Bottled Water Industry At a Tipping Point

The bottled-water industry may be at a tipping point, as some of its greatest fans begin to stray. While generations X and Y no doubt have the normal spectrum of ambitions, a chief goal is certainly being fully hydrated.

These people stagger under backpacks stuffed with liter-size water bottles, litter them about their cars, attempt to smuggle them onto airplanes, and strew them about as they play golf; not having a bottle close at hand can give them the shakes. Yet, while young people are probably the most dedicated guzzlers of bought water, they are also increasingly engaged in the battle against climate change.

They are just beginning to connect the dots: that consuming huge amounts of bottled water leads to millions of pounds of plastic waste each year and is yet another reason that crude oil consumption (used in making most plastic bottles) continues to grow.

"The industry is at an interesting juncture," the founder of the Bottled Water Web site, Arthur von Wiesenberger, said. "It has become controversial, and seen some setbacks lately."

One shot across the bow of the industry came just last month, as the mayors of San Francisco, Salt Lake City, and Minneapolis proposed a resolution at the U.S. Conference of Mayors in support of using municipal water, and ridding offices of the bottled alternative. The resolution passed despite bitter opposition from the American Beverage Association, and Coca-Cola.

No wonder. The growth of bottled water has been phenomenal for the past 20 years or more, dampening demand for rival carbonated soft drinks. For giants in the beverage industry such as Coca-Cola and Pepsi — relative newcomers to the field but already the leading vendors — continued growth in the segment is crucial to overall results. While Coke does not break out the contribution from its principal water line, Dasani, volume at the division is growing substantially faster than for the balance of the company.

According to the most recent report from Beverage Marketing Corporation, sales of bottled water in America grew 9.5% in volume last year; per capita consumption increased to 27.6 gallons from 25.4 gallons last year, and has nearly doubled since 2000.

Revenue has also been on a tear, with wholesale revenues jumping 8.5% to more than $10.8 billion, while retail sales were substantially higher. Since 2003, the relatively new bottled water industry has been the second most popular drink in America, after carbonated sodas.

What accounts for this phenomenal success? Mr. von Wiesenberger, who has made a career out of observing and analyzing the bottled water industry, says the convenience of easily portable bottled water is one reason. Also, Americans consider bottled water healthier than the alternatives.

In a recent Harris survey, more than twice as many Americans associated a healthy lifestyle with bottled water rather than milk. Obesity concerns have dulled demand for sweetened soft drinks and juices, while advertisers have played up the connection between fitness and drinking water. The message: It's healthy to sweat, and to drink bottled water.

This conviction is in jeopardy, according to Mr. von Wiesenberger, because no one is taking time to educate the consumer about the different types of water on the market.

Also, he feels that the product has been degraded. While initially the bottled water industry was selling mainly spring water, today the major vendors such as Coke and Pepsi are purifying and bottling good old tap water. The success and compelling economics of selling municipal water convinced other participants to follow suit, reducing the amount of actual spring water on the market.

Consumers were convinced of the superiority of bottled water in part by studies carried out by environmentalists highlighting the health hazards of drinking tap water. In a battle to upgrade public water facilities, organizations over the years have pointed out contaminant problems, such as one that surfaced just a week ago when chlorine toxins appeared in Washington, D.C., tap water.

Ironically, those same environmental groups who alarmed consumers about tap water are now railing against the environmental impact of mass consumption of bottled water. More recently, they have tried to undermine the health argument by conducting studies that show bottled water also has pollution problems. The Natural Resources Defense Council published one such study a few years ago, and the Earth Policy Institute carried out another last year.

The backlash is catching on, and could prove a grave threat to growth in the industry. At the Academy Awards this year, sponsors made a big point of distributing water contained in bottles made with cornstarch-based plastic. Also, several high-end restaurants, such as Chez Panisse in Berkeley, Calif., and Del Posto in New York, have eliminated bottled water from their establishments, citing environmental concerns. Although many restaurateurs will likely be loath to give up the profitable water business, it may become chic to stick to the local product.

Meanwhile, the consumer could well become unglued attempting to choose among the bewildering variety of products on the market. In our local supermarket, there were 72 different kinds of bottled water on display yesterday. Sparkling, still, flavored, vitamin-enhanced, smart, (stupid?) — the choices are endless. Some, such as a Coke product described as "Refresh & Revive Kiwi Strawberry," which contains 10% of the recommended daily amounts of B-3, B-6, and B-12, really make your head spin. It seems so much easier to turn on the tap.

Indeed, getting people to turn on the tap is the current ambition of environmentalists. Or, more accurately, getting people to install some sort on filtration system on their own water, use reusable containers of some sort, and spurn the wasteful drinking of water in disposable bottles.

Mr. Von Wiesenberger is skeptical that consumers will abandon their beloved water bottles. "People don't go backwards," he said. "Once they've developed a taste for bottled water, they won't give it up." He's also skeptical about the numerous tests showing no difference in taste. "I have a Dalmatian who is not the brightest dog on the planet. When we offer him a choice between Santa Barbara tap water and bottled water, he always goes for the latter."

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