In the first post of our multi-part series on proven sustainability strategies, we saw how Pret a Manger applied the “style & substance” sustainability strategy to create a £450 million a year sandwich business. In this post, we are excited to profile Soma, a company sending ripples through the water filtration industry by placing sustainability at the heart of its offering.
Water filtration, an untapped market?
Soma finds itself in the challenging but lucrative water-filtration sector, which is a multi-billion dollar market in the United States alone. The sector is expected to grow 7 percent annually, driven mostly by consumer concerns over the safety and quality of tap water. German-based Brita dominates the sector, boasting annual revenues of €320 million.
Within 24 months of operation, Soma has taken the market by storm and attracted the attention of venture capitalists in Silicon Valley. In its latest seed round in July 2013, Soma raised $3.7 million. Prior to that, the company raised over $150,000 from 2,000 backers on crowd-sourcing site Kickstarter.
What is special about Soma and how has it made such a splash in the water filtration market? Well, it turns out that Soma’s sustainability strategy has a lot to do with it.
Effective Sustainability Strategy #2: ”segment and dive”
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There are two stages in this strategy: “Segment” refers to segmenting the market and focusing on consumers in your target segment, and “dive” is applying deep expertise in this segment to differentiate your products and appeal to your target segment.
Segmenting is well-established in mainstream business strategy, with a long lineage of existing literature led by academics such as Hunt and Kotler. It has also been tested and implemented successfully by companies such as Red Bull and Nivea. Soma is an example of how this strategy can be applied using sustainability as the catalyst.
In the case of Soma, it made a conscious decision to segment the water filtration market to its target market — ethical and design conscious consumers. It then dove deeply into the science of water filtration to create a completely differentiated product that was not only effective in water filtration, but beautifully designed and sustainable as well.
How and why Soma segmented the water filtration market
Soma realised that Brita was far and away the incumbent and market leader in the water-filtration industry. In fact, Brita was dominating the entire market with variations of the same product across geographies, income levels, ages, genders and lifestyles. This meant that the needs of different segments of the market were potentially not being properly addressed.
The founder of Soma, Mike Del Ponte, made a conscious decision to segment the market and target a growing base of ethical consumers who not only cared about the environment, responsible sourcing and sustainability, but who also appreciated good design.
Using sustainability to deep dive and create product differentiation
Soma realised that in order to differentiate its product and appeal to its market segment, it needed to concentrate on being different rather than just beingbetter.
Firstly, it worked with water expert David Beeman to create a biodegradable, compost-able water-filtering system entirely made from vegan silk, Malaysian coconut and food-based PLA plastic, instead of traditional filtering systems based on disposable plastic resin. In fact, the sustainability benefits of Soma’s water filter are front and centre of its pitch, as evidenced by Soma’s promotional video.
Secondly, Soma partnered with the non-profit group Charity Water and donates a portion of product revenue to projects that aim to provide clean and safe drinking water in developing countries.
Finally, Soma’s water filters are designed to stand out from the crowd. Soma knew that a large proportion of ethical consumers are young professionals between the ages 20-35 who demand better design. It commissioned industrial designers Joe Tan and Markus Diebel to create a minimalist, curved water carafe made of glass that looks and feels premium. This in itself earned Soma coverage in design magazines and blogs such as DetailsInsider, and Well+Good.
These strategies were all aimed at removing the purchasing barriers of its target segment. Soma's ethical consumers are empowered to feel that its water filters are more environmentally sustainable than competitors', there is a feel-good factor that part of the premium paid goes towards socially responsible causes and the carafe is beautiful and can be placed proudly at the centre of the dinner table.
Show me the money
According to a study by Globescan, 3 out of 10 American consumers can be regarded as ethical consumers. Applying that to an estimated $1 billion water filtration market the ethical consumer segment represents an untapped potential market worth an annual $300 million. Soma appears well placed to exploit this market (or segment) gap and has already demonstrated enough potential to secure investment worth $3.7 million.
Soma’s water carafes and filters have just hit the market in September 2013, and time will tell if it will succeed. Water filtration is inherently complex and there will always be debates over how Soma’s technology compares with traditional filtration and other purification technologies. However, if its Kickstarter campaign of 2,000 supporters and $150,000 raised is anything to go by, there does appear to be a tribe that Soma looks well placed to lead.
What do you think of Soma’s sustainability based strategy? How applicable is the “segment and dive” strategy in your market? Let us know your thoughts in the comment section below.
This post first appeared on the Sustainability Reporting Examiner blog on October 31, 2013.