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Water Purveyance Bruce Lumis Amy Ott Brennan Ott Noah Whitaker Outline Water-Ways Irrigation Engineers Customers Cost Drivers Changing Technology Opportunities and Threats Political Issues Global Issues Intersection of Water Channel & Value Chain Conclusion Water-Ways Irrigation Engineers WWIE purchase equipment to sell and rent Products Pipe Drip irrigation systems Valves and fittings WWIE services equipment Pipe rental accounts for about $100 million in revenue per year (35% of revenue) Sale of equipment is about $300k per year Customers Farmers San Joaquin Valley Monterey Bay Oxnard area Washington Oregon Canada Oil Industry? Cost Drivers Increasing price of water Update equipment to use less water while producing more crops Increasing price of diesel fuel Pumps need fuel to deliver the water Changing Technology Out with the old… Water pipes used to be made with concrete, transite, and/or asbestos! Problems included easy cracking, substantial water leakage, oh… and cancer. ...In with the new 50+ years of increasing knowledge in hydrodynamics. Increasing use of drip systems vs. old school crop spraying and flooding. PVC, polyethylene, and aluminum. These pipes minimize inner-pipe friction leading to lower pumping energy demands and better flow-thru rates. Water loss and contamination is minimal. Opportunities & Threats Opportunities The high price of oil ($126/barrel) leads to lucrative markets for pipes, pumps, and drill cooling. Going “Green” – High cost of water forces farmers to seek new equipment that is more effective and efficient. Threats Capitulation of the dollar with growth of aluminum demand and increasing fuel costs. Increasing competition from Rain for Rent, Agri-Valley Irrigation, US Irrigation, Baker Tanks Political Issues Government regulation. US Ag firms cannot compete in the global market due to stringent and unfair regulations and business laws. Workers compensation, payroll taxes, inventory tax, property tax, and numerous other taxes…….. In China they can grow a bushel of cotton for pennies, in the US it takes dollars. Global Issues Explosive growth in China has lead to increased production of products like window seals, which are made using the same aluminum alloy as many of the products WWIE purchases. “Chinese [aluminum] demand this year will be about 14.9 million tons, a 24 percent rise from 2007. The country will account for 35% of total demand by 2020 from 13% in 2000.” (http://www.researchandmarkets.com/reportinfo.asp?report_id=597714&t=d&cat_id=) Intersection of Water Channel & Value Chain Channel Selection Single channel, based on direct selling High concentration of buyers High need for technical/product service Strategic Channel Options Distribution intensity Focus where large number of farmers are Oil industry in Central Valley and Oxnard THE WATER CHANNEL AS A COMBINED SUPPLY & DEMAND CHAIN “Ecology” (Mother Earth) “Value” (Offspring) “Economy” (Father Money) Water affects the Going to Market of WWIE by steering the marketing & sales, service, and ultimately the margin. Water is not used internally to any measurable extent. End Consumer Conclusion Lots of money to be made in transporting water Increase in oil prices has direct impact on water Growth in China will have HUGE impact at home in ways we never thought possible Must select channel and strategy to optimize channel carefully