Changing market favours the major players
Malcolm Hallsworth assesses the challenges facing those involved in the manufacture and supply of pumps.The UK pump market is strong but in a period of change. The principal driving force continues to be water company investment, although industrial effluent treatment is an expanding sector. In the utilities market, EU legislation, particularly the urban wastewater treatment directive, is predicted to be one of the main causes of market growth.
AMP3 will also have a positive effect, according to Dr Richard Woods, managing director of peristaltic pump specialist Watson-Marlow Bredel it will: "bring significant investment, with around 50% of AMP3 projects incorporating pumps." Dr Woods can also draw optimism from research by consultancy Frost & Sullivan, which has shown peristaltic pumping to be the fastest growing pump technology.
The EC's urban wastewater treatment directive is also the major factor behind expansion in the industrial effluent treatment sector, because many companies now find it more cost effective to meet discharge consents using their own onsite treatment facilities than to undertake treatment via a third party. Having cultivated an industrial client base through the supply of process pumps, KSB is well placed to take advantage of this development. "The trend has been quite good for KSB," according to valves division manager Ian Graves. Expansion in the industrial effluent treatment market has also been noted by Grundfos' marketing director, Errol Taylor, who commented that: "Anything driven from Brussels will eventually have a huge market impact in the UK."
In pumping as in other commercial sectors, major companies are consolidating their position through the purchase of smaller concerns. "Peristaltic pumping, an extremely energetic sector, is undergoing consolidation in the same way the entire pump industry has," said Dr Richard Woods - Watson-Marlow and Bredel came together three years ago and were joined by Alitea of Sweden in January 2000. The most recent example of consolidation was the purchase of Sarlin by Grundfos (WWT, April 2000), and there is more to come according to a report by Elsevier Advanced Technology: "Widespread consolidation within the liquid pump industry will continue as pump companies extend their product range and geographical reach through acquisition."
Grundfos' hopes the benefits of the Sarlin acquisition will be two-fold. The product range has broadened significantly and the company now has access to Sarlin's utility clients, the intention is to ensure the big spenders can buy any pump they need from Grundfos. "The argument for the one-stop shop now has credibility," according to Errol Taylor.
The notion of the one-stop shop, attempting to fulfil customers' every need, pervades the current pump market. Survival is seen as dependent on the ability to build, long-term relationships with clients and offer more than just pumps. "At the end of the day, the winners will be the ones who succeed in forming such relationships and the losers will be left high and dry," concluded Errol Taylor. Other heavyweight opinion is on his side as a recent statement from ITT Flygt showed: "The development of long-term relationships with both water companies and major municipal / industrial contractors has been at the forefront of Flygt's recent initiatives."
The need to offer something different is key to the thinking behind the one-stop shop. Both Ian Graves and Errol Taylor conceded that as products are becoming increasingly similar the ability to offer a complete service is becoming an important differentiator. The trend is also driven by the water companies growing reliance on outsourcing for installation and servicing work.
Pursuit of the one-stop shop has lead the big names into the areas of installation, commissioning and servicing, but not everyone is following suit. Wilo Salmson's coremarket is the industrial, light commercial and domestic heating sectors, but the company recently launched new products designed to expand its activities in the wastewater and sewage disposal fields. Wilo Salmson has taken a product specialist on board, and is "starting to make headway," according to managing director Howard Davis, but there are no plans to move into after-sales service and installation.
Another area of increasing importance to pump manufacturers is whole-life cost, "the key factor people are buying against," said Ian Graves. Water company specifiers are very interested in assessing whole-life costs, and buyers are willing to pay a premium for pumps which offer longevity and are cheap to run and service. Research by ITT Flygt found capital costs could be as low as 15% of whole-life costs, and stressed: "When specifying pumps and pump systems, water companies know they need to look well beyond the initial capital cost." The shift in utilities' attitudes has also been noted by Watson-Marlow's Dr Woods: "Water companies are returning to a policy of looking at whole-life costs, having seen the initial capital cost is, in the long-term, usually not the critical measure."
Supply and demand
It is not just manufacturers which are seeing buyers focus on whole-life costs. Tom McHenry of distributor and pumping systems supplier CCD Pumps has noted a move away from emphasis on initial cost as the only factor influencing customers. He too believes the ability to offer products which are cheap to maintain and operate is the essential tool with which to influence buyers.
Demand for pumps and pumping systems will remain strong. Those best placed to exploit the current market will be major manufacturers with the resources to extend their operations to deliver the complete one-stop product and service package. For smaller companies, however, things look a little less certain, especially with the current emphasis on consolidation through acquisition.