What Is in the Stars?

Industry Professionals Predict the Future of the Water Industry

Despite the economy's hard times, the water treatment
industry continues to advance. With the government taking a closer look at the capabilities
of its products and the media keeping water quality in the public eye, it is no
wonder this industry can continue to prosper even in hard times. This year the
industry saw municipalities and the government looking at POU/POE for the first
time to aid in compliance with maximum contaminant levels (MCLs). The arsenic
ruling that lowered the MCL to 10 parts per billion was an enormous step in
focusing municipalities' attention in the industry's direction. Perhaps it is
not all good news. The economy has impacted many companies within the market,
and some government bodies have hastily passed regulations without having all
of the facts. For the most part, the industry continues to succeed in these
"battles," and it will flourish. WQP asked industry professionals
nationwide to comment on what the water industry might see in the upcoming
year. Although these professionals share their outlooks for 2003, the water
treatment industry"s future is uknown, but it should continue to shoot for
the stars.

Bright Future for Home Water Treatment Industry

By Robert Ruhstorfer, Aquion Partners LP and the Water
Quality Association

Only a few years ago, most people didn't worry about their
tap water. But recently, media coverage, high-profile lawsuits and research on the
health risks of water pollutants have heightened consumers" water quality
concerns. In addition, aging water systems will be difficult for cash-strapped

municipalities to repair and replace.

At the same time, bottled water has surged in popularity as
an adult beverage. Today, most people know how high-quality water tastes. For
many Americans, it doesn"t taste like their tap water. This presents a
huge opportunity for the residential water-treatment industry.

Winning on Economy and Quality

Most consumers want a healthier lifestyle. Often, this means
better nutrition, exercise and improving their home environment. As part of
this trend, homeowners are moving away from using tap water for drinking and
cooking. They demand better quality.

Point-of-use (POU) drinking-water technology is a basic
home-improvement investment that pays tremendous dividends. Many POU units
provide the same technology bottlers use for pennies on the gallon. Often, the
units quickly pay for themselves in both savings and convenience.

Water quality is about more than just cleaner drinking
water. POU systems naturally open the door for whole-house water quality.
Point-of-entry (POE) systems offer many benefits. By combining POU and POE
technologies, we can provide effective systems that address a variety of needs.

Increasingly, homeowners will use multiple grades of water.

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* Utility-grade
water for watering lawns and washing cars.

* Conditioned
working-grade water for laundry and bathing.

* High-quality
"ingredient" water for drinking and cooking.

Once people experience the benefits of a whole-house system,
there is no going back. People love them after they are installed.

Facing the Challenges

Our biggest challenge simply is getting in the door.
High-quality water is a sensory sell. It has to be tasted and felt. In-home
sales calls probably will continue to be the best way to sell water systems.
How we get invited into homes, however, will have to evolve.

With many states instituting "no call" lists,
dealers will be challenged to shift from cold calling to more creative
marketing approaches. Home show registrations, 800 numbers and other tactics
will increasingly replace cold calls. While it will take time to sort out, in
the end we will develop better prospect lists and market more effectively.

Changing regulations pose another opportunity wrapped in a
challenge. We are in a period of active regulation and probably will be for
several years. The Water Quality Association and other organizations are
working tirelessly with regulators nationwide to ensure that standards are
based on sound science. Eventually, these models will be adopted by other
states and become national standards that raise our industry"s reputation
and credibility.

The future is bright. Our products are more reliable and
effective than ever. Our industry has a higher level of acceptance by consumers
and government regulators. We offer consumers tremendous value that
fundamentally improve families" quality of life. It is a great time to be
in the water treatment industry.

About the Author

Robert Ruhstorfer is president of the Water Quality
Association and Aquion Partners LP. Aquion"s divisions include RainSoft,
Erie Water Treatment Controls and ClearWater Tech.

Keeping Up With Business Changes

By Mike Gottlieb, ResinTech

Generally speaking, most of the traditional water treatment
business areas are likely to remain relatively stagnant. Point-of-use (POU) and
point-of-entry (POE) systems will be sold increasingly by large outlet
distributors such as Home Depot, and opportunities for small dealers to provide
these devices and services probably will remain stagnant or even shrink.

At the same time, opportunities in the high-end part of the
residential market and for emerging technologies are likely to increase
dramatically as the affluent in our country are increasingly attracted to
palatial sized homes. The market for commercial-sized residential treatment
systems is growing.

As we become more aware of the pollutants in our drinking
water, there are significant opportunities for emerging technologies even at
the residential level. However, the best opportunities with respect to drinking
water purification for small equipment manufacturers are in the small- to
medium-size municipal water systems. It seems likely that the targeting of
specific contaminants will be more readily accomplished in small- to
medium-sized systems that are attractively priced and quickly installed. For
larger industrial customers, the market is likely to continue growing.

The reliance on portable exchange by industrial
manufacturing is likely to increase due to concerns about wastewater discharge
and difficulty of operation. Other observations include the following.

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* Consolidation
in the industry has weeded out some of the larger players and made room for
some of the smaller players. The smaller regional-serving portable exchange
deionization dealers can be more efficient in local markets. Those that focus
on specific niches will prosper.

* Tightening
environmental constrictions have required that the people playing in this
market pay more attention to wastewater treatment and safety concerns in the
production facility.

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These
changes will affect how they decide which markets to go after. For example,
they have to be careful when accepting resins from metal finishing shops and
EDM shops because wastewater discharge regulations have been tightened; they
can no longer discharge heavy metals. This practice has been illegal but not well-enforced
in the past. Enforcement has become more of a factor since the change in
administrations from Clinton to Bush.

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* Outsourcing.
The market also has changed as more end users elect to outsource.

* Market
selection. The PEDI dealers will in the future need to be selective of the
non-domestic water softening markets they go after.

- High
purity

- Medical

- Basic
deionization market for small manufacturing processes and laboratories

- Waste

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The good news is that most of these markets are growing. Once
the obstacles of regulation are overcome the profit potential also is greater.

About the Author

Michael C. Gottlieb is the founder and president of
ResinTech, Inc., an ion exchange resin supplier. Its ion exchange resin
products are marketed under the ResinTech brand name. Gottlieb has served in a
variety of positions in the development and marketing of ion exchange resins
over the last 30 years. Prior to founding ResinTech, Inc., in 1986, he was vice
president of marketing and development of ion exchange resins for Sybron
Chemicals, Inc.Gottlieb is a member of several organizations and is chairman
emeritus of the ASTM Committee on Bead Ion Exchange Resin as well as the Ion
Exchange Committee of the American Water Quality Association. He has been the author
of numerous technical papers relating to ion exchange resins and is coauthor of
the ion exchange chapter in the third edition of AWWA"s Water Treatment
Plant Design Manual.

WQA Looking Ahead

By Peter Censky, Water Quality Association

I am going to devote my space here to a concise report on
the regulatory issues we are dealing with here at the Water Quality Association
(WQA). Before you read on, you might want to take some Tums and aspirin. As the
doctor says, "this might hurt a little."

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* California
softener issues. The moratorium on softener bans comes off in January 2003. We
are working on numerous fronts as this issue becomes white hot for the
forseeable future.

* Discharge
bans to septic fields. This issue heated up quite a bit this past year in Texas,
Kentucky, New Hampshire, West Virginia and a few other areas. We have been
successful so far in defeating or reversing these ban attempts.

* Quebec
mandatory product testing. The new rules require all water treatment devices
sold in Quebec be certified to ANSI/NSF standards. The code presently requires
that any labs certifying to those standards be accredited certifying
organizations similar to those certified by ANSI in the United States. The
industry protests the rules concerned that they are anticompetitive and that
many small manufacturers would find them too costly and restrictive. We are
working closely with the Canadian WQA on this sudden issue and expect favorable
results in 2003.

* European
softener standards development. Imagine a European football (soccer) riot and
you have some idea of how much progress is being made. The regulatory process
is arcane enough, but add to it attempts to gain market advantage through
slanted standards and you have a picture of the process. We are doing all we can
to represent our members in this process, but don"t look for a good
solution to emerge for a number of months at best.

* Aqua
Europa. WQA is working diligently to help Aqua Europa deal with its internal
problems and reconstitute itself in a manner that will strengthen its abiltiy
to represent the industry to CEN and Brussels. Stay tuned.

* Heterotropes.
NSF International sponsored a WHO conference at the request of Aqua Europa and
WQA to nail down once and for all whether Heterotopic bacteria are a danger.
The scientists met, did their work and came to the conclusion that HPC bacteria
are not a threat. (The industry knew that but needed the scientists to bless
it.)

* Standards
development issues. We are seeking changes to NSF/ANSI 61 (materials safety) to
accommodate POU/POE. We also are seeking a data transfer protocol for NSF/ANSI
58 (reverse osmosis drinking water treatment systems).

* WQA's
lab is seeking ANSI accrediation for the Gold Seal Certification program.

* New
standards development. We are developing a new distillation standard to submit
to NSF. Also, a new ozone generator standard and further development of a
protocol for supplemental microbiological reduction are all being worked on for
submission to NSF International.

* Small
systems projects. WQA is active with projects across the country to develop our
industry"s technologies as the best available technologies for small
community water treatment.

* Plumbing
code issues. We are near completion of an education module aimed at plumbing
code inspectors to increase their knowledge and acceptance of our products.

* Fixture
flow rates. Developing a strategy to capitalize on our favorable study and
insert changes into the national plumbing codes.

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Well, that's not everything but it gives you an idea of the
issues that we are contending with next year. Of course, WQA also enhances your
business success in other ways as well. Here are just a few.

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* Next
year's convention in Las Vegas will be the best ever.

* Three
new pavilions in the Ground Water show, Kitchen and Bath show and the Home
Builders show will boost sales.

* The
website continues to expose member companies to thousands

of consumers.

* Media
stories featuring WQA help educate the public.

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The coming year will be an eventful one. Membership in WQA
is the only way to stay on top of this sea of change.

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About the Author

Peter J. Censky was appointed executive director of the
Water Quality Association (WQA) in 1987. Censky brought to his new position an
extensive background in coordinating policy and legal strategies. Censky is a
member of the Board of Directors of Aqua Europa, a European Trade Association
headquartered in Brussels, Belgium. WQA (www.wqa.org) is an international trade
association of 2,300 member companies worldwide who manufacture and sell
point-of-use (POU) and point-of-entry (POE) water treatment equipment.

Bottled Water Continues Growth

By Dr. Alan Leff, QUASI LLC

As I peer into my crystal ball, this is what I see....

The U.S. domestic bottled water industry will continue to
consolidate in its small pack business (less than 2.5 gallon/9 liters). Small
pack bottled water will be accepted as a commodity. However, there will be
extensive competition in the 5 gallon/18 liter business. The competition will
drive the price much lower and only the low cost producers and distributors
will survive. The results will be fewer local companies in the large pack
business. Nonetheless, this is a service business and good local service will
allow the better service companies to survive long-term.

The global bottled water industry faces a similar future.
The fastest growing markets are in India, China and Indonesia. The major
players will continue to enjoy the disproportionate growth of their shares of
the small pack market.

They also will reap their brand recognition benefits in the
large pack business. The support industries will realize the extent of the
China market when they attend the Asia Bottled Water Association Convention in
Shanghai. A similar impact on the support industries will occur from the result
of the International Bottled Water Association Convention in joint forces with
the Worldwide Food Expo in Chicago.

The nature of the industry and the trade associations that
represent the industry begin to change shape and form this year. Bottled water,
beverage and soft drink associations blend and merge to meet the needs of small
pack bottlers, large pack bottlers and mineral water producers, globally.
Putting my money where my mouth (or crystal ball) is, I am directing my
business to be consistent with this picture.

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About the Author

Dr. Alan A. Leff is the managing director of QUASI LLC,
which provides training, consultative inspections and third-party audits to the
food and beverage industries. Leff is a current member of the Water Quality
Products editorial board. He previously served as vice president of operations
for National Testing Laboratories Network. Leff is a member of several
associations and serves as cochairperson on the ICBWA Technical Committee and
chairperson on the Asia Bottled Water Association Technical Committee.

Bottled Water: Beyond Trend to Necessity

By Joseph K. Doss, International Bottled Water Association

The beverage industry, led by the bottled water segment, continues
to grow at an astounding pace. In 2001, bottled water posted a solid 10.6
percent volume growth and saw a healthy 9.4 percent increase in per capita
consumption to 19.5 gallons. This continued growth means increased production
at bottled water plants and a greater need for those products and services that
help bottlers produce the safe, high-quality products for a thirsty public.

Beverages have become increasingly popular for at-home and
on-the-go consumption. In the water category, "enhanced" or "functional"
products have captured the public's fancy by using ingredients that purport to
deliver certain wellness or performance benefits. As a result, virtually every
month, new product introductions vie for retailer and consumer attention.
However, not all of these products meet the U.S. Food and Drug Administration's
(FDA) Standard of Identity (i.e., definition) of "bottled water."

Determining whether a particular beverage really is a
"bottled water" is a brand-by-brand proposition. One must consider the
additives that are used, how the product is labeled and if/how claims are
stated in labeling. By law, ingredients added to conventional foods such as
bottled water must be an FDA-approved food additive or generally recognized as
safe. From there, distinctions as to the product's labeling and usage must be
considered, as the product could be classified as a soft drink, dietary
supplement, vitamin or even a drug. Of course, some of these products do meet
standards that place them squarely in the bottled water realm.

However, some things about bottled water (e.g., product
safety, quality and security) will never go out of style. As this article goes
to press, federal and state lawmakers and regulators are looking even more
closely at food safety and security. Moreover, emergency and safety advocates
such as the American Red Cross and the Federal Emergency Management Agency
continue to issue water storage guidelines for emergency preparedness. It is
bottled water that continues as a leader in developing and implementing
processes that help ensure safety and security, from the water source to
finished product.

Starting with approved groundwater or public water sources,
as required by FDA"s bottled water Good Manufacturing Practices (GMPs),
bottlers look to equipment manufacturers and consulting services for continued
product quality enhancement. Whether tried and true or newly innovative, the
water quality products industry must be an integral partner in developing
real-world solutions to help ensure ever-improved bottled water safety and
quality.

The International Bottled Water Association (IBWA) and the
bottled water industry are tuned into the latest safety and security measures
to help protect production, packaging, transport and distribution systems.
Through the IBWA Model Code, member bottlers are required to implement a Hazard
Analysis and Critical Control Point (HACCP) program, which was voluntarily
adapted by IBWA from FDA and the U.S. Department of Agriculture, for a
science-based approach to bottled water safety from water origin to finished
product. FDA recognizes HACCP-type programs as a key component of plant and
product safety and security. The IBWA Model Code also requires IBWA member
bottlers to have in place written security procedures that make clear bottling
facility's plan source, transport and production measure to help further ensure
the safety of the plant and products. All IBWA Model Code requirements are
verified by an annual, unannounced third-party plant inspection program and
records audit.

The IBWA Model Code, in concert with stringent federal and
state regulations and standards, help secure an important, viable bottled water
industry now and in the future.

About the Author

Joseph K. Doss has served as president and CEO of the
International Bottled Water Association (IBWA) in Alexandria, Va., since 1999.
Doss has extensive experience in food and drug, government affairs, public
relations,legal and association management issues.

Founded in 1958, IBWA's membership includes U.S. and international
bottlers, distributors and suppliers. IBWA works with the U.S. Food and Drug
Administration (FDA), which regulates bottled water as a packaged food product,
and state governments in concert with the IBWA Model Code to set stringent
bottled water standards for safe, high quality products. Contact IBWA at
800-WATER-11; www.bottledwater.org.

EPA and Municipalities Provide New Opportunities

By Shannon Murphy, NSF International

Consumer concerns over water quality and the general
public's awareness, whether through the water treatment industry, the local
retail outlet, mass media or their own research, serve as drivers for the water
industry. This heightened awareness in water quality and the need for clean
potable water will continue to promote what appears to be the next market for
many POU/POE water treatment devices. Whether this increased consumer awareness
and concern is through continued research and reduction of existing allowable
levels for contaminants or through the potential contamination of water
supplies, consumers are looking for assurance that they have a proactive means
to ensure acceptable drinking water.

In the past year, we witnessed a greater focus on the use
and implementation of POU and POE devices for water treatment municipalities as
a part of their systems for ensuring compliance with federal water quality
requirements. As we know, the maximum contaminant level (MCL) for arsenic was
reduced from 50 parts per billion (ppb) to 10 ppb, effectively lowering the
previous arsenic MCL by 80 percent and affecting some 4,000 public water
systems, the majority of which serves fewer than 10,000 customers. NSF
International, in conjunction with the U.S. Environmental Protection Agency
(EPA) and the National Water Research Institute, currently are involved in
assessing the feasibility of using POE devices to meet the drinking water
standard in these small communities. This study, expected to be completed in
late 2003, will establish the cost, maintenance requirements, water quality
compliance issues and public acceptability of this centrally managed POU
treatment. The use of POU devices, through the municipality, may have
long-lasting positive effects on the POU/POE market. With this added support
from the municipalities, this working relationship will add value to the water
treatment industry in the eyes of the consumer.

Homeland security will begin to play a larger role in the
market focus of the water treatment industry. NSF International's ETV group
currently is involved with the Department of Homeland Security in developing
validation protocols for water treatment devices. Initially focusing on
mechanical filtration, the plan is to have a number of different protocols
completed by the end of 2003. The goal of the testing that will be performed according
to these protocols is to establish the effectiveness of POU/POE devices as
tools for consumer protection in the event of a terrorist attack on public
water supplies. This year will see heightened awareness and push for the
development of these protocols. Systems are designed to meet certain
performance needs, and with many of these protocols in the development phase,
this year could see the development of new innovative products to meet these
new, more stringent exotic organism removal protocols.

This year also will see the completion of a long-standing
industry concern regarding purification. Standards 55 for supplemental
treatment and Standard 221 for treatment of unknown water sources are planned
to be completed this year. These standards will address the removal of
waterborne microorganisms such as bacteria, viruses and protozoa. The microbial
task group diligently worked through several hurdles in the past year including
test methods and surrogate organisms for predominant treatment technologies
such as mechanical, halogen, ultraviolet, distillation and ozone. Completion of
this standard, initially intended to be completed in 2002, will allow the
industry to validate the performance of microbiological purifiers according to
an accepted national standard.

Some may say that we began down this path years ago, and
some may say only in the most recent past. However, the merging of the water
treatment industry with the water municipalities will see continued
developmental efforts that will only strengthen the growing relationship.
Centrally managed POU treatment, whether driven by the lower arsenic MCL or
through the Department of Homeland Security, will become a greater reality in
the coming year. Officials are concerned about cost, operation and maintenance
of these water treatment devices. Through the NSF ETV research project, many of
these operation and maintenance concerns are being addressed. Manufacturers may
need to develop new innovative products to meet the tighter removal
requirements of these protocols. Consumers will view this moving partnership as
a proactive means to personally improve the quality of their water and thus
their family's well-being.

About the Author

Shannon Murphy is operations manager of the Drinking Water
Treatment Unit program at NSF International, Ann Arbor, Mich. He has been with
NSF for seven years, working in the areas Standard 61 and the drinking water
treatment unit standards. His bachelor's degree in biology is from Concordia
University in Montreal, Canada, and his master's degree in biology with an
emphasis on limnology is from Wayne State University in Detroit. Murphy may be
reached at 800-673-6275; fax 734-769-0109; murphy@nsf.org.

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