For Tennant Co. tap water may become gold.
The 139-year-old Golden Valley company, known for selling floor-cleaning machines that can cost $10,000 to $25,000, is using a new technology that electrically converts water into a super-cleanser.
Some longstanding industrial customers are already using the groundbreaking technology. And in the current environmentally conscious era, Tennant is hoping the chemical-free cleaning will generate hundreds of millions in new sales as it expands its customer base and converts businesses to the new technology.
For Tennant, a revenue boost couldn't come quickly enough. The recession has taken its toll, with revenue falling 24 percent in the first quarter. It's expecting sales for the year will be down at least $100 million from 2008.
"We're in the middle of trying to transform the company from being a floor-cleaning company to being an environmental cleaning solutions company," said Chris Killingstad, Tennant's chief executive. He didn't offer estimates but said chemical-free cleaning products will help Tennant become a much larger company.
"What we have discovered is a way to electrically convert plain tap water to perform like a powerful detergent," said Killingstad, who joined the company in 2002.
"You can imagine when we went out there with this people looked at it and said, 'It can't be true,'" Killingstad said. But Tennant introduced the new cleaning technology in commercial scrubber machines in May 2008 and gave some of its major customers machines to test the process.
"Seeing is believing," he said. The Target Center basketball court is now cleaned with the new technology, and it's employed in retail settings such as Nieman Marcus. On a recent weekday, a Tennant ride-on scrubber, filled with tap water that it converts electrically, cleaned the floor at a noticeably quiet Nickelodeon amusement park at the Mall of America before it opened.
Akshay Rao, a marketing professor at the University of Minnesota's Carlson School of Management, said that Tennant's timing is good.
Companies are being asked by their consumers and suppliers "what they are doing on the topic of sustainability and green issues and conservation," Rao said. If they use the Tennant chemical-free process, it's tangible evidence that they are doing something to protect the environment, Rao said.
George Tennant founded the company in 1870 as a maker of wood flooring, and in the 1930s it secured the rights to make a floor cleaning machine that was developed by a local janitor. After World War II, the company moved closer to its current line of work: helping companies maintain and clean their floors.
Before the global recession hit, Tennant was steadily growing. Powered by new product launches and expansions into new markets, such as China and Brazil, sales grew 11 percent in 2007, to $664.2 million, and its profit was $40 million. Investors noticed, and Tennant's stock was trading above $45 a share in late 2007.
When the recession tightened its grip early this year, few companies were buying big cleaning machines. Tennant stock fell below $10 in March, though it has recovered since then and has been trading above $20. The stock closed Friday at $21.
Ernest Owens, a University of St. Thomas assistant professor, said that Tennant previously managed to weather bad economic times by taking advantage of its expertise with fluids and cleaning systems and updating them. Owens, who did some project management consulting for Tennant a few years ago, said that Tennant "has always been a firm that strategically looks ahead, and it is trying to redefine its core markets" by providing environmentally conscious products.
In his early days at Tennant, Killingstad said, he believed that the green movement "was going to accelerate."
Killingstad said Tennant created an advanced products development group a few years ago, and it is charged with seeing "if we could come up with a new set of solutions beyond just floor cleaning."
The new green technology, ecH20, which stands for electrically converted water, is the most concrete evidence of that effort to toss product ideas on a bigger canvas.
Killingstad maintains that the chemical-free cleaning process differentiates Tennant in the mechanized cleaning industry, which generates about $5 billion worldwide on an annual basis.
He said Tennant has filed more than 30 patent applications for the water-splitting technology that it has developed.
Here's how the process works:
There are acidic and alkaline elements in water molecules, and the Tennant process separates those properties. First it adds oxygen bubbles to the water before applying an electric current that separates it into positively and negatively charged water for 45 seconds -- while the cleaning is done.
"This is important because the acidic side is a great sanitizer and the alkaline element is a great cleaner," Killingstad said. "When the water goes back into the recovery tank, it reverts back to plain tap water."
That's the process inside Tennant's big ride-on scrubbers. And it recently licensed its invention to a start-up company, Activeion Cleaning Solutions, that is making special spray water bottles that are being used to clean tables and other surfaces in schools and government buildings. Within a year, a smaller version of the sprayer likely will be available to consumers for cleaning at home.
Activeion, based in Rogers, Minn., is selling the spray bottles for $300 apiece. Jim Wiese, Activeion's chief executive, said that the company was formed last summer to take advantage of Tennant's new technology, but wants to apply it to products outside of Tennant's core floor cleaning business.
"We are just starting to talk to hotels," said Wiese, who declined to disclose how many sprayers have been sold. But he thinks the chemical-free spray bottles will have broad consumer appeal.
"We have a growing number of moms with young children who don't want chemicals under the sink," Wiese said, and he added that the chemical-free spray cleaner also should be popular with people who have allergies.
'Bouncing along the bottom'
Tennant won't release expected revenue from the licensing deal, announced in May. So it won't make much of a dent in this year's estimated revenue declines. The company is projecting 2009 revenue will be between $560 million to $600 million, down from $701 million last year.
Killingstad said he doesn't think the recession is getting any worse, but he also isn't talking about a recovery yet. "We're bouncing along the bottom" of the economic cycle, he said.
While Tennant has cut jobs -- it now employs about 2,750 around the world -- and taken other cost-cutting measures to ride out the recession, Killingstad is focusing his attention on product innovation, including more applications for ecH2O. He's also searching for other products that will reduce waste as well as the use of chemicals, water and energy. He said, "We've got to figure out ways to clean more of our customers' environments than just their floors and do it in a more environmentally responsible way."
Liz Fedor • 612-673-7709