Ecology and economics are creating new opportunities in the water category
FOR MANY ECO-MINDED CONSUMERS, bottled water is now public enemy No. 1.
Last month, organizers in Canada celebrated the first-ever “bottled water free” day. In the United States, groups like Food and Water Watch, whose influential “Take Back the Tap” campaign encouraged consumers to use reusable water bottles, have made their voices heard. And in cities like San Francisco, New York and Toronto, officials have outlawed the sale and distribution of bottled water in municipal offices.
The movement against bottled water has been building steam for several years now, and the central argument — that it's wasteful to bottle an abundant natural resource — has struck a chord. Now, there's evidence that it's starting to impact sales. According to market research firm Mintel, sales of bottled water fell to $4.7 billion last year after peaking at $5.2 billion in 2007.
The recession has played its part, with money woes causing many consumers to turn to the tap instead of spending $1 for an Aquafina or Dasani. But many argue that environmental activism against the industry is behind the decline, as well.
“Consumers are recognizing that bottled water is an unnecessary burden on their wallets, the environment and the communities from which it is taken,” said Wenonah Hauter, executive director of Food and Water Watch.
Manufacturers have taken the criticism to heart, and they're responding with water in more sustainable packaging. Some, like Nestlé-owned Poland Spring, have introduced bottles that contain less plastic; others, such as Coca-Cola's Dasani brand and its new 100% recyclable “PlantBottle,” are using plants and other renewable resources instead of petroleum. Companies are also utilizing their packaging to market humanitarian efforts, like carbon offsets and water-relief efforts in developing countries.
Canadian manufacturer Naya recently transitioned its bottles to 100% recycled plastic. That caught the eye of Whole Foods Market, Austin, Texas, which recently began stocking the water in 1-liter and 1.5-liter sizes.
Then there are companies that are doing away with the bottle entirely. One recent introduction, Michigan-based Boxed Water Is Better, tells the story in its name. First appearing on shelves a year ago, and with plans to expand nationally to supermarkets this year, Boxed Water Is Better comes in a white gable-top carton featuring the company name in large black print. It's partly a fashion statement, and an environmental one as well. The cartons are made from 85% renewable materials, and are shipped flat to the filler to reduce costs. The company also devotes 10% of its profits to reforestation efforts, and another 10% to water relief foundations.
Despite the company's best intentions, the product's reception exposed divisions amongst green consumers. Media outlets — from the Los Angeles Times to Good Morning America — gave considerable attention to what was at that time a new concept. However, the company has taken an equal dose of criticism from environmental groups, who felt the cartons were still a wasteful commoditization.
Founder Benjamin Gott said he accepts both viewpoints.
“People say to us a lot, you know tap water is better than boxed water? And absolutely we agree with that,” said Gott. “But the market isn't going away. People will continue to consume these things, and it's our job to make them better.”
Several other companies have developed new bottle alternatives, from startups like Watsonville, Calif.-based H2O Box to established players like O.N.E., which nationally distributes coconut water and other flavored drinks.
Retailers are starting to catch on to the trend. The Goddess and the Grocer, a three-store retailer in Chicago, began stocking Boxed Water Is Better cartons last summer. Manager Phyllis Petrilli said she liked the alternative package, and the fact that it came from a supplier that's one state away.
“Even though we sell a lot of Fiji water, we feel guilty that it's being shipped in all the way from Fiji,” she said.
Others are approaching with more caution. Lisa de Lima, vice president of grocery with MOM's Organic Market, which operates six stores in Maryland and Virginia, pointed out that the aseptic cartons many companies use are only recyclable at special facilities. That's kept her from stocking the recent lines.
“When vendors originally started coming to me, at least in Maryland those packages were not recyclable,” de Lima said. “And that's not a gain to us.”
Packaging companies are working to fix that problem. A year ago four of them — Tetra Pak, Elopak, Evergreen Packaging and SIG Combibloc — joined together to form the Carton Council, with the goal of expanding carton recycling to municipalities across the country. So far, according to Jeff Fielkow, Tetra Pak's vice president of recycling programs, 25 million households out of 100 million are able to participate.
Cartons or no, MOM's has still taken significant steps to offer its customers more sustainable water options. In 2008, the retailer stopped stocking imported water, using the shelf space instead for reusable bottles and water filtration equipment.
MOM's President Scott Nash said his customers, the majority of whom are up to speed on sustainability issues, understood the move.
“We put up signs around the water department just saying we were eliminating imported bottled water because of its negative environmental impact, and that's how we left it,” said Nash.
Even with the growing popularity of reusable bottles, home filtering supplies and the emergence of carton packaging, the fact remains that bottled water isn't going anywhere anytime soon. Despite its modest drop in sales over the past two years, the category still remains “a beverage industry phenomenon,” according to a report by the Beverage Marketing Association. Gary Hemphill, managing director for the New York-based consulting firm, expects sales to rebound as the recession lifts. Bottled water, he said, offers the one advantage that trumps many environmental concerns: convenience.
“Having water available in that resealable lightweight plastic bottle is a key factor in the success of that category,” Hemphill explained.
Along with retaining a tremendous sales volume, bottled water continues to play an effective price game. To keep things competitive, retailers have introduced private-label brands that are significantly cheaper than national and premium brands.
The result, according to Mintel and the BMA, is a bifurcation in the market. Some consumers are sticking with premium brands they trust, while many others are trading down to value options.
Mainstream brands, meanwhile, have focused on lowering their prices to stay competitive with the more environmentally friendly newcomers.
“There's been a lot of aggressive pricing lately in the category,” said Hemphill.
Sales of bottled water in the United States are dropping in light of increased environmental and economic concerns.
| $ BILLION | %CHANGE | |
|---|---|---|
| 2004 | $3.50 | — |
| 2005 | $4.15 | 18.6 |
| 2006 | $4.77 | 15.0 |
| 2007 | $5.22 | 9.4 |
| 2008 | $5.07 | -2.9 |
| 2009 | $4.75 | -6.4 |
Source: Mintel
Gable-top and aseptic cartons may be made from renewable materials, but their “green” profile isn't complete unless consumers can recycle them. Most municipal facilities are not able to process the containers, though packaging companies are working to change that. Last year, four of them — Tetra Pak, Elopak, Evergreen Packaging and SIG Combibloc — joined together to form the Carton Council, which works with cities and communities to add carton recycling to their facilities.
More specifically, according to Jeff Fielkow, vice president of recycling programs for Tetra Pak, this means creating a separate classification for cartons within each system, and then finding the best market for the end product. Tissue paper manufacturers, he said, are one possible outlet.
“It's really making sure that they understand the markets that are available to them, how to get to market, and the rest of actually getting the product ready for market,” said Fielkow.
Twenty-five million households out of a potential 100 million currently have access to carton recycling, whether through curbside pickup or separate drop-off points. The industry's goal, said Fielkow, is to increase to 50 million households in the next five years. Globally, 25 billion cartons are recycled each year.
“The U.S. is playing the role of catch up right now, but we're catching up quickly,” said Fielkow.
Crystal clear springs, ice cold glaciers, soaring mountains: Bottled water companies make sure to play up their pristine sourcing, and for good reason. According to market research firm Mintel, 43% of consumers consider taste the most important reason why they purchase bottled water.
The rise in popularity of water filters, however, proves that tap advocates can play that game, too. Mintel data also shows that the water filtration market grew by more than $1 billion between 2002 and 2007. Manufacturers like Brita have seized on growing consumer unrest towards bottled water and established grassroots marketing efforts. Brita recently began a campaign called FilterForGood that asks consumers to take a pledge to drink only filtered water from a reusable bottle. The company and others also now offer filter recycling, though that often requires a consumer commitment to mail the cylinders to a designated recycler.
Nevertheless, the shift has led retailers to stock more filtering equipment and, in some cases, fewer cases of bottled water. MOM's Organic Market phased out imported bottled water in 2008 because of transportation emissions, and filled the shelf space with water filters and reusable bottles.