As unique as 2007 was for many in this industry, 2008 will follow with some of the same trends observed last year. Consider the last quarter of 2007 just the tip of the iceberg for what may come in 2008. As daunting as that sounds, putting things into perspective and preparing for the changes will help us all. It also gives Canadian Water Quality Association (CWQA) a keen focus to assist, where it is able, its members and the industry.

I state that some of this article is not mine but the thoughts of the Canadian Water Quality Associations best minds, i.e. its members. Their insights were the basis of this article.

Industry Regulations and Canada’s Fragmented Framework
The trend to apply blanket regulations to every wetted piece of equipment in the industry continues to worry the industry players. Here’s why: interpretation — Health Canada or the National Plumbing codes might be developed nationally, but it is still up to the provinces to adopt (often with changes) these guidelines, causing fragmentation. Add to that, standards from the certifying bodies and interpretation become a quagmire for the inspectors and the professionals trying to make a living. Industry stakeholders need to continue the process of educating professionals and regulators, resisting this fragmentation trend wherever possible.

We are still very much in favour of overall codes and standards, but it is the lack of understanding by regulators on the topic of residential water treatment — or rather their interpretation of what it is — that is of concern to us all.

The U.S. Economy
As everything flows from 2007 and especially the last quarter, the U.S. economy and its obvious challenges will affect Canadians in 2008. The worst is yet to come if we listen to some of the financial experts. The opinion is that the U.S. is still in for a rough ride and that the sub-prime debt problems have not yet reached their peak. This will have effects on our economy, our dollar and Canadian buying power.

There is a host of other challenges with the U.S. economy that have yet to come home to roost in that particular nest. The U.S. dollar losing strength, massive trade and budget deficits, growing personal credit card debts, defaults on personal mortgages, interest rates and oil prices will affect our Canadian economy. Once these start impacting consumption and spending, it could all start to ripple pretty quickly and affect us, as we are their major tradig partner.

The good news for us is that the water treatment market is somewhat cushioned from recession. People need their clean water — that is uncompromising. This is a big wait and see, but many people remember the October rush to revise budgets for 2008 when the dollar reached US$1.10. We can only hope that the changes affect us in a positive way. Regardless, a stronger Canadian dollar will change the way we have done business in the past with our American neighbours and with the world.

The Strong Canadian Dollar
Many water treatment dealers, manufacturers and OEMs that buy from the U.S. scrambled in the last quarter of 2007, with the loonie soaring to record breaking heights. The appreciation of the loonie continued to change the competitive situation in this country almost on a daily basis. But this is very much a two-sided sword — lower import costs for material also means lower competitors’ prices from the U.S.

The U.S./Canada border still seems to be a formidable barrier in our industry in its ability to restrict competition, bucking the overall trend in most products. However, at parity we have seen a steady stream of U.S. companies looking at opportunities here. Over the last quarter, CWQA has fielded many questions from U.S. firms about business in Canada. A few are looking for a new market and others are expanding theirs.

While there are a few obvious technical breakthroughs on the horizon, none are major. What can be expected in ‘08 are products from 2007 refining their value proposition, and other manufacturers offering similar products to compete. As usual, the industry will continue to see product improvements and model updates, but no new quantum leap technologies will appear any time soon.

Canadians Understand the Value of Drinking Water
Expect major improvements this year from your customers, both new and old. Canadians are starting to understand there are alternatives and solutions for the water they drink and use. They can control their water quality — and they don’t have to pay $4 a litre for it.

Changes in the outlook of Canadian consumers regarding the “Green Movement” (environmentalism, water conservation, etc.) will affect our market. Learn how to sell green.

Out west, the demand for water has been driving interest in water recycling and water reuse. Expect to hear more on this topic in the New Year as codes and standards are further developed with our industry in mind.

Another big thing will continue to be the health effects of decisions that have been made over the last 50 years in regards to chemicals and metals in our water supplies. We are starting to understand the “old sciences” are just that, and we may have to re-examine our guiding principles on water quality. New solutions will assist here, along with the hundreds of studies that will come out in 2008 telling us that chemicals we have used for the last 50 years may not be so benign. This too will impact the POU/POE industry in a monumental way. This may cause some headaches in the industry, but we will cope. Probably the best example of this is the occurrence and study of endocrine disrupting chemicals and pharmacological care products in our waters.

Science will be developed, pushing guidelines and regulations — it may not come tomorrow but it is on the horizon.

Canadian Business
Water is now a sexy business. This will attract consolidation and acquisitions in the market as the larger players move into the large markets and its niches via acquisition. With big money, a chance for large ROIs and stability will attract private equity. Expect to see more from the private money guys in 2008.

2007 was an interesting year, and 2008 will be as well. Barring the unforeseen and the unanticipated, expect to be as busy. The economy and the North American market will keep us all on our toes. Regulations, codes and standards will continue to be worked on. This will trigger the regulators to ask questions in the process of reacting to changes in their environment. Rest assured that CWQA is out there representing the interests of the industry and its members.

Kevin Wong is the executive director of the Canadian Water Quality Association.


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