Distribution Partner Briefing: A Partnership for Profit Welcome to Smartcool s information package for prospective channel partners. This publication is intended only as a general guide to assist you in deciding if you would like to proceed with further discussions regarding a Smartcool Distributorship.
Executive Briefing Smartcool Systems Inc., specialises in cost reduction technologies for refrigeration and air conditioning systems. Smartcool markets its products through distribution and sales channels for its energy efficiency products: the Energy Saving Module (ESM) and ECO 3. The ESM has been manufactured and marketed by Smartcool in various forms since 1986. Today, over 25,000 installations have been completed worldwide. The newest energy efficiency product, the ECO 3 hit the market in 2008 is following in the successful footsteps of the ESM. Currently, Smartcool has distributor and sales channel arrangements in more than fourteen countries throughout the Americas, European Union, and the Asia Pacific region. The enormity of the success of the ESM and ECO 3 is due to the uniqueness of the products and their diverse market applications. Some of the unparalleled benefits include: There are no direct competitive products. High profit margins. Ease of installation. The products interface with and do not replace the existing controls. Cost effective for the end user. Most applications will provide a return on investment usually within 2 to 3 years. Savings are easily verifiable. Quantifiable reduction in greenhouse gas emissions. The overall market for the ESM is huge. Any company or organization that has air conditioning and/or refrigeration and has an electric bill greater than US$5,000 per month is a potential customer. Please see the Sales Targeting Overview that follows for more details. The ESM was developed for customers with smaller cooling systems and potentially lower electric bills than are appropriate for the ESM. By implementing Smartcool technology in a simple, economic product like the ECO 3, the market reach of the technology is greatly increased. With the relatively unlimited market potential for the ESM and ECO 3, Smartcool is keen to continue expanding the sales success of the products and is interested in establishing further distribution and sales channels in major world markets. - 2 -
The distributor is provided with the opportunity to sell unique, exclusive, high profit margin products. The ESM and ECO 3 supplied by Smartcool are not available from any other source. The proven energy reduction functions of the products are not obtainable from any other product solution. The simplicity of installation, high reliability and minimal after sales service, make the ESM and ECO 3 ideal for all areas and a diverse range of market applications. The growth opportunities provided by the global push for increased environmental sustainability and reduced greenhouse gas emissions, are limitless for energy and cost reduction solutions such as the ESM and ECO 3. This provides an ideal platform for expansion into further world markets. Smartcool s services are utilised by some of the worlds leading corporations particularly in the commercial, retail and food service areas. Since 1992, over 25,000 ESM units have been sold and installed. In that time, Smartcool products have reduced electricity consumption by approximately 2.3 million mwh, eliminating over approximately 2.8 million tons of greenhouse gas emissions. Currently it is estimated that worldwide the ESM and ECO 3 are reducing electricity usage each year by 213,000 mwh and greenhouse gas emissions by 255,000 tons annually. This is enough electricity to supply a city with a population of 250,000 people. - 3 -
The Business Businesses are constantly looking for means to reduce cost, increase profits and satisfy increasing demands to reduce greenhouse gas emissions and improve the environment. Pressure from governments and environmental lobby groups is accelerating a global demand to reduce the dependency on fossil fuelled electricity generation. Already this movement has lead to reductions in supply and increased costs. We have what every business wants: a painless way to reduce costs, increase profits and provide environmental benefits to the whole community. In addition to providing cost effective savings, the ESM and ECO 3 also achieve significant environmental benefits for the community by reducing greenhouse gas emissions. Although the aim of the Distributor is to sell and install the ESM and ECO 3, which are unique technical products, the presentation to the customer is not a technical sale: it is a solutions-based, financial presentation. Smartcool s world wide experience has shown that a well prepared business case demonstrating a sound return on investment will in most cases be accepted. Suitable for all Businesses Prior to the development of the ESM this type of electricity reduction was only available from expensive complex systems requiring highly skilled installers and programmers. The cost of these systems prohibited the installation by most small to medium consumers. The modular design of the ESM and the simple packaged option of the ECO 3, have resulted in low cost solutions to businesses of any size. Clients with electricity bills as low as US$5,000 per month will typically receive a full return on funds within two to three years, when installing the ESM. For clients with even lower monthly bills, the ECO 3 can achieve a similar return on investment. - 4 -
Identifying Customers is Easy Sales Targeting Smartcool suggests its distributors use the following 6-level sales targeting model to determine ideal potential customers for the ESM and ECO 3 : Level 1: Must be a Controlled System Temperature controlled systems Suction Pressure controlled systems BMS or Digitally controlled systems NOT blast chilling Level 2: Compatibility of the System Multi-stage or Single stage compressors for the ESM Single compressor refrigeration and A/C, or dual compressor A/C for the ECO 3 Compressor types: Reciprocating, Scroll, Screw (fixed stage & variable) and Centrifugal for the ESM Equipment must be properly sized and maintained Level 3: Money Spent on Electricity for Air Conditioning / Refrigeration Our ideal prospect: Spends more than $5,000 each month on electricity, making them candidates for the ESM. Prospects with lower monthly bills are generally a better fit for the ECO 3 Has long operating hours and days for their facility Pays a high price per kwh for electricity Typical Load Factors: Refrigeration: Air Conditioning: - 75% all 12 months of the year - 34% (Ranging from 10% in winter to 60% in summer) - 5 -
Level 4: Geography Operating costs are impacted by electricity rates, climate and the presence of a utility or government rebate / assistance plan. The greatest opportunities for Smartcool products are found in countries with high electricity rates, a warm climate, and a rebate or financial assistance program in place for energy efficiency projects. Level 5: Applications / Vertical Markets Businesses with significant electricity consumption from air conditioning and refrigeration are ideal target markets. Our opportunities include but are not limited to: Data centres Telecom facilities (sub-stations, switching offices, etc.) Cold storage warehouses Shopping malls Pharmaceutical manufacturing facilities Plastic injection & molding Petroleum & chemical refineries Restaurants Food service facilities Movie theatres Hospitals Hotels/Motels Universities/Schools Large places of worship Big box retail Fruit ripening facilities Supermarkets Convenience stores Commercial real estate Breweries Office buildings Government institutions Level 6: Equipment Type DX, Chilled Water, RTU (packaged & split packaged) Size - HP and Tons Number of compressors MUST be properly sized and maintained - 6 -
Market Size Smartcool has extensive experience in establishing distributors in North America, Australia, England, Europe, Asia and the Pacific. Based on this experience and on market research, the market for the ESM and ECO 3 in most major developed countries is estimated to be in the 100 s of millions of US Dollars. Based on the above Sales Targeting structure, potential customers generally fit in three broad categories: Retailers, Commercial and Industrial. Retailers Experience in the US, Asia, Europe and Australia has shown this segment of the market to be a large user of refrigeration and air conditioning. Retailers, with their low profit margins, are very focused on cost reduction. The picture shows a customer of our British distributor, a supermarket group with the ESM installed in over 600 stores and recording savings in excess of $6 million each year. Typically the retail category includes the following: Shopping Malls Supermarkets Convenience Stores Discount Stores Department Stores Fast Food Restaurants Drug Stores The value of sale for the ESM to a retail customer typically ranges from a low of $7,500 USD for convenience type store to more than $75,000 USD for an installation in a large discount department store. For the ECO 3, a sale generally starts at $1,200 for a convenience store with a small cooling system. - 7 -
Commercial This category includes a variety of businesses too numerous to quantify. The picture shown below is the administration building for Tamworth City Government located in Australia. The ESM installed on this building provided an electricity reduction of 23% and a return on investment within 17 months. Potential customers in this category include: Energy Service Companies Electricity Utilities Telephone Companies Office Buildings Banks and Financial Providers Government Medical Centres Hospitals Places of Worship The market value of this segment is extremely difficult to estimate due to vast variety of applications. The value of an ESM sale could range from US$5,500 to more than US$100,000 depending on the application. An ECO 3 sale would again start at around $1,200 for smaller systems. Industrial This category also offers a huge number of potential customers. These are any industry or manufacturer that has an air conditioned administration building or use refrigeration or mechanical cooling in the manufacturing process. The picture below is of a customer utilising the ESM to reduce the operating costs of the Chilled Water cooling system for the injecting moulding machines. Such customers would include: Food Storage & Distribution Food Processing Plastic Injection & Moulding Computer manufacture Pharmaceuticals Computer Rooms - 8 -
The ESM Development of the ESM began in 1983 with the first commercial models being introduced in 1986. Since that time the ESM has advanced through four generations of development. The present generational model was introduced in 1999 and is in its fourth revision. The ESM is specifically designed to interface with the existing air conditioning and refrigeration controls to reduce the electricity consumption by an average of 15%. They are compatible with all forms of control from a simple thermostat to advanced Building Automation Controls. Not having to replace the existing controls is a very important sales tool. Experience has shown that clients are often reluctant to replace their existing, expensive control systems but are very receptive to improving the existing controls to achieve savings. Installation of the ESM. Installation is relatively easy and can be carried out by an electrical or mechanical trades person. The ESM is connected in the control circuit in series with the existing compressor controls. No programming is required. The set up is a simple four step procedure. Savings Evaluation. A major advantage of interfacing with the existing controls is the ability to easily measure the savings. The ESM can be switched off and the plant restored to the conventional control for a normal measure. The ESM units can then be switched on and a savings measure taken. We do not believe there is any other energy saving product with this feature. Features The ESM offers some unique features to the Distributor: Proven Product Cost Effective Savings Large Customer Base Easy Measurement & Verification Easy Installation High Reliability, Low Maintenance. - 9 -
The ECO 3 The ECO 3 was developed to meet the needs of clients with smaller air conditioning and refrigeration units than are ideal for the ESM. The ECO 3 is compatible with single or dual compressor air conditioning systems or with single compressor refrigeration systems. Like the ESM, the ECO 3 uses Smartcool s patented technology to optimize the compressors in these cooling systems, reducing their energy consumption by an average of 15%. Installation of the ECO 3. Installation is very simple, and can be carried out in under two hours by a qualified technician. The ECO 3 is connected in the control circuit in series with the existing compressor controls. No programming is required, and as a set and forget technology, the ECO 3 does not require any upkeep. Savings Evaluation. A major advantage of interfacing with the existing controls is the ability to easily measure the savings. The ECO 3 can be switched off and the system restored to the conventional control for a normal measure. The ECO 3 can then be switched on and a savings measure taken. Alternatively, the cumulative electrical consumption savings achieved by the ECO 3 can simply be read off the LCD display on the front of the unit. Features The ECO 3 offers some unique features to the Distributor: Proven Product Cost Effective Savings, even for clients with smaller cooling systems Increased Customer Base Easy Measurement & Verification Easy Installation High Reliability, Low Maintenance. - 10 -
The Distributor Smartcool is keen to expand the sales success of the ESM and ECO 3, and is interested in establishing further distribution partnerships in major world markets. Features of the Distributorship Smartcool commits substantial human, material and monetary resources to the establishment of the Distributorship. If the Distributor is not successful then Smartcool will not be successful. With many years in the business, Smartcool has developed the methods and techniques to help make a distributorship successful. The Distributor receives the following resources from Smartcool at no cost: High Profit Margins. The Smartcool ESM and ECO 3 deliver a high gross margin to the Distributor. For example: for a typical small ESM sale: Common unit of sale US$9,665 Less Distributor Costs Energy Saving Module Site Install Costs Gross Margin US$5,810 US$1,365 US$2,490 No License Fee. Smartcool does not require a licensee fee, royalty, or commission of any kind from the Distributor. The Distributor is asked to meet certain product purchase requirements at the commencement of the distributorship and to meet scheduled quarterly purchases. Sales & Technical Training. Smartcool provides, at no cost to the Distributor, ONE sales and technical training session at the Distributor s premises. Distributor Visits. During the first year of the distributorship Smartcool will visit with the Distributor to assist in the establishment of the Distributorship. These visits are completed at no cost to the Distributor. Sales & Technical Support. The Distributor will be expected to provide first level support to customers basic technical, operational or troubleshooting questions. Smartcool will provide telephone support to resolve any unusual technical problems or issues relating to a product malfunction. - 11 -
Distributors Commitment Smartcool also expects the Distributor to be equally committed to the success of the distributorship. Smartcool expects the distributor to commit the following resources. Adequate Operating Capital. The Distributor will need sufficient working capital to fund the operation of the distributorship for six months. Smartcool may assist in preparing a business plan for the distributorship. Adequate Work Force. The Distributor must supply sufficient Human Resources exclusively dedicated to the distributorship. The minimum start up requirement would be two sales engineers and an office administrator. Smartcool will provide recommendations to assist in keeping this work force to a minimum at the start up stage. Business Premises. Suitable business premises must be made available for the conduct of the business. Telephone, facsimile and email facilities will also be required. Inventory. At the commencement of the Distributorship, the distributor is expected to purchase inventory of the ESM and/or ECO 3 suitable to a specified agreed value and to maintain adequate inventory levels to meet the market demand. The Next Step After reading this briefing document, should you be interested in continuing further discussions with Smartcool regarding distributor opportunities in your market, please fill out the Assessment Profile and return it to Smartcool. - 12 -