Extra
Bottled water: A river of money
Clean water comes out of the tap for next to nothing, yet Americans spend
more on bottled water than on movie tickets or iPods
-- a stunning $15 billion last year. Here's a look at a booming industry's
economics and psychology.
By Fast Company
The largest bottled-water factory in North America is on the outskirts of
As far as the eye can see, there are double-stacked pallets of half-pint
bottles, half-liters, liters, "aquapods" for school lunches and 2.5-gallon jugs for
refrigerators.
We Americans pitch 38 billion water bottles a year into landfills -- in
excess of $1 billion worth of plastic. And 24% of the bottled water we buy is
tap water repackaged by Coca-Cola (KO, news, msgs) and PepsiCo (PEP, news, msgs).
The Hollis factory holds a virtual
Looking at the piles of water, you can have only one thought: We sure are
thirsty.
Water, water everywhere
Bottled water has become the indispensable prop in our lives
and our culture. It starts the day in lunchboxes; it goes to every meeting,
lecture hall and soccer match; it's in our cubicles at work and the cup holder
of the treadmill at the gym; and it's rattling around half-finished on the
floor of nearly every minivan in
Fiji Water shows up on the ABC show "Brothers & Sisters";
Poland Spring cameos routinely on NBC's "The Office." Many hotel
rooms offer bottled water for sale alongside the increasingly ignored ice
bucket and drinking glasses. At Whole Foods Market (WFMI, news,
msgs), the upscale emporium of the organic and
exotic, bottled water is the No. 1 item by units sold.
Thirty years ago, bottled water barely existed as a business in the
Bottled water is a drink phenomenon of the times. American generations
raised on tap water and water fountains now go through a billion bottles of
water a week, and they're raising a generation that views tap water with
disdain and water fountains with suspicion. Americans have come to pay good
money -- two or three or four times the cost of gasoline -- for a product
they've always gotten, and can still get, virtually for free, from taps in
their homes.
Video on MSN Money
Tap
water versus bottled water
Katie Couric talks with Ronni
Sandroff of Consumer Reports about whether water that
you buy is better than what you can get free from the tap.
A story gets swallowed
When we buy a bottle of water, what we're often buying is
the bottle itself, as much as the water. We're buying the convenience: A bottle
at a 7-Eleven store isn't the same product as tap
water, any more than a cup of coffee at Starbucks is the same as a cup of
coffee from the Krups machine on your kitchen
counter. And we're buying the artful story the water companies tell us about
the water: where it comes from, how healthy it is, what it says about us.
Surely, among the choices we can make, bottled water isn't just good -- it's
positively virtuous.
Except for this: Bottled water is often simply an
indulgence, and despite the stories we tell ourselves, it is not a benign
indulgence. About 1 billion bottles of water a week are moved around in
ships, trains and trucks in the
Meanwhile, one out of six people in the world have no dependable, safe
drinking water. The global economy denies the most fundamental element of life
to 1 billion people while delivering to us an array of water
"varieties" from around the globe, not one of which we actually need.
That tension is complicated by the fact that if we suddenly decided not to
purchase the "lake" of Poland Spring water in
A chilled plastic bottle of water in the convenience-store cooler is the
perfect symbol of this moment in American commerce and culture. It acknowledges
our demand for instant gratification, our vanity, our token concern for health.
Its packaging and transport depend entirely on cheap fossil fuel.
Yes, it's just a bottle of water -- modest compared with the indulgence of
driving a Hummer. But when a whole industry grows up around supplying us with
something we don't need, when a whole industry is built on the packaging and
the presentation, it's worth asking how that happened and what the impact is.
And if you do ask, if you trace both the water and the business back to where
they came from, you find a story more complicated, more bemusing and ultimately
more sobering than the bottles we tote everywhere suggest.
In the town of
And in
At the Peninsula hotel in
Being the water in the Peninsula minibar is so
desirable -- not just for the money to be made but for the exposure with the
Peninsula's clientele -- that Boyens gets sales calls
each week from companies trying to dislodge Fiji.
'I thought water was water'
Boyens, who has a master's degree
in business administration from Cornell, used to be indifferent to water. Not
anymore. His restaurants and bars carry 20 different waters.
"Sometimes a guest will ask for Poland Spring, and you can't get Poland
Spring in
So what does he do?
"We'll call the Peninsula in
The marketing of bottled water is subtle compared with the marketing of,
say, soft drinks or beer. The point of Fiji Water in the minibar
at the
Seeing it isn't difficult because the water aisle in a suburban supermarket
typically stocks a dozen brands of water, not including those enhanced with
flavors or vitamins or, yes, oxygen. In 1976, the average American drank 1.6
gallons of bottled water a year, according to Beverage Marketing. Last year, we
each drank an average of 28.3 gallons of bottled water -- 18 half-liter bottles
a month. We drink more bottled water than milk, coffee or beer. Only carbonated
soft drinks, at 52.9 gallons annually, are more popular than bottled water.
No one has experienced this transformation more profoundly than Kim Jeffery.
He began his career in the water business in the
"People didn't know whether to put it in their lawn mower or drink
it," he says.
Now he's the CEO of Nestlé Waters North America, in charge of
"The entire bottled-water business today is half the size of the
carbonated-beverage industry," says Jeffery, "but our marketing
budget is 15% of what they spend. When you put a bottle of water in that cold
box, it's the most thirst-quenching beverage there is. There's nothing in it
that's not good for you. People just know that intuitively.
"A lot of people tell me, 'You guys have done some great marketing to
get customers to pay for water,' " Jeffery says. "But
we aren't that smart. We had to have a hell of a lot of help from the
consumer."
How an industry began
Still, we needed help learning to drink bottled water. For
that, we can thank the French.
Gustave Leven was the
chairman of Source Perrier when he approached an American named Bruce Nevins in 1976. Nevins was
working for athletic-wear company Pony. Leven was a
major Pony investor.
"He wanted me to consider the water business in the
Back then, the American water industry was small and fusty, built on home
and office delivery of big bottles and grocery sales of gallon jugs.
Nevins looked out across 1970s
From the start, Nevins pioneered a three-part strategy.
First, he connected bottled water to exclusivity: In 1977, just before
Perrier's
Nevins' strategy worked. In 1978, its first full
year in the
What made Perrier distinctive was that it was a sparkling water, served in a
signature glass bottle. But that's also what left the door open for Evian,
which came to the
"If you were cool, you were drinking bottled water," says Ed
Slade, who became Evian's vice president of marketing in 1990. "It was a
status symbol."
Evian was also a still water, which Americans prefer, and it was the first
to offer a plastic bottle nationwide. The clear bottle allowed us to see the water
-- how clean and refreshing it looked on the shelf.
Americans have never wanted water in cans, which suggest a tinny aftertaste
before you even take a sip. The plastic bottle, in fact, did for water what the
pop-top can had done for soda: It turned water into an anywhere, anytime
beverage, at just the moment when we decided we wanted a beverage, everywhere,
all the time.
An alignment of convenience and virtue
Perrier and Evian launched the bottled-water business just
as it would prove irresistible. Two-career families, over-programmed children,
prepared foods in place of home-cooked meals, the constant urging to eat more
healthfully and drink less alcohol -- all reinforce the value of bottled water.
But those trends also reinforce the mythology.
We buy bottled water because we think it's healthy. Which it is, of course:
Every 12-year-old who buys a bottle of water from a vending machine instead of
a 16-ounce Coke is inarguably making a healthier choice. But bottled water
isn't healthier, or safer, than tap water in American homes.
Indeed, while the United States is the single biggest consumer in the
world's $50 billion bottled-water market, it is the only one of the top four --
the others are Brazil, China and Mexico -- with nearly universally reliable tap
water.
Tap water in the
For this healthful convenience, we're paying what amounts to an unbelievable
premium. You can buy a half-liter Evian for $1.35 -- 17 ounces of water
imported from
In
Taste, of course, is highly personal. New Yorkers excepted,
Americans love to belittle the quality of their tap water. But in blind taste
tests, with waters at equal temperatures, presented in identical glasses,
ordinary people can rarely distinguish between tap water, spring water and
luxury waters. At the height of Perrier's popularity, Bruce Nevins
was asked on a live network radio show one morning to pick Perrier from a
lineup of seven carbonated waters served in paper cups. It took him five tries.
The industry's comeback
Americans are actually in the midst of a second love affair
with bottled water. In the
In the late 1800s, Poland Spring was already a renowned brand of healthful
drinking water that you could get home-delivered in
The car, the Depression, World War II and, perhaps most important, clean,
safe municipal water unwound the resorts and the first wave of water as
business. We had to wait two generations for the second, which would turn out
to be much different -- and much larger.
Today, for all the apparent variety on the shelf, bottled water is dominated
in the
The really big water company in the
Because most water brands are owned by larger companies, it's hard to get
directly at the economics. But according to those inside the business, half the
price of a typical $1.29 bottle goes to the retailer. As much as a third goes
to the distributor and transport. An additional 12 to 15 cents is the cost of
the water itself, the bottle and the cap. That leaves roughly a dime of profit.
On multipacks, that profit is more like 2 cents a
bottle.
Water sales to overtake soda
As the abundance in the supermarket water aisle shows, that
business is now trying to help us find new waters to drink and new occasions
for drinking them. Aquafina's marketing vice
president, Ahad Afridi, says
his team has done the research to understand what kind of water drinkers we
are. It has found six types, including the "water pure-fectionists,"
the "water explorers," the "image seekers" and the
"strugglers" -- consumers who "don't really like water that
much" and "will have a cheeseburger with a diet soda."
It's a startling level of thought and analysis, until you realize that
within a decade,
Afridi is a true believer. He talks about water as
if it were more than a drink, more than a product -- as if it were a character
all its own, a superhero ready to take the pure-fectionist,
the water explorer and the struggler by the hand and carry them to new
adventures.
"Water as a beverage has more right to extend and enter into more
territories than any other beverage," Afridi
says. "Water has a right to travel where others can't."
Uh, meaning what?
"Water that's got vitamins in it. Water that's got some immunity-type benefit to it. Water
that helps keep skin younger. Water
that gives you energy."
Water: It's pure, it's healthy, it's perfect -- and it's been made better.
The future of water sounds distinctly unlike water.
The label on a bottle of Fiji Water says "from the islands of
Every bottle of Fiji Water goes on its own version of this trip, in reverse,
although by truck and ship. In fact, because the plastic for the bottles is
shipped to
The pollution behind the purity
That is not the only environmental cost embedded in each
bottle of Fiji Water. The Fiji Water plant is a state-of-the-art facility that
runs 24 hours a day. That means it requires an uninterrupted supply of
electricity, something the local utility structure cannot support. So the
factory supplies its own electricity, with three big generators running on
diesel fuel. The water may come from "one of the last pristine ecosystems
on Earth," as some of the labels say, but out back of the bottling plant
is a less pristine ecosystem veiled with a diesel haze.
Each water bottler has its own version of this oxymoron: that something as
pure and clean as water leaves a contrail.
San Pellegrino's 1-liter glass bottles -- so much a part of the mystique of
the water itself -- weigh five times what plastic bottles weigh, dramatically
adding to freight costs and energy consumption. The bottles are washed and
rinsed, with mineral water, before being filled with sparkling Pellegrino -- it
takes up 2 liters of water to prepare the bottle for the liter that's sold.
The bubbles in San Pellegrino come naturally from the ground, as the label
says, but not at the San Pellegrino source. Pellegrino chooses its carbon
dioxide carefully -- it is extracted from supercarbonated
volcanic spring waters in
Poland Spring may not have any oceans to traverse, but it still must be
trucked hundreds of miles from
Clean water gets cleaned
In transportation terms, perhaps the waters with the least
environmental impact are Pepsi's Aquafina and
Coca-Cola's Dasani. Both start with municipal water.
That allows the companies to use dozens of bottling plants across the nation,
reducing how far bottles must be shipped.
Yet Coca-Cola and Pepsi add a step. They put the local water through an
energy-intensive reverse-osmosis filtration process more potent than that used
to turn seawater into drinking water. The water they are purifying is ready to
drink -- they are recleaning already-clean tap water.
They do it so marketing can brag about the purity and to provide consistency --
so a bottle of Aquafina in
There is one more item in bottled water's environmental ledger: the bottles
themselves. The big spring-water companies tend to make their own bottles in
their plants, just moments before they are filled with water -- 12, 19, 30
grams of molded plastic each.
Americans went through about 50 billion plastic water bottles last year, 167
for each person -- durable, lightweight containers manufactured just to be
discarded. Water bottles are made of totally recyclable polyethylene terephthalate (PET) plastic, so we share responsibility for
their impact: Americans' recycling rate for PET is only 23%, which means we
pitch into landfills 38 billion water bottles a year -- more than $1 billion
worth of plastic.
Another view
John Mackey is the CEO and a co-founder of Whole Foods
Market, the national organic-and-natural grocery chain. No one may think about
the environmental and social impacts and the larger context of food more
incisively than Mackey, so he's a good person to help frame the ethical
questions around bottled water.
Mackey and his wife have a water filter at home and don't typically drink
bottled water there.
"If I go to a movie," he says, "I'll smuggle in a bottle of
filtered water from home. I don't want to buy a Coke there, and why buy another
bottle of water -- $3 for 16 ounces?" But he does drink bottled water at
work: Whole Foods' house brand, 365 Water.
"You can compare bottled water to tap water and reach one set of
conclusions," says Mackey, referring both to environmental and social
ramifications. "But if you compare it with other packaged beverages, you
reach another set of conclusions.
"It's unfair to say bottled water is causing extra plastic in landfills
and it's using energy transporting it," Mackey
says. "There's a substitution effect -- it's substituting for juices and
Coke and Pepsi."
Indeed, we still drink almost twice the amount of soda as water -- which is,
in fact, 90% water and also in containers made to be discarded. If bottled
water raises environmental and social issues, don't soft drinks raise all those
issues, plus obesity concerns?
What's different about water, of course, is that it runs from taps in our homes
and from fountains in public spaces. Soda does not.
'I don't think water should be picked on'
As for the energy used to transport water from overseas,
Mackey says it is no more or less wasteful than the energy used to bring merlot
from France or coffee from Ethiopia, raspberries from Chile or iPods from China.
"Have we now decided that the use of any fossil fuel is somehow
unethical?" Mackey asks. "I don't think water should be picked on.
Why is the iPod OK and the
water is not?"
Mackey's is a merchant's approach to the issue of bottled water: It's a
choice for people to make in the marketplace.
"Where the drinking water is safe, bottled water is simply a
superfluous luxury that we should do without," he says. "How is it
different than French merlot? One difference is the value of the product in
comparison to the value of transporting and packaging it. It's far lower in the
bottled water than in the wine.
"And buying the merlot may help sustain a tradition in the French
countryside that we value -- a community, a way of life, a set of values that
would disappear if we stopped buying French wines. I doubt if you travel to
"We're completely thoughtless about handing out $1 for this bottle of
water, when there are virtually identical alternatives for free. It's a level
of affluence that we just take for granted. What could you do? Put that dollar
in a jar on the counter instead, carry a water bottle, and at the end of the
month, send all the money to Oxfam or CARE and help someone who has real needs.
And you're no worse off."
Water goes out; money comes in
In
The reality is, if Fiji Water weren't tapping its aquifer, the underground
water would slide into the
Fiji Water has, in fact, done just that, to some degree -- 20 water projects
in five nearby villages. Indeed, Fiji Water's parent company, Roll
International, has reinvested every dollar of profit since 2004 back into the
business and the country.
Jim Siplon, an American who manages Fiji Water's
10-year-old bottling plant in
"Does the world need Fiji Water?" he asks. "I'm not sure I
agree with the critics on that. This company has the potential of delivering
great value -- or the results a cynic might have expected."
Water is, in fact, often the perfect beverage -- healthy, refreshing and
satisfying in a way soda or juice aren't.
Worldwide, 1 billion people have no reliable source of drinking water; 3,000
children a day die from diseases caught from tainted water.
Nestlé Waters' Jeffery may be defending his industry when he calls bottled
water "a force of nature," but he's also not wrong. Consumption of
bottled water has outstripped any marketer's dreams or talent: If you break out
the single-serve plastic bottle as its own category, Americans' consumption of
bottled water grew a thousandfold between 1984 and
2005.
In the array of styles, choices, moods and messages available today, water
has come to signify how we think of ourselves. We want to brand ourselves -- as
Madonna did -- even with something as ordinary as a drink of water. We imagine
there is a difference between showing up at the weekly staff meeting with Aquafina or
Bottled water is not a sin. But it is a choice.
Packing bottled water in lunchboxes, grabbing a half-liter from the fridge
as we dash out the door, piling up half-finished bottles in the car cup holders
-- that happens because of a fundamental thoughtlessness. It's only marginally
more trouble to have reusable water bottles, cleaned and filled and tucked in
the lunchbox or the fridge. We just can't be bothered. And in a world in which
1 billion people have no reliable source of drinking water and 3,000 children a
day die from diseases caught from tainted water, that conspicuous consumption
of bottled water that we don't need seems wasteful and perhaps cavalier.
'Today' show host Katie Couric talks with Ronni Sandroff of
Consumer Reports about whether water that you buy is better than what you can
get free from the tap.
That is the sense in which Mackey, the CEO of Whole Foods, and Singer, the
Once you understand the resources mustered to deliver the bottle of water,
it's reasonable to ask as you reach for the next bottle, not just "Does
the value to me equal the 99 cents I'm about to spend?" but "Does the
value equal the impact I'm about to leave behind?"
This article was reported and written by Charles Fishman for Fast Company.