Bottled Water and Government Small Business Set Asides:A Marketing Opportunity

The Federal Government and many State and Local Government agencies offer a valuable contract preference to bottled water companies who qualify as small businesses.

This preference grew out of the desire of the Federal Government to help small businesses capture government contracts for drinking water and the small business preference for bottled water companies can be very relevant and very valuable.

The home and office bottled water delivery business is dominated by two large companies and one is foreign owned which gives small American companies an additional advantage. The first large bottled water company is Nestle, a Swiss company, that bottles and markets water under many brand names like Deer Park, Poland Springs and Arrow Head among others.

The second company is DS Waters, a large business owned by the investment firm Kelso & Co. that markets under many brand names including Crystal Springs and Sparkletts.

Neither Nestle nor DS Waters qualify as small businesses.

It is a fact that, in the government purchasing world, agencies prefer American companies that qualify as small businesses.

The small business preference means that, if an opportunity is designated a small business set aside, only small businesses can bid and win government contracts. Even though large companies are extremely aggressive and often predatory in their pricing, they are legally precluded from bidding on small business set aside contracts. This is good news and good business for small bottled water companies.

Approximately 25% of all Federal government opportunities are set aside for small business. Remember this is 25% of the total business and specific industries like bottled water may be higher. State and local set asides are also a large percentage of total business.

The small business preference is especially valuable for water manufactures because the Federal small business rules classify a water manufacturer as a small business as having less than 500 employees. Both Nestle and DS Waters have more than 500 employees.

Therefore if you are a water manufacturer with less than 500 employees you can bid and win Federal, State and Local contracts.

In addition, since water is heavy and distribution costs are a large part of the price to the customer, a small business water manufacturer has a natural advantage in capturing business if they are located near government offices or installations. Of course, government marketing is different from the standard rules of commercial marketing but Federal, State and Local procurement regulations are well documented and establish a level playing field for all bidders.

So, if your company is a small manufacturer, you should pursue government business at all levels. It is profitable and the best part is that you don’t have to compete with Nestlé or DS Waters!

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About the Author: Jon M. Stout is Chairman of the Board of Element H2O. For more information about bottled water, private label bottled water and bottled water delivery go to www.elementh2o.com