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The Billion-Dollar Product In Search of an Inventor

November 18th, 2009 Leave a comment Go to comments

China First Capital blog post -- Ming Dynasty lacquer screen

Too many inventive minds over too many years have focused on trying to solve environmental problems that may be insoluble: like a internal-combustion engine that gets +100mpg, or a new fuel that will burn cleaner and cost less than gasoline. Of course, a solution to either of these would earn its inventor a multi-billion fortune. That’s a very powerful motivator.

But, let’s face it. Some of these bigger problems may be beyond the wit of man and the realms of molecular science. There are so many smaller, more manageable problems to be solved that will both lower pollution and earn its inventor a very tidy sum. Case in point: a new water cooler for China. 

Here’s a problem crying out for a solution. Solve it and you could build one of the largest consumer products companies in the world, much like how Sony’s Akio Morita got his start inventing a small, portable transistor radio in the 1950s. 

Most offices, as well as a large percentage of urban households in China, have a water cooler. They look like the kind you see in the US, but with one addition: Chinese water coolers also have a hot water spigot. The machines keep hot water, as well as cold water, on tap. They do this by having a small in-built heating system to keep about one liter of water continuously heated to around 80-degrees centigrade (176-degrees Fahrenheit). The reason is obvious: many Chinese still like drinking tea. 

When I first came to China almost 30 years ago, cold potable water and bottled water were both all but nonexistent. Today, they are both pervasively common. Tea often seems like a dying brand in China, except as an accompaniment to a cooked meal. 

But, most Chinese water coolers still offer the hot water function, and will likely continue to do so for many long years to come. There are two problems with the current design in China. First, the hot water is produced continuously, even outside of working hours, at enormous cost in wasted electricity. Since in China most electricity is produced by burning coal, this equates to a lot more coal being mined and burned than is necessary. 

Problem number two: though heated, the water is kept at a temperature too low to make a decent cup of tea.  For that, you need water at or about boiling point. It’s not a difference discernible only by tea connoisseurs. You need the hotter water to get the flavor, as well as get the tea leaves to sink to the bottom of the cup. All tap water needs to be boiled, for health reasons in China. But, the water coolers use bottled water (in 18.9 liter jugs). Each jug weighs over forty pounds. The massive infrastructure to deliver these water bottles, mainly done by guys riding specially-configured bicycles that can hold four of the jugs over the back wheel, is another problem crying out for a solution. But, we’ll leave that one be, for the time being.   

China needs a better water cooler. The person who can invent one, and can protect it from copycats with patents,  is going to become very rich. Two relatively small changes would achieve the goal: (1) incorporate a timer so that the machine will waste less energy;  and (2) design a system that will bring water to a boil and then dispense it. Better air and better tea. Both marketing messages should resonate deeply with a large part of China’s urban population.   

I’m no engineer, but assume there will be a positive energy trade-off here. The new system will likely use more power to get water 25% hotter, to boiling point.  But, the timer would shut down the hot water production, in most cases, for at least 40% of the time, outside of office hours. 

How big is the potential market? My guess would be it’s quite big. In most of the larger hypermarkets in China like Wal-Mart or Carrefour, the section devoted to water coolers is quite large, with at least ten models on display – more space than is given to vacuum cleaners, for example. This gives some approximation of overall sales volume. The current models are all roughly equivalent. Top-of-the-line models not only have the hot water, but refrigerate the cold water before dispensing. These generally cost around $150-$200. An eco- and flavor-friendly model should be in the same price range. If so, it would likely become market leader. 

Inventors mostly like to tackle life’s biggest problems. But, there’s a lot of money to be made in “gradual innovation”, particularly when it delivers improvements on a product that is a ubiquitous in a country as large as China.


  1. Jackalope
    November 19th, 2009 at 01:09 | #1

    How about a microwave? Fill cup with cold water from dispenser. Microwave for 30 sec. Add tea. Done.

  2. November 19th, 2009 at 06:33 | #2

    Many years ago, I had a US client that was interested in entering into a JV with a Chinese company that made these heaters/coolers. My client told me that the Chinese were making the best of these. In the end, my client backed out and one major reason was the energy inefficiency. I kid you not!

  3. James
    November 20th, 2009 at 04:34 | #3

    I’ve been following this blog for quite a while now and I love it. I feel a bit miffed that my first comment on this awesome insight into Chinese private capital is going to be like this… but might I suggest a kettle next to the cooler? I’m pretty sure this would be the most efficient and cheapest solution and by far the easiest.

    In my eyes the hot water feature on those coolers sounds like a case of over innovation. Many British like drinking tea too and we have either kettles or dedicated tea and coffee machines for it. On the other hand, I may be completely wrong and someone comes up with a way to make it work better and more efficiently and grabs a large chunk of the market with it. It will be interesting to see if anyone does.

  4. Joshua Smith
    December 16th, 2009 at 09:26 | #4

    Although I mainly practice Project Management I am a mechanical engineer by trade (In fact I am back in university for my Masters in Mechanical Engineering in Tianjin) I bet you anything I could design a much better one without too much problem. In fact I could probably design 5 to 10 different ones. However that wouldn’t be the problem. In China it would be capitalizing on selling it. I can’t see how one can design a innovated commodity type item and then protect it from what the Chinese do – copy, mass produce, and sell on the gray market.

    http://www.linkedin.com/profile?viewProfile=&key=8724793&trk=tab_pro

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