by M Miller · 2006 · Cited by 9 — bottled water industry. The bottling companies eventually formed their own lobbing group in 1950 in order to promote their product, and have only been recently
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1 Bottled Water: Why Is It so Big? Causes for the Rapid Growth of Bottled Water Industries HONORS THESIS Presented to the Honors Committee of Texas State University-San Marcos In Partial Fulfillment of The Requirements For Graduation in the Mitte Honors Program By Mark Miller San Marcos, TX May 2006

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2 Introduction Recently, American consumers, as well as overseas consumers, have seen the dramatic expansion of the bottled wate r industry (Howard, 2003). The growth and penetration of the industry has been unprecedented, and is comparable to the recent proliferation of home computers. In a mass change of habit, Americans turned from buying sodas and beers to bottled water. Si nce the introduction of bottled water by the major beverage companies, bottled water ha s become the second most purchased drink after sodas, and will soon become the most purchased (Phoods, 2001). This has caused a major shift in the beverage landscapes, a nd has had significant impact throughout the world. The rapidly escalating rate of bottled water purchases has caused some consequences that are not reflected in the overall image of the pr oduct. By and large, bottlers have sold their waters on the basis th at they are pure, clean, filtered, or otherwise superior to other water sources (Howard, 2003). This has placed them in competition against, at least in the developed world, large publicly funded municipal systems. To overcome this competition, bottlers uniformly market their products as cleaner than the municipal supply, or offer some other a dvantages, like Penta brand water™s USP Medicinal Grade Oxygen (label). In any case, it has become apparent to the author that this carefully cultivated cam paign of fear and doubt propagated by the bottlers takes advantage of minor lapses in municipal wate r quality and serves only to sabotage any meaningful discussion of addressing issues related to water quality.

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3 This paper will address each aspect of bottled water as a product Œ its history, its purpose, its material, its advantages, its disa dvantages and its costs; correlate it with bottler™s marketing activities, and tie those to sales and government regulations. These comparisons will address and progressively el iminate the different qualities of bottled water as a whole product in order to arrive at the most likely reasons for its phenomenal success.1 History of the bottled water industry The earliest modern bottled water company was founded in the United States in the middle of the 19 th century. In 1845, the Ricker family of Maine bottled and sold water from a so-far unidentified source. Their small operation qui ckly grew, capitalizing on the spring™s supposed medicinal properties, even tually becoming the Poland Springs water company. (polandspringinns.com, 2006). Mirro ring the Ricker success, in 1905, the Ozarka Spring Water Company was founded in Eureka Springs, Arkansas. Since then, the bottled water landscape has expanded tremendously. This expansion has come mostly recently, and it seems to the author to be th e acceleration of a slowly expanding industry. Between the early part of the 20 th century and its end, there was little activity in the bottled water industry. The bottling companies eventually formed their own lobbing group in 1950 in order to promote their product, and have only been recently successful. 1 A Note on Mineral Waters For the purpose of this paper, mineral waters have been excluded. They are a different product, and sold on a different premise, not unlike coffee and t ea. Mineral waters are usually sold on the basis of its mineral content. Bottled waters, on the other hand, ar e sold on the premise that the water is pure and has no other content. Mineral water does predate modern bottled water companies by a large margin Œ the San Pellegrino brand, the oldest, is six hundred years ol d. Bottled water companies are relatively recent, and have taken cues from the mineral companies. Interestingly, some bottled water companies have placing additives in their products to enhance their marketability in niche areas.

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4Now, there are hundreds of companies and t housands of brand names of bottled water, and worldwide consumption is in the billions of dollars. Currently, both the Ozarka and Poland Spring brands are owned by Nestlé, and are part of Nestlé ™s seventy-five US water brands (US Water News, 2003). Advantages of Bottled Water Consumption There are many possible reasons why bottled water has become such a large industry, and some of those reas ons are because of its advantages in regards to ordinary tap water, according to the large number of advertisements that showcase bottled water™s qualities. Two other la rge reasons, pursuant to the author™s viewing of many of the above advertisements, are its relative convenien ce, and its safety and purity (Howard, 2006). Bottled water appeals to many as bei ng far more convenient than tap, and logically so. Bottles are av ailable virtually everywhere now. One can purchase water bottles by the dozens at most supermarkets, a nd one can find individual bottles at service stations, vending machines, and even some re staurants. Restaurants are particularly happy to sell bottled water, as bottled water replaces, or at least complements, a previously free service. At delis, fast f ood, takeout places and similar establishments where one picks a drink out of a refrigerator , bottled water is considered the norm, and usually takes up about half the drink refrigerators. Tap water is still available through the soda fountain, but one would have to ask for a cup. Common experience tells us that this usually results, however, in a small cup, which is hardly convenient, or even portable in a stuff-in-bag sense.

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5 Portability as another key convenience fo r bottled water. The physical container is plastic bottle with a screw-on lid. This configuration allows for a re-sealable container. One can grab a bottle and not worry abou t spilling it. This offers an edge over conventional aluminum cans, which cannot be re -closed. Because bottles are re-sealable, places that prohibit food and drink will often allow water bottl es and similar containers. Such places typically include mass transit, classrooms, libraries, museums, conference centers, and other public accommodations. Re-sealability has granted another advantag eous quality to the bottles. Since it is re-sealable, it is also re-usable. When the or iginally bottled water runs out, the consumer can simply refill the bottle with ordinary tap water, or soda, alcohol, or whatever the consumer wants. This changes the purpose of the product, and even the industry™s purpose as well. Instead of bottled water being sold as different or better water, it is sold as a container for more water. This places it in competition with more traditional sports bottles. Using the water bottle for the re-u seability does compromi se another of its advantages. This advantage is purity. Many consumers of bottled wate r typically consider it more desirable because of its purity (How ard, 2006). One way the water can be more pure than tap because bottled water is usually placed into its container almost immediately after collection. Due to the fact that the water is usually bottled at its source, it can avoid the possible contamination that could result in city treatment processes (IBWA, 2006). These processes include wastewater treatment, river and rainwater collection, contaminated plumbing, and exce ssive fluoridation or chlorination. Common experience tells us that damaged, broken, or rusting pipes are a health concern, and are the responsibility of the municipality. Since such entities are typically slow to respond,

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7stating it was bottled inside a city. This means that the bottler simply attached his plant to a city™s water system and started bot tling the city water (Shermer, 2003). For the consumer, purchasing bottled wate r from a municipal source is simply a poor economic decision. Citizens in the United States, and in much of the developed world, have access to clean water, courtesy of extensive public works programs. In the US, the water system is one of the most reli able in the world, and benefits the entire community. Potable water is in great supply, and an average American uses about 74 gallons of clean water a day. (AWWA, 2006) These systems are not free, and taxpayers pay large sums of money to maintain the water supply. A citizen who drinks bottled water pays taxes to support a water system, pa y fees to take water from that utility for showering and dishwashing at the like, then pays an for-prof it, independent, and probably not local, company an exorbi tant amount for the same, already cleaned water. In San Marcos, Texas, an average homeowner pays roughly $30 a month for four thousand gallons of potable water. There is an additional $30 wastewater fee, bringing the total cost for a family of three to $60 a month. This works out to half a penny per person per gallon per month. That™s $0.005 per gallon.2 (Sokol, 2006) If that water was bottled municipal water Œ the same potable water al ready cleaned by the municipal, community- funded system Œ the cost would be roughl y $16,000, compared to the $60 charge for municipal water. The bottled water cost would vary according to the bottler; the $16,000 is at $1/quart, the cheaper end of bottled water lines. This works out to a 266.67 times increase in cost per month to acquire the same water secondhand through a private bottling company. For simply drinking water, it is reasonable to assume that an average 2 Jake Sokol, San Marcos, TX. Actual fee is $18.98 for first two thousand gallons. Actual water bill was $28. $30 wastewater fee is mandatory. From two to four thousand gallons, the price is 1.5 pennies per gallon. Calculation was $60 divided by 4000 gal, then divided by three people.

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8adult drinks, at most, roughly three quarters of a gallon of water per day. (Mercola, 2001) That would be twenty-two and a half gallons a month. At a penny a gallon, that™s 22.5 cents. At a dollar per quart for bottled wa ter, municipal or not, that would be $22.5/month, 100 times the cost. What is less obvious about bottled water is the container itself. The plastic bottle is damaging to both the drinker and to the envi ronment. There is a popul ar belief that the bottle will eventually degrade into the water and contamin ate it. (Snopes.com) The idea goes follows that as the bottle is reused, th e plastic will break down into carcinogenic materials and can harm the dr inker. (Snopes.com, 2006) The plastic used in the bottle does leach out into the water, but the rate is insignificantly slow. On average, one nanogram3 of plastic will leach into the water per liter of water per day. This rate is simply not enough to really ever cause harm . (Benfenati, 1991) The IBWA recommends that bottles be used only once, not to avoid the off-loading effect of the plastic degradation, but to avoid bacterial contamin ation from refilling the bottle. (Cutler, 2003) On the whole, however, the far greater da mage is dealt to the environment. This damage comes in all forms and severities and all are major factors, but not all are included in the price of the water. The factors that are not included are what economists term fiexternalities.fl (Economist.com, 2006), and are the consequences fiarising from an economic activity that affect somebody other than the people engaged in the economic activity.fl Construction of water harvesting installations inevitably disrupts the local ecosystem and can cause significant local pr oblems in the future. Many pumps in the US can move 500 gallons per minute or more (Howard, 2006), and run all day every day. 3 A nanogram is equal to 1.0 x 10 -9gram. One ounce contains roughly 28.4 grams, making 1 nanogram equal to 0.0000000000352 ounce

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9This has brought some concern among populations local to the wells. The collected water is then purified, which is a wasteful process. It is estimated that two gallons of water are wasted for every gallon purified (Howard, 2006). Furthermore, this water, once purified, is frequently sold far away from its source, and so must be transpor ted to the tune of 23.5 billion tons of water a year worldwide. (Baricelli, 2001) Moving this water is done entirely without pipelines, and so relies entirely on fossil fuels. The amount of fuel is extraordinary, thousands of gallons a year simply to get water to market or a bottler™s plant or market. (Howard, 2006) Millions of tons of plastic bottles are produced every year, using an amazing amount of oil to do so. These bottles, made of polyethylene terephthalate (PETE or simply P ET), plastic can be recycled, but it is far more frequent to find the bottles simply thrown away. Since they are disposable water containers, it is clear that consumers do not attach great importance to them, and so simply cast them off. It is estimated that 9 out of 10 bottles used worldwide are not recycled, and find their way into landfills around the world (Howard, 2006). This is a rate of 30 million bottles thrown away every day, where they will take a thous and years to biodegrade. (Howard, 2006) In a more local context, the author estimates that he finds at least four or five discarded bottles littering th e areas in which he travels everyday. The amount of plastic used every y ear to manufacture enough bottles for the American market is phenomenal, requiring an impressive 1.5 million barrels of oil for the US alone. That is enough oil to fuel 100,000 cars for a year (Howard, 2006). To top all of this off, the water for wh ich people pay dearly may not be as pure or as clean as they expect. Bottled water is regulated by the Food and Drug Administration (FDA), which has set some extremely basic minimum standards, which are noted later in

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10this paper. The bottlers themselves have ba nded together to crea te their own set of standards, but these are also lacking when compared to both FDA and Environmental Protection Agency (EPA) standards, also noted below. The IBWA, Model Code and Industry Self-Regulation As the bottled water industry grew bigge r, some manufacturers pooled some of their resources in 1958 to create an indus try advocacy organization Œ the International Bottled Water Association (IBWA). Based in Al exandria, Virginia, it is the voice of the industry for the government. Membership is not compulsory for the bottlers, but is recommended. Being the voice of the industry the IBWA is the lobbyer for negotiations with state and federal authorities.. The IBWA, to help promote their product, published an industry standards document called the IBWA Model Bottled Wate r Regulation. Also referred to as the Model Code, the document was first issued in 1982, and the latest revision was published in March of 2005. This document is availabl e from the IBWA website. However, the Model Code is just that: it™s simply a m odel. It fiprovides comprehensive guidancefl (Model Code, 2005), but it is not required for bottlers to adhere to the Code. The Model Code itself is divided into six rules that highlight the major parts of water quality protection. The first rule is a co nvenient list of definitions that define the different kinds of bottled water, includi ng fisparklingfl, fiapproved sourcefl and so on. The second rule states the most basic recommendations for bottlers. Specifically, it states that the water must be from an approved source, and that it should be free from coliform bacteria. The Rule also states that the water must meet certain contaminant

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