The Tribune

By NEIL HARTNELL Tribune Business Editor THE investor group that acquired the former Bacardi plant believes its ECH2O bottled water brand can generate $20-$30 million in annual sales in five to six years time, telling Tribune Business it had been in "expansion mode for the last four-six months". Tennyson Wells, the former Cabinet minister who is principal in the 40 investor-strong Source River group, said that despite "growing pains and headaches", sales of ECH2O - which was launched in April 2010 - had to-date reached the $2 million per annum mark. Disclosing that Source River had been unable to keep up with demand for the distilled pure water product, Mr Wells said the investor group had last January invested $400,000 in equipment that would enable it to produce its own bottles. Given the extremely narrow margins in the bottled water industry, Mr Wells explained that through producing its own bottles, Source River cut costs and thus increase its margins. And, building on ECH2O's success, he added that Source River aimed to expand into juice production in 18 months' time. "We've been developing the capacity to produce our own bottles and stuff like that," Mr Wells told Tribune Business. "We've been in expansion mode for the last four-six months, from last year October, and have added one-gallon bottles. That should have started last week or this week. "We have the ability now to blow our own water bottles for the 20 ounce, 12 ounce and 1.5 litres. We don't have the pre-fab in yet for the 12 ounce and 1.5 litres yet, but are blowing for the 20 ounce. "When we started we were buying our bottles already produced and sourcing from abroad, but can now produce our own bottles." Acknowledging that establishing ECH2O in the Bahamian market had not been as easy as Source River thought, Mr Wells said: "It's a growing thing. There's a lot of pain and headaches, but it's growing. "It hasn't gone as fast as we expect, as the cost of producing distilled water is three times' as much as ordinary reverse osmosis water. But we are capturing the market here, and more and more people are buying it. As soon as they know the price and quality of it, people are buying it." ECH2O has to compete with imported rivals from the mineral and aerated water sector. Statistics produced by the CARICOM Regional Negotiating Machinery (CRNM) showed that the Bahamas' imported $3.617 million worth of such products in 2010. While the volume and value of mineral water imports into the Bahamas both declined by 6 per cent in 2010, compared to 2009, spending on them had increased by an overall 1 per cent between 2006 and 2010. This was despite a 50 per cent tariff on such imports, the CRNM said. Noting that annual ECH2O sales were in the $2 million range, Mr Wells told Tribune Business: "It is capable of doing $20-$30 million. That's in like five to six years time, but that's the objective. "There's hardly any profit in it because the margins are very narrow. We are not displeased with what we have done to date, but we have not been able to meet the demand for it due to the cost, and cost of buying supplies. "We decided to put money into training and equipment, so we can produce our own supplies and have better margins. The last set of equipment we committed to was $400,000, and we got that in January last year. We started working towards it in October." Mr Wells said Source River was now capable of producing 5,000 five-gallon bottles per day, and could do 10,00o if it ran two shifts, whereas before it could only produce 1,000 bottles per day. "We have had customer complaints because we were not able to meet the demand when it came on stream, so we had to re-position, readjust, and are still in that process," the former Cabinet Minister added. "It will take us six months to a year before we finish that. We have growing pains, but the potential is there." Looking to the future, Mr Wells told Tribune Business: "There are some other things we want to produce. We want to move into juices in a year-and-a-half. "As soon as we get all the equipment in-house, the water to where we need it, we are going to go into juices." Source River, he acknowledged, had to delay a number of plans for the former Bacardi site due to the wider economy. "The bottom dropped out of the economy," Mr Wells said. "All sorts of things had to be put on hold. We're dealing just with water; there's no point in going after these things with the economy the way it is. We're hoping things will now start to turn around."