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New and Profitable Opportunities Remain in the $600 Billion Water Industry

Lux Research

A Lux survey found profits average 12.9% industry-wide and identified new technologies and start-ups promising to create additional opportunities, Lux Research says

BOSTON, MA – January 21, 2013 – Despite a drumbeat of pessimism, the $600 billion water industry boasts of a sizeable number of profitable large companies. What's more, new entrants are bringing emerging technologies that will disrupt the industry and create new opportunities, according to Lux Research.

A review of 150 companies across the value chain – representing 23% of the market – found average operating profit of 12.9%, torpedoing claims that it's impossible to make money in the water business. Customer-facing sectors in public service and small consumer systems do even better, clocking 14% profits.

“To read recent headlines in the water industry, one might think the sector is impossible to navigate, but that couldn’t be further from the truth,” said Brent Giles, Lux Research Senior Analyst and the lead author of the report titled, “Making Money in the Water Industry.” “By targeting worthwhile market sectors and keeping in mind some key sector-specific principles, a company can build a successful business.”

Lux Research analysts also drew on a survey of over 150 start-up companies to map emerging technologies where new players can find ways to enter – and where established companies will find both opportunities and threats. Among their findings:

  • Two areas dominate innovative company activity. A quarter of the start-ups focus on monitoring, forecast and control, an area that includes advanced sensors and process control. Nearly another quarter focuses on basic wastewater treatment. Other fast-moving areas include metals and organics recovery, and disinfection.

  • Advanced sensors are a top technology within monitoring. Advanced sensors read key analytes sensitively, in real time, and use robust techniques suitable to opaque samples, allowing for uses like monitoring of municipal water systems to reduce leakage and non-revenue water. Companies like ANDalyze have received strong early-stage traction and startups in this space increasingly compete with larger companies like GE, Veolia, and IBM Smarter Water.

  • Low-energy, low-sludge systems lead paradigm change in wastewater. An important development poised to go mainstream is low-energy, low-sludge wastewater treatment. Start-ups like Biogill, Microvi, and Emefcy's Sabre have developed simpler systems that do away with traditional energy-hungry blowers and significantly reduce the sludge resulting from treatment.

The report, titled “Making Money in the Water Industry,” is part of the Lux Research Water Intelligence service.