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California drought makes economic winners and losers

Golden State residents have gotten the message: Brown is the new green. They've slashed water consumption, and a poll by the California Water Foundation claims residents are now more concerned about the drought than they are about the economy, jobs and education.

One man's drought is another's man's deluge, and here are two examples of the California drought's winners and losers.

Winner: NWP Services Corporation

NWP is a company that helps apartment buildings lower their utility costs. Most California apartment tenants have no idea how much water they're using, since more apartments aren't individually metered. NWP is installing meters in new construction, including the Westgate apartment building in Pasadena, owned by Sam Zell's Equity Residential (the company was an early investor in NWP). "About 15 percent of our business is in California," said NWP CEO Ron Reed. "It's one of our largest markets in the country."

It costs about $200 to $300 per apartment to add the meters, a cost that the builders absorb. "One, it's the right thing to do from a conservation standpoint," said John Yunker, first VP of Equity Residential. "It's an investment and, again, it's very difficult to measure whether or not we're making money. We hope that a resident is conserving water, they're paying less in utilities, and they're happier."

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Reed said NWP doesn't make money on the installation, but by handling the water billing and adding a monthly charge to bills ranging from $2 to $3.75. The result? On average, consumption falls 14 percent to 20 percent. An added bonus is that NWP monitors usage for spikes at unusual times—like the middle of the night. This could signal a leak. "It not only influences resident behavior and makes them want to conserve more water, but it also makes sure that they report things like a drippy faucet or a leaky toilet," said Yunker.

A gardener waters plants and foliage in front of an apartment complex in Monterey Park, California
Frederic J. Brown | AFP | Getty Images
A gardener waters plants and foliage in front of an apartment complex in Monterey Park, California

The company's sales are in the tens of millions of dollars, and Reed said the meter installation business is up 400 percent in three years. He hopes to expand the technology to monitor lights, temperature, security, all the things that could create "smart apartments" in the future.

"Imagine when you moved out of an apartment, we would start lowering the thermostat to a more ambient temperature," he said. "At any time, 10 percent of the units in a building could be vacant, and you want to make sure they're doing the least amount of consumption as possible."

Loser: Daily Greens

Shauna Martin survived cancer. Now she has to survive the California drought. The former corporate lawyer founded Daily Greens more than two years ago after discovering that people liked the organic, cold-pressed juices she made for herself as she recovered from breast cancer eight years earlier. Based in Austin, Daily Greens persuaded Whole Foods to help it buy commercial equipment, and now the juices are sold in several chains and online.

"We're expecting this year to be our biggest year ever, and either double or triple our revenues last year," Martin said, while standing next to a display of her juices inside a Whole Foods in Venice, California. This year's revenues could be around $10 million.

Profits, however, are more challenging. Organic produce prices are rising in part due to the drought, something Whole Foods management pointed out on its earnings call this week. Most of that produce comes from California this time of year.

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"As of this summer, celery, cucumber are at an all-time high," said Martin. "I'd say that over the last couple of years things have gone up probably about 50 percent."

Daily Greens is beginning to experiment with changing ingredients in order to bring down costs.

"Taste is very key, and so you have to be very careful," Martin said. She does not want to raise prices, as cold-pressed juices are already expensive. In fact, she recently lowered prices and admits margins may take a hit.

The drought isn't the only reason her costs are rising. There's also more demand for organic produce than there is supply, as it takes three years for a conventional farm to become organic. Daily Greens is negotiating directly with some farmers.

"One of our flavors has watermelon in it, and we have one of the only steady supplies in organic watermelon. I won't tell anybody where we get it from," Martin laughed. "It's top secret."