SANDPOINT—Despite sales growth of 25 percent last year, a Sandpoint company that designs and manufactures innovative office water coolers might have achieved only a drop in the bucket of what's possible, its president says.

The executive, Craig Story, who co-founded Pure Health Solutions Inc. a little over decade ago with then-Sandpoint accountant John Windju, says no one really knows how big the market is for elegant water coolers that are designed to fit in with most any office dcor and have the latest technology to purify drinking water and optimize its taste.

"It's such a huge market that even the so-called experts, all the guys who are doing market research, really don't have a clue," Story says. "We haven't begun to scratch the surface. We've done very little in Canada, nothing in South America, nothing in the Mideast, nothing in New Zealand or Australia, very little in Asia. We're in Japan. Korea is the only market I know that's saturated."

Pure Health Solutions has a distribution center in the Spokane area, where it employs four, and it employs 14 people in its Sandpoint offices and another 10 elsewhere in the U.S. It employs 75 people in all now, including at its plant in Korea, and might add five workers in Sandpoint next year, Story says. In Korea, labor costs and taxes are the same as they are here, but materials costs are about a third, "which forced us to buy this factory in Korea," Story says.

The company sells and distributes its coolers through a network of dealers. It works every day to recruit new dealers, "to put more feet on the street," and signs up an average of two new dealers a month, Story says.

Pure Health Solutions is in what the Europeans call the "mains-fed" drinking water industry. It designs, manufactures, and sells water-purifying coolers that get their supply of H2O from the same place most people go to get a glass of water—the tap, or water main, if you will. It's unlike the bottled water industry, whether one means companies that deliver five-gallon jugs of water that must be carried into the office and lifted onto a cooler-dispenser, or the smaller bottles of water that people take with them almost everywhere these days.

While the mains-fed drinking-water industry might not have scratched the surface of its potential market, Pure Health Solutions clawed out $17.5 million in sales last year, for a hefty 25 percent revenue gain, and enjoyed growth of 30 percent in net income, Story says. For 2009, it's expecting 15 percent growth in sales and another 30 percent growth in earnings.

The company, which has its offices in a bucolic setting at the south end of Sandpoint in an office building overlooking Lake Pend Oreille, has enjoyed growth of 125 percent in sales since 2005. One higher-end line is designed for lawyers' and architects' offices.

The machines have to look good to gain acceptance in the office market, although a prototype Story built in 1996 "was not very pretty," he says.

A key to the company's growth is its network of dealers, who handle sales in defined local territories across the country and whose ranks the company is seeking to swell.

Dealers must have $250,000 in capital, have a business plan, be able to find a facility in which to run their dealerships, have phone and computer systems, be able to recruit five to 10 sales representatives, and have systems for monitoring their sales reps, Story says.

"We want entrepreneurs that get up in the morning, eat gunpowder for breakfast, and go to work managing their teams. They've got to be spark plugs," he says.

Dealers buy the water coolers from Pure Health Solutions and lease them to their customers, typically for 60 months at a rate of $60 a month, although that can vary depending on the type of machine. The dealers handle installation and maintenance of the machines and any needed repairs, Story says.

"There's no capital expense to the customer," Story says.

The company's customers typically already were buying bottled water, but Pure Health Solutions' machines eliminate the labor of carrying and lifting heavy water bottles and the potential contamination issues that come with such systems, he says.

Pure Health Solutions says its machines use a sediment filter to remove rust and dirt from water; a carbon filter to remove chlorine and organic impurities; a reverse osmosis membrane to remove nitrates, arsenic, and inorganics; a fine carbon filter to "finish" the water; and injection of activated oxygen to kill microbiologic contaminants and provide a fresh, pure taste. The machines' holding tanks are made of stainless steel.

"As more and more companies develop 'green' and 'sustainability' programs, the demand for our eco-friendly technology is dramatically increasing," the company says in a brochure.

The company requires dealers to "touch" machines they've installed at least once a year, typically when they change filters to maintain the coolers, but dealers usually visit their clients' premises more often because such calls result in referrals, which increase sales, build strong dealerships, and help drive Pure Health Solutions' own growth, Story says.

In addition to its dealer network, the company has a national account team that deals with Fortune 500 and Fortune 1000 customers, which can be "hard to tackle," Story says. "We go directly to corporate customers. Contract negotiations are typically intense" with big companies, he says. The Sandpoint concern has several national companies among its clients. It also has a wholesale division that caters to bottled water, water treatment, and office coffee companies.

The company has expanded internationally. "We're in 15 countries in Europe," although it would like to find a "large, master distributor" there, Story says.

It has just signed an agreement with a distributor in Russia. "We have sold and been paid for a (shipping) container of products," Story says. "Our distributor is close to the government." Story expects the machines will go into schools, universities, and hospitals there. A shipping container includes 281 of the coolers.

The bottled water industry is beginning to see the value of the kinds of machines Pure Health Solutions manufactures and distributes, Story contends. Nestle, the Swiss food, nutrition, and wellness giant, which is big in bottled water, has bought 19 containers of the Sandpoint company's machines in the past year, and he expects it will buy another container load, he says.

With concern rising about how much landfill space used water bottles take up, and with recent television news footage showing accumulations of "a swirling mass of bottles out in the Pacific," the media has become "our cheerleaders," Story says. Some universities have banned bottled water, San Francisco Mayor Gavin Newsome has done the same, and other mayors likely will follow suit, he says.

Other issues besides the environment, however, prompted Story to get into the water-cooler industry, which occurred after he had moved his family to Sandpoint from California to enjoy North Idaho's relatively unspoiled setting.

The residential area near Sandpoint where they moved, however, had a contaminated well, and his family had to use bottled water, which was delivered to their home.

Also, years before, when Story was growing up in California, the water at his father's home was contaminated, and he had the job of filling up water jugs for household use. As he did so, he recalls, "I saw the algae and the crap in there."

His father was in the semiconductor industry, and Story also saw that workers carried one-gallon jugs of hazardous chemicals into the industry's "clean rooms" where the chemicals would be used in the chip-making process. He knew that wasn't an ideal way to handle the chemicals, and later, when he was in college at Brigham Young University, in Provo, Utah, he decided to start a high-purity chemicals distribution company in his father's garage.

Story's father told his son he would invest in his company if he would get a pilot's license before launching the business. In flying, his father explained, "If something goes wrong and you make a bad decision, you die. You need a flight plan. In business, you need a business plan. If you make the wrong decision in business, your company can die."

Story got his pilot's license, but the first time he flew solo, he failed to file a flight plan, entered restricted air space, got lost, was threatened by the military with being shot down, and eventually landed 180 degrees in the opposite direction from where he had thought he was. He didn't fly without a flight plan again.

He launched Specialty Chemicals Inc. and started selling the product while visiting plant managers and showing them crude drawings he'd made. He and his wife worked long hours to make the business go, he says. Later, they sold out, and he was fired by the new owner, he says. He took a year off, and while deciding what to do next, the couple took a trip to North Idaho. They looked at Coeur d'Alene, but also visited Sandpoint, and stayed at the Edgewater Inn on a beautiful evening. "We fell in love" with Sandpoint, he says.

He designed an air purifier, but his own family's need to use bottled water there, along with his memories of having to use it as a boy, helped give him a business concept, which was: "Let's get rid of the bottle," he says. He adds, however, that he couldn't have put together Pure Health Solutions without the knowledge he had learned at his first company. "That first company was my degree in chemicals, materials, electronics, engineering, design."

Windju was a Sandpoint CPA who had helped Story with his taxes. "I needed a numbers guy," Story says. When Story showed Windju his plans and said he was thinking about opening a company, Windju said, "Let's do it," and said he would sell his CPA firm. That was in the fall of 1997. Today, Windju runs Pure Water Finance, the company's finance division, which funds rental contracts for the company's equipment while protecting dealers' rights and title to the equipment. Story says he, Windju, and a few small shareholders own Pure Health Solutions.