
Our company also happens to serve as a wholesaler for Anheuser-Busch. The majority of the value of our business is the rights to the Anheuser-Busch brands for our assigned territory. This value is much greater than the value of our warehouse, trucks, and other physical assets.
If you remove branded consumer products from a retail store, consumers will notice and retailers risk losing customers who will go elsewhere to find their favorite brands (“Where’s my Budweiser®, my Pepsi-Cola®, my Campbell’s Soup®, my Orville Redenbacher® popcorn, my Crest® toothpaste? etc.).
In contrast, most packaged ice companies do not have any value in brand rights. For large ice companies that completely dominate their market, there is value in their retail customer base since most retailers still only use one ice company, and we presume a value for keeping that retail business. However, because there is no brand equity, even the most
dominant ice companies are
vulnerable because virtually no consumers would notice or care if their ice company was changed overnight.
An observation on current industry programs:
The current PIQSC program from the International Packaged Ice Association is helping to raise the bar for manufacturing standards in our industry. However, most consumers probably already assume that we are using good manufacturing standards. If consumers are not making a distinction between our ice and the ice from their ice tray at home, then we still haven’t done anything to raise barriers to entry for our industry. For some reason, many people in the ice industry seem to view the water quality issue as “What do we need to do to get by?” or “What is considered sanitary and acceptable?” If we stop there, we haven’t distinguished ourselves from ice made at home or from any on-premise icemaker. Many ice manufacturers who have state-of-the-art manufacturing equipment, stainless steel contact surfaces, etc., would need to invest only a relatively
modest amount to
MOVE TO IMPROVE in the direction of purification.
Let’s contrast the current state of the ice industry with that of the bottled water industry. According to the
April 14, 2001 edition of Beverage World, the bottled water industry grew over 8% in gallonage and over 9%
in dollar sales in 2000, despite the Y2K water buying panic that inflated 1999 numbers. This same article
predicted that bottled water will be the second largest beverage in the United States behind soft drinks by
2004 that’s right, bottled water will be ahead of milk, coffee, and beer. Per capita consumption of bottled
water was over 18 gallons in 2000 and is projected to exceed 23 gallons by 2004.
The Bottom Line:
• Can the packaged ice industry point to similar numbers for itself?
• Without differentiation by quality or brand, can lower census in hotels and motels, lower usage
among an aging population and no purification for the younger, newer bottle water purchasers
combine to diminish packaged ice sales?
Where is the packaged ice industry to go if it is to grow?
Asking ourselves that question, results in more questions.
We believe all questions about the industry's future have the same bottom line:
Without branded purified water based products, the industry cannot grow.
Is normal population expansion enough to keep the industry viable?
Without differentiation by quality or brand, what will grow sales levels?
Will our aging population have less need for unpurified packaged ice as they become empty nesters?
Will our aging population have less need for packaged ice as their social life revolves more around
less active, more restrained lifestyles? Will the population growth below the aging boomer wave offset
the loss of sales within the aging population? And if it does, will the younger purchaser be interested in
unpurified ice products for anything other than beer kegs?
Will the new, younger populations be more serious about their water
quality?
If that were not the case, would major marketers be investing major
production expansion and advertising dollars to make sure purified
bottled water sales grow?
Will new purchasing populations want ice for the purified water they
have shown they prefer?
Would they be more inclined to large purified bottle water purchases if they had ready access to purified ice?
Can we partner with the bottled water industry?
Can purified ice producers become part of the purified water industry?
The Bottom Line:
• Quality packaged water products will be king of growth in the next decade.
• Where will the ice industry be without parallel broad-based production and distribution of branded
purified ice products?
The bottled water industry has profited enormously from the increased awareness of and sensitivity to
water quality by millions of consumers. Conversely, the packaged ice industry with its lack of quality
improvement has not benefited at all from this heightened awareness and sensitivity to water quality.
Worse yet, Jeff Lamkin’s survey done for last year’s IPIA convention showed that half of the people
surveyed felt that homemade ice is of a similar or better quality than packaged ice.
The Bottom Line:
Growing consumer concerns about water quality coupled with consumer perceptions about
packaged ice could condemn our future.
• Advantages: Looking at a Business Model for a Network of Licensees
Take Arctic for Instance:
The Arctic Group’s licensing program seems to be a promising business model to address the retailer consolidation issue. A participating ice company pays a licensing fee per bag to be under the Arctic umbrella. One Arctic licensee with whom we spoke said that for his company the licensing fee was offset by the lower cost of the bags because he was able to be part of Arctic’s larger volume. The licensee has to meet quality standards set by Arctic for production, merchandising, etc. In return for giving up some independence, the licensee acquires brand rights for an assigned territory. If Arctic is successful, the licensee can share in that success because the value of the brand rights for his or her territory will increase.
The Bottom Line:
The value of acquiring a customer base alone is much less than acquiring brand rights for a successful brand.
• Licensee Advantages
There are a number of potential advantages for an independent ice
company to become part of a licensing network.
• The parent’s relationship with national or regional chains can flow through to the licensee in it’s
individual service area.
• If the parent is successful in developing a presence throughout the country, the licensee can benefit in
many ways from their neighboring licensees as a network. Buying ice from their neighbors when
needed, getting help and expertise from other licensees, sharing best practices in production, delivery,
marketing, etc. are some advantages that come to mind.
• When the parent’s brand, packaging and marketing plan is available to the licensee can receive the
benefits of point of sale materials, advertising, etc. that would have been difficult and very expensive
to develop on one’s own. Programs can be tested at the parent’s expense and only proven programs
flow to the licensee. Licensee implementation and buy in costs are greatly reduced as compared to
total development costs.
• Being part of a successful network awards each entity with a number of buyers for the business as well
as potential sellers of territory that you might later be interested in. Neighboring licensees, as well as in
some cases the mother company itself, can become potential buyers for your business.
• As a local, community based ice company service strengths can be maintained to the benefit of
retailers while still offering, as part of a large network, the seamlessness valued by large
national retailers.
• About Brand Value
Even if we develop a network of licensed ice companies that covers all of North America, we still remain very vulnerable if we do not develop a brand that consumers care about. In our opinion, a successful brand program for the ice industry must begin with the quality of the water used to make the ice. As discussed earlier, millions of consumers who are sensitive overall to water quality seem currently oblivious to the quality of the water used to make their home ice. A successful marketing program for a branded ice would pound home the message that the ice that consumers are currently using from their icemaker is as inferior as the water from their taps. At the very least, they have no idea what is in that ice.
A nationally networked and branded purified ice would allow the launch of convincing consumer programs against unpurified, unbranded products. The program could extend consumer consciousness to away-from-home ice consumption in areas such as fast-food chains thereby pushing an opening through to new, high-volume markets for the purified product.
• Better/Best Model
In his “Good, Better, Best” article in the first quarter 2001 issue of Ice World Journal, Paul Russell suggests that ice companies continue to make the same ice and call it “better”, and then add a “best” ice that is pure. While we agree with the overall MOVE TO IMPROVE premise in Paul’s article, we envision a different spin on his better-best approach.
We think that
• tap water ice that is currently used should be pushed into the unacceptable category and liken that as
equivalently unacceptable as it would be to find a store’s tap water on the bottled water shelf.
• the “better” and the “best” should both be made from purified water with differentiation
coming through packaging approaches:
“better for cooling,” and “best for beverages” using reduced graphics but quality bags with the metal
ties that we currently use on the “better” ice, suiting the package to one-time, pour and use needs such
as coolers and kegs and using slide/zip-lock packaging with high-end graphics for the use-and-store
“best” packaging. This could be likened in reverse to the bottled liter pack aging for soft drinks, use
and store purpose, versus the aluminum can’s one-time usefulness. Both packages would stress the
importance of purification against food, in prolonged melt down times, and in beverages: BETTER
FOR COOLING, BEST FOR BEVERAGES.
Consumers have become used to paying a premium for convenience packaging if it works to ease use.
Purified ice should carry a value perception that supports this understanding.
• Conclusion
A spokesperson for a large beverage company recently stated that the company was declaring war on tap water. He stated that while tap water might be suitable for washing clothes and taking showers, it is not suitable for human consumption. The packaged ice industry needs to join in this war against tap water. As an industry, we must move to a purified standard and, once done, we should seek to make the general public regard ice made from tap water as unacceptable. If we don’t,
• we are dooming ourselves to a price perception that equivocates us to a homemade product viewed
as a free bonus to the already paid for necessities of tap water and a refrigerator for daily use and
as a cheap volume alternative for coolers. As bottled water becomes the water of choice, we will be
replaced by a set of plastic ice trays.
Against plateauing,if not diminishing sales, an we afford to wait it out?
• and, moreover, we will have doomed our quality perception to a rapidly diminishing one as the
country’s water quality perception diminishes. A much faster track to demise will ensue
should terrorism against a local, regional or national water supply occur.
Can we afford to rebuild an industry completely replaced in store coolers by bottled water?
When lack of promotion allows brand price and quality perceptions to erode to a negative position and when leaders fail to move a product group forward to growth through improvement, the track to demise is not only heightened, it is quickened.
Over time or tomorrow, without a MOVE TO IMPROVE that includes an industry-wide quality-focused product and communications effort, consumers will move to quality bottled waters and, in lieu of a better choice, will view packaged and refrigerator ice as consumables that have earned replacement with ice trays and purified bottled water fill ups.
With the exception of volume use, the industry may already be there.
Should terrorism hit, packaged ice will not even be perceived as safe for volume cooling.
The Bottom Line:
Either way, the packaged ice industry’s product as it now exists faces a very real scenario that casts it as part of the
problem rather than part of the solution.
Public awareness of water quality has increased dramatically in the past two decades. Information will travel and
be absorbed light years faster now than in the past. Also, in light of recent world events, water quality concerns
will heighten even more rapidly definitely at the consumer level, potentially at the federal and state levels.
We believe that now is the time for action by the packaged
ice industry.
We believe that both large and small packaged ice companies have an important role in forming a successful
North American packaged purified ice network.
We believe that providing the public with purified ice for general daily use and as a hedge against terrorism
is not only the right thing to do, it’s the smart thing to do.
• Recommendations
We recommend that a North American network of packaged ice companies, acting as members of the International Packaged Ice Association (IPIA), agree to form a core group that will manufacture, market, and distribute a purified water-based ice brand. We further recommend that the IPIA encourage this action to:
• Passionately and aggressively adopt a purified water standard consistent with Code of Federal Regulations
definitions for the brand to assure a consistent, high quality product throughout the network
• Join the war on tap water. Reduce ice made from tap water to an unacceptable option with consumers.
Act as partners with consumers to alleviate their concern about the water quality of non-purified ice
• Adopt a model that rapidly establishes the network of purified ice companies
• Form a mother company or a cooperative of initial member companies with ownership applied on a
percentage basis using tonnage or some agreeable measure or measures for ownership.
Structure the mother company or cooperative entity to
• manage and sell key national accounts,
• develop marketing materials including POS and advertising materials to be used and
executed by member companies, and
• be responsible for assuring quality control at member company plants.
• Adopt a trademarked brand to be used throughout the network
• Build brand awareness so that consumers recognize it easily and quickly throughout America
• Build equity in the brand so that each member company in the network benefits and grows significantly in value
• Organize the network to share best practices and to help each other continuously improve the product and operations
• Grow the purified packaged ice market so that the purified packaged ice industry parallels the growth rate of the purified bottled water industry
• Adopt for consumer testing a packaged purified ice “better, best” packaging model that allows economy closures as well as slide zip-lock bags
We are interested in discussing these issues with other IPIA members.
We are also open to and interested in the views of other visitors to this web site.
DASANI is a trademark of The Coca-Cola Company. Aquafina ia a trademark of PepsiCo., Inc.