by C Ferrier · 2001 · Cited by 256 — Coca-Cola is already selling its BonAquA purified water in 11 Eastern European countries and in Germany. Companies tend to invest abroad and create local

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Catherine Ferrier Bottled water Discussion paper 2 Table of contents 1. Executive Summary3 2. Introduction.6 3. About bottled waters..6 3.1. Multiple products6 3.2. Multiple packaging.9 4. The bottled water industry.10 4.1. Bottled water companies..10 4.2. Bottled water market trends12 5. Bottled water consumption: a certain way of life.16 5.1. Consumers care for their health and safety.16 5.2. Changes in ways of life.18 5.3. Drawbacks19 6. Environmental impacts19 6.1. Protecting water quality20 6.2. Bottled water packaging materials and transport.21 7. Conclusion.23 References..25

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Catherine Ferrier Bottled water Discussion paper 3 1. Executive Summary The objective of this discussion paper is to provide an overview of the bottled water market situation. Bottled water is the most dynamic market of all the food and beverage industry. The term bottled water doesn™t refer to one single product (section 3.1) and the same designation can be used to qualify different products, depending on countries. Three major types of bottled water can be identified: å Natural mineral water is, in the European Union, an extremely specific product responding to strict criteria. It is wholesome underground still or aerated water, protected against pollution hazards and characterised by a constant level of minerals and trace elements. This water cannot be treated, nor added any exogenous elements, such as flavours or additives. United States require for natural mineral water to have a minimum level of 250 ppm total dissolved solids. å Spring water in Europe is also underground water protected against pollution hazards. It cannot be treated but it doesn™t need to have a constant mineral composition. Water from different springs can be sold under the same brand name. In United States, spring water is derived from an underground formation from which water flows naturally to the surface of the earth. å Purified water is surface or underground water that has been treated in order to be suitable for human consumption. It differs from tap water only through the way it is distributed (in bottles rather than through pipes) and its price. In addition to these three major categories, the International Bottled Water Association (IBWA) considers four other categories of bottled waters: artesian water / artesian well water; drinking water; sparkling water and well water. So many different categories do not facilitate consumers™ identification of the product they buy. In some cases, bottled water is actually bottled tap water. Different materials are used for the packaging of bottled water: glass; plastic (PVC and PET) and aluminium or steel cans (section 3.2). These packaging have different shapes, colours and capacities. They are an essential part of the bottled water marketing. In some cases, it is even possible to recognise the brand of the bottled water only thanks to the shape and colour of its packaging (e.g.: Perrier). The bottled water industry is very dynamic: numerous bottled water companies compete on this market. Although they can be extremely different, it is possible to identify three major categories of bottled water companies (section 4.1): å Smaller or larger firms that were created to run and market one specific brand of bottled water. Some of them are century-old and family-owned, but most of them have now grouped or are under control of major multinational food companies, in particular Nestlé and Danone. å Sodas or soft drinks companies now turn to the very promising bottled water market. Coca-Cola and PepsiCo, for example, take advantage of their large world-wide network of bottlers to sell purified water.

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Catherine Ferrier Bottled water Discussion paper 4 å Companies providing tap water, with extensive know-how in water purification now turn to a more lucrative distribution of water. Suez-Lyonnaise des Eaux and Vivendi, for instance, develop water services, such as home and office delivery of carboy water. The world bottled water market represents an annual volume of 89 billion litres (section 4.2), and is estimated to be worth US$ 22 billion. Western Europeans are the world™s major bottled water consumers (85 litres/person/year), but the most promising markets are in Asia and the Pacific, with an annual increase of 15% for the period 1999-2001. The average world consumption grows by 7% each year. 75% of the world market is still controlled by local actors. Evian is n°1 in the world for still water, with 1™441 million litres sold in 1999. Bottled water is a particularly competitive market, hence companies need to develop diverse marketing strategies, such as accessing new markets by owning or developing partnership with regional brands, developing new products (e.g.: flavoured water) or by-products (e.g.: cosmetics) and developing services (e.g.: home and office delivery of carboy water). Bottled water consumption reflects a certain way of life (section 5). There is a long tradition in Europe for drinking bottled water. Nowadays, this habit has reached the rest of the world. Why do consumers choose to drink bottled water? In many cases, bottled water is an alternative to tap water. Consumers think it tastes better than tap water (no chlorine taste), they perceive it as being safer and of better quality. They also look for security: food scandals in industrialised countries and water-borne diseases in developing countries have a great impact on their attitude. Bottled water is perceived as pure and safe, although it is not necessarily the case. Consumers care for their health and their well-being: they buy bottled water to feel well, to lose weight. Bottled water is a healthy alternative to other beverages. Changes in ways of life also explain this boost of bottled water sales. Increasing urbanisation, causing tap water quality to decline, can explain this situation. In particular, natural mineral water cannot be treated, nor added any element. It is therefore perceived as finaturalfl by city dwellers looking for genuine products. Increasing standards of living and greater use of cars enable people to bring home without pain a higher number of heavy and expensive bottled water: the price of bottled water is an average 500 to 1000 times higher than the one of tap water. The use of plastic (PVC, then PET) makes bottles lighter and easier to carry than when they were only made of glass. The expansion of shopping centres, outside city-centres, provide consumers with a greater choice in bottled water brands. Working habits change in developed countries, with the decline of agriculture and industry. Most people have office works and the bottle of water is now a common element on a desk, next to the computer and the telephone. Drinking bottled water is a sign of a rise in the social scale. Above all, bottled water is a huge marketing success. Bottled water, like any other industries, is not exempt of environmental impacts, either positive or negative. Natural mineral water and other bottled waters, as well as regular drinking water, must meet strict quality requirements. However, this doesn™t necessarily imply an improvement in general water quality: natural mineral water springs are indeed protected against pollution hazards, but this has an impact on a limited area; purified bottled water doesn™t need extremely good quality water prior to being treated, although this could reduce treatment loads and costs. Protection areas are often established around water abstraction points, locally protecting the environment. The choice of bottled water packaging material is increasingly done taking into account environmental considerations. PET is increasingly chosen instead of PVC because of its

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Catherine Ferrier Bottled water Discussion paper 5 properties: it is light, easy to work on and very transparent. It can be re-manufactured into many different products, such as fibres for the clothing industry. When burnt, it doesn™t release chlorine into the atmosphere, contrary to PVC, whatever type of incinerator is used. Negative environmental impacts, in particular energy consumption, are reduced if PET, aluminium and glass packages are washed and re-filled rather than re-manufactured. Emerging and developing countries may not have the necessary infrastructure to incinerate or recycle the bottles. Trading and transporting bottled water all over the world also has an important environmental impact, in particular on atmospheric pollution and climate change because of fuel combustion. This impact varies a lot depending on many factors, i.e.: the type of transport used (train vs. old trucks), the type of fuel used (electricity vs. diesel), the distance to travel, etc. Considering current market trends, transport of bottled water should keep growing; nevertheless, 75% of the world bottled water is produced and distributed on a regional scale, thus limiting transports. Drinking bottled water has become a trivial habit in many people™s lives. Bottled water may even be necessary, for instance in case of temporary tap water contamination. Whatever the reasons, the trend towards consuming bottled water will keep increasing in the coming years. Bottled water quality is generally good, although it can suffer from the same contamination hazards as tap water. In Europe, bottled water quality is frequently tested, both by independent labs and by companies™ internal services. Certainly, controls made by bottled water companies™ internal labs may be biased. Yet, it is not in the interest of the companies, who base their marketing strategies on the purity of their products, to hide away occasional contamination and sell bad quality waters, although this may happen. To improve bottled water quality, companies should release their quality tests on a day-to-day basis and make them available to a wide number of people, for instance through the internet. Also, it is essential that consumers have access to major information directly on the bottles™ labels, i.e., the fitypefl of water (natural mineral water, purified water, etc.), its mineral composition, the location of the spring (particularly if the water is derived from municipal networks) or the treatments this water may have undergone. Developing international standards on bottled water could facilitate consumers™ access to this product, for instance simplifying bottled water designations and ensuring its good quality. The standards the Codex Alimentarius Commission is working on could be given more importance in the future due to the increasing bottled water trade. Once mere recommendations, these standards could be referred to in trade controversies under the World Trade Organisation rules. Negative environmental impacts of bottled water could be further reduced implementing simple solutions, e.g. re-using bottles of water, in adequate sanitary conditions, rather than re-manufacturing them or promoting local springs instead of trading world-wide. Could the current increase in bottled water consumption threaten local water resources, in particular in countries already facing alarming water problems? Either bottled water put an additional pressure on local water resources already under stress, or imported bottled water slightly reduce water stress. Is bottled water a threat to tap water? Bottled waters should not be considered a sustainable alternative to tap water: they are not exempt of periodical contamination and are less energy-

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Catherine Ferrier Bottled water Discussion paper 6 efficient than tap water. Tap water is and should remain a public service meant to deliver good quality drinking water. 2. Introduction Bottled water consumption has been steadily growing in the world for the past 30 years. It is the most dynamic sector of all the food and beverage industry: bottled water consumption in the world increases by an average 7% each year, in spite of its excessively high price compared to tap water and although industrialised countries consumers have, in principle, access to cheap good quality tap water. How can we explain this trends and what are the consequences for tap water producers, for consumers, for the environment? This discussion paper aims to provide background information on bottled water and the bottled water world market, in order to understand the reasons of a trend that goes beyond a simple fashion and turns to be a real social phenomenon. It will first identify existing types of bottled water: although they seem very much alike, bottles of water don™t contain the same product. The increase in bottled water consumption has boosted the bottled water industry and market trends show very promising perspectives for the future. This paper will then identify the major reasons why consumers choose to buy expensive bottled water rather than drink tap water. It will finally analyse the impact this industry has on the environment. 3. About bottled waters When sold in groceries or supermarkets, bottled waters all look like the same. However, there are important differences: all bottles don™t contain the same product. There is very little in common between natural mineral water and purified water, as the chemical compositions or the treatments these waters can undergo respond to very different criteria that can change from one country to another. In some cases bottled water is merely bottled tap water. 3.1. Multiple products Three major types of bottled water can be identified: natural mineral water, spring water and purified water. 1. Natural mineral water corresponds, in the European Union, to an extremely specific product that must meet certain criteria. It is fimicrobiologically wholesome water, originating in an underground water table or deposit and emerging from a spring tapped at one or more natural or bore exitsfl1. Natural mineral water, whether still or aerated, is very different from other types of bottled water, because of: å its nature, characterised by a constant level of minerals and trace elements. Natural mineral water is particularly wholesome and can have health-benefiting effects; å its original state, preserved intact because of the underground origin of the water, which has been protected from all risks of pollution. Its composition must remain stable and must not be affected by possible variations in the rate of flow. 1 Council Directive 80/777/EEC of 15 July 1980 on the approximation of the laws of the Member States relating to the exploitation and marketing of natural mineral waters, OJ L 229, 30.08.1980, Annex I: fiDefinitionfl.

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Catherine Ferrier Bottled water Discussion paper 8 body. However, iron is unstable in water and is removed prior to bottling. Natural mineral water can often be highly concentrated in minerals, much above the limits generally admitted for tap water. Excessive drinking of such waters could, in the long run, be harmful to human health. Box 1: Water, minerals and trace elements 2. Spring water is underground water, protected against pollution hazards, microbiologically safe, suitable for human consumption without any additional treatment, except those authorised such as aeration (Evian, 2000). In Europe, spring water is different from natural mineral water as it must stick to the same standards applicable to drinking water. It doesn™t need to have a constant mineral composition. The consumption of this type of water is increasing, as it is generally cheaper than natural mineral water. In United Sates, the IBWA understands spring water as fiwater derived from an underground formation from which water flows naturally to the surface of the earthfl. Spring water must be collected only at the spring or through a bore hole tapping the underground formation finding the spring. Spring water collected with the use of an external force must be from the same underground stratum as the spring and must have all the physical properties, before treatment, and be of the same composition and quality as the water that flows naturally to the surface of the earth (IBWA, 2000). 3. Purified water or drinking water is water taken from rivers, lakes or underground springs that has undergone some form of treatment. It can be produced by fidistillation, deionisation, reverse osmosis or other suitable processesfl (IBWA, 2000). It can be chemically treated in order to have some components disappear. Waters with different components can be mixed. Considering the way it is produced, there is little difference between purified water and municipal tap water, except in the distribution method and retail price. Some companies also market enriched water, i.e. purified water that was added some minerals: this is the case, e.g., of Nestlé™s Pure Life, and Coca-Cola™s BonAquA (see § 4.1). Purified water is actually a manufactured product. The International Bottled Water Association considers four additional categories of bottled waters (IBWA, 2000): 1. Artesian water / artesian well water is bottled water from a well that taps a confined aquifer (a water-bearing underground layer of rock or sand) in which the water level stands at some height above the top of the aquifer. 2. Drinking water is water that is sold for human consumption in sanitary containers and contains no added sweeteners or chemical additives (other than flavours, extracts or essences). It must be calorie-free and sugar-free. Flavours, extracts or essences may be added to drinking water comprising less than one-percent-by-weight of the final product or the product will be considered a soft drink. Drinking water may be sodium-free or contain very low amounts of sodium. 3. Sparkling water is water that after treatment and possible replacement with carbon dioxide contains the same amount of carbon dioxide that it had at emergence from the source. 4. Well water is bottled water from a hole bored, drilled or otherwise constructed in the ground which taps the water of an aquifer. If these waters contain the minimum required mineral content according to US standards, they can be called fimineral watersfl.

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Catherine Ferrier Bottled water Discussion paper 9 So many different categories of bottled water, changing from one country to another, are not easy for consumers to differentiate. In addition, bottled water brands do not ease the identification of the product, often showing misleading images on their bottles™ labels, such as lakes and mountains when the water actually comes from municipal networks (see § 4). The United Nations Food and Agriculture Organisation (FAO) is working on an approximation of standards for natural mineral and drinking water. On its 1997 session, the Codex Alimentarius Commission6 adopted7 a draft standard on natural mineral water, converting world-wide the European regional standards, especially: microbiological purity of the product and bottling at the source. Many non European countries objected that this does not permit antimicrobial treatments of the water, nor its transportation in bulk containers. United States stated that this standard created a barrier to international trade by including fiunnecessary and inappropriately restrictive requirementsfl8. 3.2. Multiple packaging Packaging used for water can have very different shapes and colours and are made of different materials. For a long time, bottled water were only available in glass, a very good but heavy material. At the end of the 1960s, bottlers started to use packaging made of PVC (vinyl polychlorure). In the 1980s, a new kind of plastic started being used: PET (polyethylene terephtalate). PET is progressively replacing PVC because of its numerous advantages (see §6). Figure 1: Types of packaging used for bottled water, in percentage, in 1999, (Source: UNESEM, 2000) Plastic, either PVC or PET, is the most frequently used material to make bottles of water: about 70% of the bottles used for natural mineral water are made of plastic (see Figure 1). We 6 The Codex Alimentarius Commission, founded in 1962, is a common organ to FAO and World Health Organisation (WHO), in charge of elaborating international standards to ensure food safety. 7 By 33 votes in favour, 31 against and 10 abstentions. 8 FAO, 40 50 60 70 8090100BrazilIrelandHungarySpainBelgiumPortugalItalyFranceSwitzerlandSloveniaYugoslaviaAustriaGermanyPlasticGlass

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Catherine Ferrier Bottled water Discussion paper 10 can estimate that roughly 1.5 million tons of plastic are used world-wide to make bottles of water9. Indeed, plastic bottles are more expensive than the liquid they contain. Their price can fluctuate according to oil prices. In Germany, though, water is almost exclusively bottled in returnable glass packaging. There is therefore a lesser need for disposable plastic. In addition, Germans prefer (and mostly produce) aerated waters. Even if special PET bottles can resist gas pressure, they tend to be more porous than glass. In other countries, glass bottles are used mostly for the catering industry. Still or aluminium cans are marginal in most countries; in Belgium, Switzerland and Hungary they account for respectively 1% and 0.4% of bottled water packaging. Cans are a practical packaging to sell through automatic distributors. They are mostly used for carbonated waters. Bottles usually contain 33cl, 50cl, 1 litre, 1.5 litre, 2 litres or 5 litres. The biggest packaging for bottled water is a 5-gallon carboy (about 20 litres), sold in the USA mostly through home and office delivery. 28% of the bottled water drunk in the world is distributed through home or office carboy delivery services. 72% of the bottles used contain less than 5 litres (Belot, 2000). American consumers tend to drink more and more water in smaller packages (less than 5 litres): +16% between 1996 and 1999. Packaging is an essential part of bottled water marketing strategies. fiThe packaging makes the brand. The brand makes the packaging. A product must have visibility to sell, its presentation refers to notions such as service, security, hygienefl (Miquel, 1999). In some cases, such as Perrier, it is even possible to recognise the brand of the bottled water thanks to the shape and colour of its packaging. Some brands have reshaped their bottles in order to make them look like the marketing message they are supposed to carry. Evian bottles, for instance, now figure high mountains not only on the labels but also on the plastic itself (see § 4.2 and 5). Bottles of water are becoming aesthetic objects, that can be collected. 4. The bottled water industry Bottled water is the fastest-growing beverage category in the world: it fihas expanded from a tap water substitute into the beverage arenafl (Lenzner, 1997). The bottled water industry is extremely prosperous, involving companies with different histories and approaches to water. Which are the major companies and brands in this sector? What are main trends of the bottled water market? 4.1. Bottled water companies Bottled water is a booming and very competitive market involving numerous companies: in 1992 in the United States, there were 700 brands of bottled water produced by 430 bottling facilities (Olson, 1999). Although bottled water is a world market, with companies present world-wide, 75% of it is still controlled by local actors. Three major types of bottled water companies compete on this market: 1. Companies that were created to run and market one specific brand of bottled water, for instance Perrier or Evian. Some of them are century-old and family-owned, but most of them 9 Considering that a PET bottle nearly weighs 25g / litre, that the world consumes 89 billion litres of bottled water each year and that 70% of it is distributed in plastic containers.

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Catherine Ferrier Bottled water Discussion paper 11 have grouped or are now under control of major multinational food companies, in particular Nestlé and Danone. Danone and Nestlé have a long tradition in selling natural mineral waters. Nestlé is number 1 on the world market of bottled water with a turnover of about US$ 3.5 billion in 1999 – representing 15.3% of the world market share – and 67 bottling factories employing over 18’000 people in the world10. Nestlé/Perrier-Vittel SA11 owns well-known brands in 17 countries, like Perrier, Contrex or Vittel (France), Arrowhead, Poland Spring, Calistoga (United States), Buxton (UK), Fürst Bismarck Quelle, Rietenauer (Germany) or San Pellegrino (Italy). Danone, holding 9% of the world market share with a turnover of about US$ 1.5 billion, challenges Nestlé. Danone comes first in some regions: Latin America and Asia-Pacific. Its best-known brands are Evian (see box 2), Volvic (n°3 in the world with 937 millions litres sold in 1999) and Badoit. Danone and Nestlé only recently started to consider marketing purified water (see § 4.2). The first bottle of Evian appeared on the market in 1830. At the time, the water was sold in earthenware jugs. Evian received its first ministerial approval as a natural mineral water in 1878. In 1892, the city of Evian leased the company the water springs and the casino until 2027 (Evian, 2000). Evian is now world number 1 for natural mineral still water, with 6 million litres produced daily12, 1™441 million litres sold in 1999 to 130 countries. The company has subsidiaries in Belgium, UK, Germany, Switzerland, USA and Canada. Evian was employing 1™632 people by the end of 1999, including 900 at the bottling factory. The company had a turnover of US$ 500 million in 1999 (Danone, 2000). Box 2: Evian 2. Sodas or soft drinks companies now turn to the very profitable bottled water market. Coca-Cola and PepsiCo, for example, take advantage of their large world-wide network of bottlers which provides them with immediate access to the markets. To purified and aerated water used to make sodas is added a concentrated solution of minerals and sold as purified, enriched water, on the same principle as Coca-Cola and Pepsi. Like for colas, benefits for the company come from the sale of mineral concentrates to local bottlers. Coca-Cola markets BonAquA and Dasani: launched in 1999 in the USA, it is now in the 9th place for bottled water in this country. PepsiCo™s Aquafina was launched in 1995 in the USA where it has a turnover of US$ 600 million (Belot 2000). According to Olson (1999), Aquafina fihas taken Pepsi into the top 10 sellers of bottled water in the United States, with sales jumping 126 percent in one year to more than US$52 million in 1997fl. Although Aquafina labels fipicture beautiful stylized mountainsfl, the water is actually fiderived from municipal tap water. The water reportedly is treated tap water taken from 11 different city and town water suppliesfl across the USA. PepsiCo targets the world market and launched Aquafina in India in 1999. 3. Companies providing tap water, with extensive know-how in water purification and pipe distribution now turn to a more lucrative way of distributing water. Suez-Lyonnaise des Eaux and Vivendi, for instance, are specialists for public water treatment and distribution. They now develop water services, such as home and office deliveries of water carboys. Vivendi recently bought USFilter, producer of Culligan, a purified water sold 10 Bottled water activities amount to around 25% of Nestlé™s beverage activities, and 7% of the total turnover of the group (Fabre-Pujol, 1999). 11 Perrier-Vittel SA is the world fiwaterfl division of Nestlé. Its headquarters are in France. 12 Except at night, during week-ends and public holidays.

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