Water Purification System Distributor
Water Purification System Distributor
Fresh Faucet Distribution
570 Turnberry Dr.
Tulsa, Oklahoma 74101
Christopher Lee Aubuchon, Ryan Franklin, Justin Gimotea, and Elliot Smith
The need for clean water in the developing world is a large and growing concern. Today, over one billion people do not have reliable access to clean drinking water. To help alleviate this suffering, Fresh Faucet Distribution will operate as a micro-franchisor for water purification systems in the developing world. We will partner with local microfinance institutions in India to provide simple water purification systems that can be operated locally. We will provide knowledge, training, and support for local entrepreneurs in building and operating their own small water filtration and distribution businesses. We will utilize the existing infrastructure and resources available through our microfinance partner institutions to gain access to underserved markets and to reach local entrepreneurs. By coupling the power of microfinance with proven business systems we can scale the distribution of clean drinking water faster and more efficiently than traditional charity organizations, create job opportunities, and share business knowledge with aspiring small entrepreneurs in the developing world.
Fresh Faucet Distribution is a Microfranchise Institution that will provide an integrated service and product to small entrepreneurs in Bangalore, India. This integrated service and product features three components. First, Fresh Faucet Distribution will connect small entrepreneurs to the Industrial Credit and Investment Corporation of India, a leading Microfinance Institution. Second, Fresh Faucet will enable these small entrepreneurs, now equipped with capital to invest in a water filtration system produced by Filtration Systems Ltd. Finally, after connecting Bangalorean entrepreneurs to capital and equipment necessary for them to operate a small enterprise, Fresh Faucet will provide them with a training system that will educate them on how to effectively operate their water filtration systems and how to effectively run their small enterprise. In order to provide this integrated product and service and in accord with the typical structure of a franchise business on a micro-scale, Fresh Faucet will charge royalties on profits.
Fresh Faucet will connect local entrepreneurs in Bangalore with local Microfinance Institutions (MFIs) in order to aid their purchase of water filtration systems, essentially enabling their potential as micro-franchisees. For initial entry into India, Fresh Faucet will utilize the infrastructure of one of India's largest and most successful MFIs, Industrial Credit and Investment Corporation of India (ICICI).
ICICI operates with the critical understanding that universal financial inclusion requires a systematic understanding of the markets, people and the local economies. With this critical understanding, ICICI's mission is to address the needs of the poorest of the poor and vulnerable populations across the country and to provide funding support to institutions that address critical resource gaps. ICICI concentrates on the most vulnerable geographies and sections of society that get excluded by other initiatives thereby enabling Fresh Faucet to connect more small entrepreneurs to the lifeline of micro-finance. More particularly, Fresh Faucet's partnership with ICICI will enable small entrepreneurs in Bangalore to purchase water filtration systems that will serve as a key element of their small enterprise.
Filtration Systems Ltd.
Fresh Faucet Distribution will connect Bangalorean entrepreneurs to Filtration Systems Ltd., producers of a solar powered UV light based filtration system capable of turning nearly any well, creek, river or other water source into clean and safe drinking water. The three step filtration process involves: sediment pre-filter, a Carbon Block Polishing Filter, and an ultraviolet light. The sediment filter removes dirt and large debris. The Polishing filter removes herbicides, pesticides, chemicals, odor, color, and bad tastes. The UV light removes Bacteria and Viruses, including Typhoid Fever, Dysentery, Cholera, Jaundice, Hepatitis, Influenza, E-coli, and other unwanted microorganisms to a 99.999 percent purity.
The system's effectiveness and value is confirmed in the way that it is currently used by Rotary International, Medical Missions, relief groups, missionary organizations as well as the Red Cross, UNICEF and the UN. It will produce about 3 gallons per minute and 500 gallons of water per day. This system is very easy to install. It can be set up in under one hour and is very simple to operate. It is a turn-key system with everything pre-assembled. The system plugs straight into the water source and can be mounted to any flat surface. It comes pre-assembled, and is simple to operate. Maintenance is typically needed once per year. The solar power means that is can be used in any village, even without electricity. The system can produce over 500 gallons per day, making it helpful to larger communities as well.
Our product runs on solar panels and does not need electricity. Not only does this make our product available to a larger market, but it also means that there is no energy cost for operating the machine. In addition, the machine requires little maintenance. Our unique ''business in a box'' package includes training and support in addition to the water purification.
Training is unique in the fact that it goes beyond maintenance of the water filter; it will feature an intensive entrepreneurial workshop, equipping our clientele with comprehensive skills to run a successful business. The following delineates the details of the two-part training system:
Product maintenance and repair
How to diagnose problems with the machine
How to order replacement parts and filters
Competitive Pricing Technique
Networks and referral marketing
Customer Service Training
Small Scale Distribution
Ethical Business Practices
Bookkeeping and Financial Practices
Already established multinationals have barred entry into the water distribution market through buyouts and exploitation of huge water reservoirs. We do not plan to attempt competition with these corporations, but they also should not affect operations based on the fact that their services are primarily bottled water distribution. There are minimal hurdles during due process of business establishment, but bureaucratic backlog may hinder initial growth of the business. There is a concern and evidence that the poverty level is so low in some areas that people may choose to drink contaminated water rather than pay for clean water. Given this concern, Fresh Faucet Distribution has engaged in intensive market research prior to entry.
Fresh Faucet is currently exploring the idea stage. This feasibility study is to examine our potential in the global water market, and more specifically India's water market. Fresh Faucet expects to be ready for launch by the beginning of 2009. Within that year we expect to accomplish the following:
- Complete feasibility study: May 5th 2008
- Begin and complete business plan: August 1st 2008
- Pursue and Receive start up capital: August 1st 2008
- Assess applicant pool: December 31st 2008
- Beginning Due Process: August 31st 2008
- End Due Process: September 4th 2008
- Start sales within India: January 1st 2009
Legal Restrictions and Rights
Fresh Faucet will operate as a non-for-profit organization. This is to ensure the lowest possible tax rate on any profits due to the low revenue nature of the business. Fresh Faucet will be comprised of a four-member board of trustees who will be responsible for planning and implementing board made decisions and who will be responsible for day to day activities. All revenues that are generated will be put back into the organization barring a small salary for the board and their subordinates. We will operate as a four-member board. Each member will be assigned to specialize in either product knowledge or training. There are few legal restrictions in India that would serve as an impediment to growth.
Although not required Fresh Faucet has decided to implement the following insurances to alleviate some of the liability burdened to the board of trustees:
- Property insurance-will insure the organization in the event of damage or loss to the business property.
- Liability Insurance-to insure against a employee or customer being injured in a situation where Fresh Faucet would be the liable party.
Micro-financing entails the extension of financial services to those living in poverty and without access to traditional mainstream credit markets or sources of capital. Micro-credit is a term which refers to loans made out to individuals, most often with no collateral, in the developing world through Micro-Finance Institutions (MFIs). These MFIs are a broad array of non-government organizations, credit unions, co-ops, private banks, and commercial banks which increasingly offer an array of financial options to the world's poorest who have little or no access to capital. These MFIs provide a diverse range of small business loans, savings, education/mentoring opportunities, and insurance to the world's poorest.
''Microcredit, or microfinance, is banking the unbankables, bringing credit, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks...'' (Gert van Maanen, Microcredit: Sound Business or Development Instrument, Oikocredit, 2004)
Micro-financing is a unique tool which offers those in the developing world a chance to actively engage in lifting themselves out of poverty. It supplements and improves upon traditional charity models by providing a means of sustained economic growth for the world's poorest without sustained subsidies. MFIs have proven themselves to be profitable and sustainable, and often provide valuable business skills and financial literacy to the developing world's budding entrepreneurs.
''For a microentrepreneur, the cost of a microcredit loan represents a small proportion of total business costs. Studies conducted in India, Kenya and the Philippines found that the average annual return on investments by microbusinesses ranged from 117 percent to 847 percent.'' (International Year of Microcredit, United Nations, 2005)
It's estimated that total market demand for micro-financing totals above $300 billion worldwide, yet less than 18 percent of the world's poorest households have access to financial services totaling just over $25 billion today. The micro-finance industry is comprised of over 10,000 MFIs worldwide. As the industry matures, a process of consolidation has begun to occur, with professional industry leaders (the top 10 percent) expanding their acquisition of smaller firms and implementing best practices. Also, leading MFIs have begun to mature both financially and operationally, in some cases transforming into banks, and integrate into the financial sector. The industry has begun to take on the skin of the more traditional financial sector with ground-breaking securitizations of micro-loans and local bond issues. This is occurring at a time when many new entrants are also entering the industry, most notably, large commercial banks. The confluence of these trends, coupled with increased acceptance of micro-credit and online vehicles for individual investors (such as Kiva.com and MicroPlace.com) suggest a rapid closing of the supply-demand gap for global micro-credit in the years ahead.
Micro-franchising represents the very latest innovation in enterprise social development and serves as a natural complement to the micro-finance industry. Micro-franchises are broadly defined as small businesses that can easily be replicated by following proven marketing and operational concepts. This is an industry that is in its infancy and is an outgrowth of the micro-finance industry model.
The underlying premise of the micro-franchise concept is that, in addition to underutilization of labor, there exists in the developing world an underinvestment in human capital (the knowledge, skills, and abilities necessary for success). In addition to all the hurdles faced by small business owners in the developed world, micro-entrepreneurs operating in the informal sector in the developing world must face low and uncertain wages, and little-to-no social welfare or security. They are not registered and cannot benefit from many support programs initiated by the government including training, financial assistance, tax incentives, etc.
Microfinance provides its clients with working capital loans for self-employment, but often does not offer the business skills, training, or technical assistance necessary for the owner to run a successful business. Micro-franchising fills this gap by offering proven business models, technical training, supervision, quality control or marketing expertise, and resource distribution scheme. The existing network capacity of microfinance institutions is still the most powerful tool for reaching a large number of the world's poorest. Integration of these two powerful concepts is beneficial because microfinance can provide the capital needed for self-employment while micro-franchise opportunities provide the capacity to develop businesses strong enough to generate continuous growth in sales, jobs and profits. One of the underlying problems with micro-financing as a poverty reduction tool has been the inability of many local entrepreneurs to scale their businesses beyond what a single person can sell, produce, and/or transport in a day. Micro-franchising can address this problem by providing simplified and proven systems for scaling businesses on the local level, thereby providing added job growth, wealth creation, and knowledge transfer.
Trends in Governmental Support
In 2000, as part of the United Nations' Millennium Declaration, International Heads of State pledged to reduce by half the number of people who lack accessible and affordable drinking water by 2015. This pledge also includes ending unsustainable exploitation of water resources and the development of integrated water resource management and efficiency plans. Fresh Faucet will benefit from this UN-sanctioned governmental support and will enable it to realize its goals with greater expediency and success.
The efforts of the Global Water Partnership (GWP) will ease Fresh Faucet's entry into the Indian market. GWP is a working partnership among all those involved in water management: government agencies, private companies, professional organizations, multilateral development agencies and others committed to meeting international goals related to water and sanitation. The GWP's particular contribution to the U.N. Decade includes working within countries, and with the community of international organizations, in order to assist countries in developing integrated water resources management and water efficiency.
Current State of Water Industry in India
Currently over 1 billion people, or 20 percent of the world's population does not have reliable access to safe drinking water. Contaminated water is one of the single largest sources of disease and death in our world. Worldwide, 250 million people suffer from water-related diseases each year. These cases of sickness and death take a great toll on the economy of developing nations, costing untold billions of dollars in lost economic output. About 226 million Indian people lack access to safe water and over 46 percent of India's people are living on less than a $1 U.S. dollar per day. In India alone, over 450,000 people die annually of diarrhea, an affliction whose leading contributor is a lack of access to clean water and the total number of children who die of water-related diseases each year is 1.5 million. Large multinationals such as GE India have begun to pay attention to this problem, and have responded by marketing water purifiers, mostly on an industrial scale. Even in this category, market penetration is a mere 2.5 percent and use of personal or village purification systems in rural areas is negligible. During the 1990s, India's access to clean tap water in both urban and rural areas actually declined, and greater use of groundwater sources ensued. Over half of the rural population now relies on groundwater and dependence on open wells (25.8 percent) continues to be high. The declining quality of groundwater due to pollution is posing health problems for people in India.
Current Microfinance Industry in India
The market potential for this industry in India is tremendous. The water market in India is a $2 billon industry and is growing at a rate of 15 percent-20 percent annually. According to data from India's National Sample Survey Organization, only 70 percent of urban and 18.7 percent of rural households have access to piped tap water supply in India. This represents a net decrease from 72.1 percent in 1988 for urban areas and only a marginal increase in rural areas. This leaves a large proportion of the population without access to water infrastructure and dependent on increasingly polluted groundwater. Moreover, as India's population and water demand increases, these groundwater sources are becoming increasingly polluted. All this occurs alongside rapid economic growth within the country and increasing per-capita income, which creates a huge potential market for local water purification.
Market Potential for Microfinance in India
- Among its varied MF providers, India has nearly all the ingredients for CMF: demand, infrastructure, human capital, management capacity, wide outreach, commercial viability
- Credit potential estimated at $6-$8 billion
- Average annual Gross National Income growth from 1990-2003: 5.8 percent
Current Microfinance Industry in India
- 1,000 private MFIs; only 1 has 200,000 clients & only very few have 100,000. Most have 500-1,500 clients.
- 90 MFIs rated by Micro-Credit Ratings International Ltd. in 2003 had, in aggregate, loans of $US 52 million & reached 1.9 million clients
- Presence of many highly educated people; some Commercial Microfinance experts with high technical capacity
- Already existing vast banking infrastructure
- Considerable financial liberalization
- High diversity of MF providers, and a new dynamic of experiments & ideas
Current Microfinance Providers in India
- Commercial banks (priority sector loans)
- SHG-Bank Linkage program
- Regional Rural Banks (RRBs) (owned by GOI, sponsor banks, & State Governments)
- Cooperative Banks
- MFIs (NGOs, Non-banking Finance Companies, & cooperatives)
- Postal banks (savings)
- Others (wholesale, retail, & some that are both)
We will be using Industrial Credit and Investment Corporation of India. They have great qualifications:
- ICICI, a private sector bank, is India's second largest bank
- Network of 955 branches in India & presence in 18 countries
- ICICI Bank reports recent presence in rural & microfinance markets, with outreach to over 500,000 rural and poor households
- Interested in scaling up, reaching underserved markets, & developing innovations for MFI
- Partnerships with MFIs; buys MFI portfolios; & has retail CMF pilots
- Internet Service provider partnerships to finance 1,500 village-level Internet kiosks; franchised distribution of ICICI products
- ICICI Bank Social Initiative Group:studies of international CMF best practices, action-research on CMF, working papers, etc.
- A promising example of building toward CMF future.
Our competitive advantage is the package of products and services we offer. It is the efficiency associated with specialized training and product knowledge, offered by our company. The solar powered Filtration Systems Limited water filtration system was chosen because, unlike most other purification systems, it is not limited by water type or electricity. Whereas other systems remove bacteria or sediment, our system effectively and efficiently removes both. The Fresh Faucet filtration system provides the most cost-efficient and effective water filtration system available. This system has few, if any, limitations, as it was designed specifically for our purposes. This system also fits our budget. With a small wholesale price of $1,700, the system can pay for itself within one year and fits the criteria for issuance of micro-credit.
Another competitor, Matt Fritz, has created a water filtration system. This system is similar to Filtration Systems' products in some respects. The system filters wastes through an evaporation mechanism and can even filter sewage waste products into potable water. This system is offered as a micro-franchise opportunity similar to our own. The system has begun an initial trial run with local entrepreneurs in Bangladesh. Though the system has features which ours does not, such as the ability to produce excess electricity and filter raw sewage, there is a considerable cost differential. Initially the product cost $100,000 to produce. The cost has been reduced to just over $3,000 for the entire system, however, this still represents an exorbitant cost to local entrepreneurs who might benefit from the system.
Fresh Faucet plans to open in India. There are three sources of competition: bottled water companies, tap water/purification companies, and public water. There are nearly 200 bottled water companies, nearly 80 percent of which are local brands. Larger, foreign companies include Nestle, PepsiCo's Aquafina, and Coca-Cola's Dasani. Some of these larger companies, such as Coca-Cola, have been accused of causing water shortages in more than 50 surrounding villages. Another problem with bottled water companies is that approximately 90 percent of bottles are used just once, and then thrown away. It takes 1,000 years for a bottle to biodegrade. Recycling is not a strong program in India. Pesticides and other toxins are still common in bottled water.
Tap water companies are less common. They allow locals to fill containers at a price based on volume. There are many problems that stem from this. Industrial commercial businesses rarely get enough profit to stay afloat. One of the few commercialized businesses with a model similar to our own has 60 locations, including one in Bangalore. They are, however, limited in location because they are a joint venture with local governments and are under private ownership. Despite these impediments, it is estimated that on a hot summer day, Bangalore slum dwellers buy anything between three to four thousand liters of canned water. This is besides the volume of drinking water that residents get from public sources and numerous borewells.
Public tap sources of clean water are not widely available and are subject to rationing, while past attempts to teach locals how to maintain the public sanitation process have fallen by the wayside. Locals want water controlled by the people, yet the people have been shown not to have enough incentive to maintain public well systems in the past. In Bangalore, slum dwellers have access to clean tap water through public tap sources; however, they are severely limited by rationing of water and are forced to stand in line for hours to fill their water needs. Also, public water sources are only available during certain times of the day, require a long travel time for most users, and are subject to frequent breakdowns/backlogs/or contaminations.
Another company has begun selling a bromide-based water purification system for use by individual families. It is a table-top device which requires no electricity and is being sold locally door-to-door in Bangalore. The purifiers, however, cost $68 U.S. apiece. Furthermore, the system requires replacement filters approximately every 4-6 months which cost an additional $10 U.S. This is a considerable capital cost for families living on less than $1 per day, making the units unaffordable for those needing them most.
Fresh Faucet provides a low cost, no waste operation that stays in the hands of the local people. It provides monetary incentive to keep the business going, and the costs are low enough that it can be open to a larger variety of villages and towns.
1.1 billion people in the world do not have access to safe water, 2.6 billion people do not have access to adequate sanitation, 1.8 million children die every year as a result of diseases caused by unclean water and poor sanitation-this equates to 5,000 deaths a day.
The lack of clean water has fatal ramifications on all age groups. 90 percent of deaths from diarrhoeal disease occur in children ages 0 to 4 years. The World Health Organization reports that ''Improved drinking water and sanitation services and better hygiene behavior especially by mothers are crucial in cutting child mortality.'' Children in Africa and Asia, especially girls, ages 5 to 14 years, miss school because of lack of adequate drinking water and sanitation in their homes and schools. This decrease in school attendance exacerbates the cycle of poverty. For people ages 15 to 59, improved drinking water and sanitation services through the efforts of community projects bring economic returns far greater than the capital investment and recurrent costs. People aged 60 years and over comprise an increasingly large proportion of the population, and in the way that they are more susceptible to diseases spread by unclean water, it is imperative that they also be considered in water and sanitation programs.
In particular, the water crisis in India is threatening economic prosperity. Lack of clean water in agricultural regions could stem massive migration of rural farmers into urban centers. This population influx into congested urban areas will put enormous pressure on existing infrastructure. Experts suggest several directives:
- Public education of wealthy farmers on water conservation
- Improvement of water management and waste facilities
- An increase in technological innovation through further advances in desalinization, water recycling, deeper drilling, and water transportation techniques
Fresh Faucet's microfranchise efforts can serve as a timely and valuable solution to this crisis.
India has the largest growing bottled water consumption rate in the world. There has been an increase of over 57 percent during the last five years. One reason for this is the scarcity of clean drinking water which forces many to drink from the same water source that others use to bathe and wash clothes.
Fresh Faucet's typical customer would be a person with low income in a rural area. Towns and villages with easy access to a water source would allow costs to be at a low. These are places where Fresh Faucet can be most effective for the people in that town.
The specified region within India for Fresh Faucet's initial entry is Bangalore. It is one of India's fastest growing cities, with a growth rate of 38 percent over 10 years. Almost 20 percent of its 6.5 million residents are packed into informal settlement areas, better known as slums.
Most of the people living in these areas do not have access to safe drinking water or household toilets. In Bangalore, people living in the slums typically collect water from a water tanker or from a polluted stream that can be as many as two miles from their homes. There are some public water connections, but the water is only available for a few hours each day. Often, the water collected is not enough to meet the most basic needs of the households. In order to get water from the water tanker, community members (mainly women and children) wait in long lines for a city water truck.
Providing access to safe water and sanitation facilities in the home and providing health education will transform the daily lives of thousands of people, enhance security and reduce the causes of communicable diseases.
Fresh Faucet's market penetration plan stems from local citizens starting their own business. There is no need to spend significant amounts of money on advertising. Word of mouth is the most powerful form of advertising, so the local entrepreneur will begin spreading the word with people he/she already knows (per our networking training). Most of the traffic in the towns we will operate will be on foot, so many people will pass the business daily and continue spreading the word. An easily accessible location and word of mouth will be the main way that the company expands the business. As each location nears operating capacity, additional locations will be considered.
A website will be created in order to raise awareness for Fresh Faucet. It will teach people significance of the impact of clean water, and show them what they can do to help.
Fresh Faucet is committed to bringing clean water to those in the developing and impoverished world. Our company structure is designed to help us grow quickly, since we are not limited by charitable donations. This fact, coupled with our dedication to the cause, means that our focus for the future is to change as many lives as possible.
In order to affect the greatest number of lives, we must first start with awareness. In the long term, a comprehensive marketing strategy will be ideal, but an initial step in raising awareness is the web as it is an inexpensive way to accomplish this. One way we can continually foster awareness is through the use of link sharing. Fresh Faucet will place links for other socially just causes on our website in exchange for a link on their site. Facebook is another way to spread awareness very quickly. As part of our future plan, we must constantly be looking for ways to spread our name, and the web is a great tool for that.
Secondly, we must seek more entrepreneurs within various parts of Bangalore. While each system can make up to 500 gallons per day, there are more than 1.3 million people living in the Bangalore slums. While not every person will be in the market, Fresh Faucet still faces enormous growth potential from Bangalore alone. In the way that there are countless other areas within India with vast numbers of people in need of clean water, there are tremendous possibilities of growth.
While Fresh Faucet wants to take advantage of economies of scale in regards to training and support, we do not want to be limited by the locations in which we grow. Fresh Faucet will also be seeking to expand into locations beyond India to make clean water sources a global possibility.
With new locations, Fresh Faucet will have to seek alternative MFIs beyond ICICI. By developing a diverse group of MFIs, Fresh Faucet will be able to keep MFIs competitive and create more safety measures in the event that MFI funds become more difficult to obtain. While ICICI does have a vast infrastructure in India as wall as in 18 other countries, Fresh Faucet will be looking to create business relationships with as many credible MFIs as possible to expand its reach further.