U.S. Residential Water Treatment Market Trends

About the author:

Shilpa Tiku is the chief research officer & partner for Verify Markets. Tiku can be reached at [email protected] or 210.595.9687.

The U.S. residential water treatment market reached revenues of more than $2.2 billion in 2020. The point-of-entry (POE) market was the largest segment by revenues, followed by point-of-use (POU), under-the-sink systems’ market. The key market driver for POE systems is expected to be water hardness.

Pitcher systems was the smallest category by revenues in 2020. Pitchers are often the first experience many customers have with residential water treatment systems. Customer education and awareness causes them to leave these products in favor of POU, under-the-sink systems or POE systems. Pitchers are easy to install and inexpensive to acquire, making them ideal for renters and other apartment dwellers who cannot permanently install water treatment systems.

The POU, under-the-sink systems market is expected to witness the highest growth rate over the next seven years. Under-the-sink systems are often an add-on sale to water softeners within the dealer channel. Customers that often purchase whole house water softeners may likely also buy an under-the-sink system. Under-the-sink systems appeal to many homeowners because they do not clutter the kitchen counter. Additionally, these systems incorporate a variety of technologies, ranging from basic carbon filtration to the more advanced technologies like reverse osmosis (RO), ultrafiltration (UF) and ultraviolet (UV).

Market Drivers

While the overall economy has taken a hit post COVID-19, the residential water treatment market witnessed a growth in 2020. The industry is set to continue to benefit from trends caused by the pandemic.

The key drivers in this market include:

Increased customer access through e-commerce and dealer channels. Amazon’s growing presence in the market has had an overall positive impact on the growth of the U.S. residential water treatment market by providing an increased level of customer exposure. COVID-19 has spurred shifts in customer-buying behavior from retail stores to online channels. Additionally, the dealer channel was considered to be an essential business and remained open in many states to serve customers throughout the pandemic. Systems that require permanent installation, for example, are best distributed through dealers where appropriate after sales service is available. While end users in the past mainly purchased POE and under-the-sink water treatment systems from dealers, it is now common to purchase these systems via e-commerce. Furthermore, end users are becoming comfortable with installing these systems themselves.
Concerns regarding emerging contaminants and rising customer expectations of drinking water quality. Customers are becoming increasingly aware about contaminants in their water supply. Additionally, ongoing media scrutiny regarding poor quality water, waterborne illness outbreaks, boil water advisories and emerging contaminants like per- and polyfluoroalkyl substances (PFAS) are creating awareness among customers.
Home remodeling trends. The pandemic has created a surge in do-it-yourself (DIY) home improvement projects. Additionally, the home remodeling market was buoyed through the pandemic as owners spent a considerable amount of time at home and realized the need to update or reconfigure their homes.

Market Challenges

Fragmented market. The residential water treatment market is highly fragmented. In addition to the larger and well-known manufacturers, the market is crowded with several small and mid-sized companies. Many of these smaller companies operate online, or on a local basis, or concentrate only on limited products.
Water treatment systems are not considered as essential appliances. Unlike appliances like refrigerators, cooktops, washers and dryers, water treatment systems are not considered to be essential home appliances. End users find it difficult to justify costs, both up-front and continual, associated with residential water treatment systems. The majority of end users in the U.S. are on municipally treated water, and they often feel that additional water treatment is redundant. This challenge is likely going to continue to play an important factor in the market in the near future.
Initial capital investments hampering sales. Residential water treatment systems can require a high initial capital investment by the homeowner. This is especially true for POE systems, as well as some POU systems.

Market Trends

The market is extremely competitive and fragmented. The availability of a diverse portfolio of brands, price points and treatment capabilities has strengthened market competition. Brands are no longer just competing on price but also on aesthetic designs, treatment capacity, contaminant removal and overall product design/quality.

POU systems are expected to witness a compound annual growth rate (CAGR) of 4.4% over the next seven years. POE systems are expected to witness a CAGR of 3.3% over the next seven years, and pitchers are expected to witness a CAGR of 4.5% over the next seven years.

The market for faucet mount systems is on a decline due to lack of product differentiation, limited treatment capabilities and compatibility issues with changing faucet designs. The demand for counter-top systems is also expected to decline. Counter-top systems take up kitchen counter space and are in plain view. Most American customers dislike clutter on kitchen counters. Additionally, there has been little to no revolutionary technology innovation in the POU counter-top systems market. Several manufacturers have discontinued providing counter top systems due to a lack of customer interest.

More sophisticated technologies, like RO for instance, are receiving increased attention as it is more effective against emerging contaminants. RO systems cater to an increasing number of end users that are aware about emerging contaminants and tap water quality issues.

Distribution Trends

POU, under-the-sink systems are predominately sold through dealers and plumbing wholesalers, since residential customers are comfortable having these units installed professionally. However, under-the-sink systems are also sold at hardware and warehouse stores. For pitchers, diverse customer access occurs through a variety of distribution channels. Mass merchandisers, such as Walmart and Target, are leading the way; however, e-commerce is gaining traction. Retail and e-commerce channels serve the DIY crowd and have gained popularity in recent years. The chart below shows the distribution share analysis by revenue for POU counter-top and under-the-sink systems market. In 2020, the largest revenue share was occupied by dealers and plumbing wholesalers, making up an estimated 45% of revenues.

Conclusion

Companies will likely continue to cater to multiple demographics by offering diverse product lines with multiple price points. Hard water will likely continue to be a major driver for POE systems in the U.S. E-commerce is expected to continue to gain traction. Most customers prefer the convenience and lower prices offered by online shopping. Companies will likely attempt to bring the Internet of Things (IoT) into their water treatment systems.

The U.S. residential water treatment market will continue to benefit from increased customer awareness levels regarding tap water quality, and it is expected to witness a steady growth rate over the next seven years.