Research: Rapid change drives water revenues to nearly $1T in 2020

Water is the one essential resource for which there's no substitute, and rising demand threatens crisis. But executives and investors aiming to harness these trends have been consistently flummoxed by water's fragmented business segments, hyper-local markets, and long adoption cycles. A new report from Lux Research cuts through the confusion by mapping and forecasting the $522 billion "Hydrocosm" of water-related businesses for the first time...

Nov 17th, 2008

• Lux Research report is first to map and forecast the "Hydrocosm" of water-related businesses

NEW YORK, NY, Nov. 13, 2008 -- Water is the one essential resource for which there's no substitute, and rising demand threatens crisis. But executives and investors aiming to harness these trends have been consistently flummoxed by water's fragmented business segments, hyper-local markets, and long adoption cycles. A new report from Lux Research cuts through the confusion by mapping and forecasting the $522 billion "Hydrocosm" of water-related businesses for the first time -- projecting that a new approach of "water cultivation" characterized by efficiency, reuse, and source diversification will be required to meet rising needs.

"By 2030, the world will use 40% more water than today and nearly half of the world's population will face severe water stress," said Michael LoCascio, Senior Analyst at Lux Research and primary author of the report. "The world will avert crisis by cultivating water as a durable asset rather than throwing it away as a consumable -- creating growth opportunities in everything from oxidizing new contaminants to rehabilitating creaking infrastructure."

To make sense of water's complex landscape, the Lux Research team interviewed 66 water experts worldwide, inventoried all water financing transactions since 1998, built a multivariate regression model to forecast water demand, and conducted exhaustive secondary research including modeling revenues of more than 300 water-related companies. Report highlights include:

Total water-related revenues stand at $522 billion in 2007: $385 billion in services, $64 billion in equipment, $9 billion in chemicals, and $62 billion in bottled water. Approximately 14% of total revenue derives from developing technologies and business models poised for growth, such as the $3.3 billion desalination equipment segment.

Revenue will grow to $961 billion in 2020 as specific growth segments such as zero-liquid discharge, UV disinfection, drip irrigation, and metering and monitoring break away from the ranks.

Investors have flocked to water technologies: Of $1.12 billion in venture capital funding since 1998, 59% has been invested in just the past two years. In the last 10 years, 506 water M&A events have occurred worth $176 billion in deal value while 39 water IPOs have raised $4.8 billion.

A few key areas -- including next-generation desalination, waste management, energy mitigation, infrastructure integrity, advanced oxidation, and water sourcing and transport -- dominate near-term growth opportunities.

"The technologies and business models required to meet future water challenges are either already here or dangerously close to commercialization," said Heather Landis, Lux Research Analyst. "Companies that make wise choices have potential for rapid revenue growth."

The 133-page report, entitled "Water Cultivation: The Path to Profit in Meeting Water Needs," includes market sizes and projections for 85 water-related business segments through 2020. It offers a concise introduction to the technologies and business models in water as well as in-depth analysis of the forces shaping their future outlook.

"Water Cultivation: The Path to Profit in Meeting Water Needs" is part of the Lux Water Intelligence service. Clients receive: 1) regular market overview reports; 2) ongoing technology scouting reports and proprietary data points in the weekly Lux Research Water Journal; and 3) on-demand inquiry with Lux Research analysts. For information on how to become a client, contact John Schwartz at john.schwartz@luxresearchinc.com or (646) 649-9582.

Lux Research provides strategic advice and on-going intelligence for emerging technologies.

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