Bridging the gap in the market
Agribusiness has a major impact on water quality and resources. Research, however, shows farmers feel neglected by water companies and almost every other area of the industry
A huge variety of companies in different industry sectors use water and have to deal with water and wastewater and effluent management issues. These major commercial users account for more than 20% of the UK economy – so water is a huge issue for UK plc.
The organisers of IWEX 2005 commissioned research that focused on representative samples from these diverse industry sectors, in order to get to grips with what the commercial impact of water really is, what are the issues being faced and what does the water industry as a whole need to do to address some of these issues?
The research included companies in the agriculture, food manufacture and brewing, pharmaceuticals, chemicals and paper and packaging sectors. The research found UK companies are spending £20B every year buying water and disposing of wastewater and effluent, accounting for, on average, almost 4.5% of turnover. Water management, therefore, can have a fundamental impact on a business’ profitability, environmental impact, end product quality, plant longevity and even brand reputation.
A £0.33B market
UK agriculture contributes £6.6B a year to the economy, uses around three quarters of the country’s land area and employs more than half a million people. The research showed in the agricultural sector more than 5.1% of turnover is spent on water use and wastewater management (1.85% is spent on
water use and 3.16% on wastewater management).
With more and more pressure on profit margins, improving water management could have a potentially huge impact on the bottom line. This much turnover also represents an annual market of a third of a billion for consultants, water equipment
manufacturers and suppliers and the water companies –
but most businesses do not have a water strategy.
Agricultural businesses are the second highest spenders on water for industrial use (as a proportion of turnover), and yet less than one in ten agricultural businesses develop their own water strategies. This is probably because, for farmers, though utterly dependent on water, it is just one of a number of things on their list of priorities, and is seen as peripheral to the industry, rather than core as with brewing, where 69% of businesses have a water strategy.
Though the use of water in agriculture has remained static for the last three years and most farmers predict no increase in water consumption over the next year, 24% plan to invest in new or upgraded equipment in the next five years, representing a big opportunity for suppliers.
Over the next two years the key priority for agricultural businesses centres on the reduction of water usage and production costs. Agricultural businesses need help and advice. Spend will focus on:
Relationships between agricultural businesses and the water industry have some way to go. What was apparent from the research though, was that the relationship between agricultural businesses and suppliers and consultants is pretty poor. Only 14% described relationships as good and 57% did not know where to go for help.
Only 4% said their equipment suppliers kept them up to speed with developments. This suggests agricultural businesses are not being actively targeted in the way that say, brewers and food manufacturers are, where for example nearly half (48%) described their supplier relationships as good.
As a result, farmers feel more isolated and less understood than many other big industrial water users. This sense of isolation also applies to relationships with the water companies. Only 57% felt their relationships were good or average, compared to 93% for brewers and 82% for pulp paper and packaging industries. Over half felt their needs were not understood, with almost a third (32%) feeling their water company offered a poor service or did not understand their business or water needs. A further 25% felt water companies were too focused on their domestic customer base. This level of dissatisfaction was higher than across all other industries and highlights a need for improved dialogue and relationship building between farmers and the water companies.
Essentially, suppliers are not exploiting this market fully. The IWEX research shows a massive demand by these companies for help to better manage their use of water and treatment of wastewater and effluent, yet most suppliers have not realised the potential and are not targeting these companies effectively.
What shapes their water strategies? Although three out of five agricultural businesses are aware of legislation, interestingly only 7% of them have a Corporate Social Responsibility (CSR) policy at all. This is extremely low compared to most other industry sectors, where for example 53% of chemical companies have them. And this is consistent with the fact they are more heavily influenced by
shareholders and their customers (large retailers) than environmental groups and local communities.
This probably reflects the fact many farmers feel they are already caretakers of their local countryside and playing a proactive role in environment within which they operate, so the need for a formal CSR policy is less urgent. Due to the huge environmental impact of farming on the environment, there are a number of initiatives and laws affecting farmers including codes of good agricultural practice for the protection of water, air and soil, and laws pertaining to nitrate and phosphorous pollution, farm waste, groundwater to name but a few.
Around 61% of agricultural businesses were aware of the latest legislation affecting use of water and wastewater treatment, making this sector one of the more savvy industry sectors. In terms of keeping up with legislation, 21% said they are in touch with policy makers. This is higher than any other sector and probably reflects the high number of farmers who are associated and plugged in to the NFU – the largest farming organisation in the UK – representing around three quarters of the full-time commercial farmers of England and Wales.
Around 21% of farmers say water and environment legislation have a big impact on their business. However, worryingly, 90% interviewed said they felt their industry carried little or no influence with the legislators. This compares to, for example chemicals, where nearly a quarter felt their influence was significant, suggesting chemical companies have much more political clout than their agricultural counterparts. As with suppliers, farmers feel much more powerless politically than other big industrial water users and this is a gap that needs to be bridged.
Grasping the nettle
All of these factors highlight the huge opportunity that exists for suppliers, manufacturers, consultants and water companies to target this marketplace. It is a big market that plans to invest in the next five years and will have more political pressure to decrease its environmental impact as green issues move higher up the political agenda – yet it is a market that feels under catered for and misunderstood. This gap can start to be bridged by the water industry tailoring services to smaller businesses as well as large, and focusing on products and services that deliver savings and efficiencies and also support the ever increasing need for farmers to be more proactive in terms of the environment and compliant with legislation. IWEX 2005, which takes place at the NEC in Birmingham from October
18-20, is broadening its reach and tailoring a large part of its programme to the needs and issues of industrial end user markets. This will include a seminar stream devoted specifically to the challenges of water management within the agricultural sector. IWEX is the only UK event where water consultants, water equipment manufacturers, water companies and a diverse range of commercial water users, get together under one roof. For further details about exhibiting at or visiting the show, please visit www.iwex.co.uk
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