PNWS-AWWA 2008 Annual Conference Bottled Water: Tapping the Trends Patrick Weber Brown and Caldwell

Outline What is bottled water? Industry growth and consumer choices Marketing strategies Regulations and standards Water quality and independent studies Plastic bottles Tips for personal use

Why does this matter? It’s an important related industry Maintain awareness of trends Despite media attention, not necessarily bottle vs. tap Some ads both ways take that approach Cases of “implied impurity” Is growth in bottled water consumption a threat to municipal suppliers? Not directly Public perception is important We’ll come back to this

What is bottled water?

What is bottled water? Sources: Artesian Spring Mineral Well Municipal Surface FDA rules for labeling certain types

What is bottled water? Containers: Bottle Water cooler Counter-top spigot Gallon jug Other Materials Plastic Glass

What is bottled water? For U.S. consumers: 60-70% sold in the same state it’s bottled About 5% imported About 25% from municipal sources Aquafina and Dasani reportedly going to voluntarily label as “from public sources” Both do reverse osmosis and/or other filtration and mineral addition Many bottlers do some type of filtration or other treatment, or add minerals for taste Other types: sparkling, flavored, vitamin enhanced, etc.

Consumption Trends

Consumption Trends The bottled water industry is the 2nd largest commercial beverage category in the US. In 2007 there were 8.8 billion gallons of bottled water sold in the US, which is an increase of 6.9% from the previous year. The average consumption in the US was over 29 gallons per person, more than any other beverage annually.

U.S. BOTTLED WATER MARKET Volume and Producer Revenues Consumption Trends U.S. BOTTLED WATER MARKET Volume and Producer Revenues 2000 - 2008(P) Millions of Annual Year Gallons % Change Dollars 2000 4,725.1 -- $6,113.0 2001 5,185.3 9.7% $6,880.6 12.6% 2002 5,795.7 11.8% $7,901.4 14.8% 2003 6,269.8 8.2% $8,526.4 7.9% 2004 6,806.7 8.6% $9,169.5 7.5% 2005 7,538.9 10.8% $10,007.4 9.1% 2006 8,253.5 9.5% $10,857.8 8.5% 2007 8,823.0 6.9% $11,705.9 7.8% 2008(P) 9,418.0 6.7% $12,573.5 7.4% (P) Preliminary Source: Beverage Marketing Corporation

Consumption Trends U.S. vs. International Consumption: #1 in total volume consumed #9 in per capita consumption GLOBAL BOTTLED WATER MARKET Per Capita Consumption by Leading Countries 2002 – 2007 2007 Gallons Per Capita Rank Countries 2002 1 United Arab Emirates 35.2 68.6 2 Mexico 37.7 54.1 3 Italy 44.2 53.3 4 Belgium-Luxembourg 32.7 39.5 5 France 37.1 35.8 6 Germany 27.8 33.3 7 Spain 29.7 31.7 8 Lebanon 24.9 29.3 9 United States 20.1 10 Hungary 13.5 28.5

Consumer Choices

Consumer Choices Phone survey of Washington residents Conducted April 2007 as part of DOH Tap Water campaign Key points: 55% prefer tap water 45% prefer bottled water More likely to prefer tap: Males, people over 35, and households without children More likely to prefer bottled: Females, people under 35, and households with children .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Why choose bottled or tap? .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Advantages of Bottled .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Advantages of Tap .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Which Do You Trust More? .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Consumer Choices Natural Resource Defense Council (NRDC) (from AWWA, 1993): Why People Drink Bottled Water .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Consumer Choices International Bottled Water Association (IBWA) reasons: Convenient choice. Alternative for people living in the developing world. Consistently safe, quality, good taste and convenience. An alternative to other bottled beverages that are high in calories and sugar content. Most people drink both bottled and tap water and it is not an issue of one vs. the other. .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Consumer Choices Three trends emerging in the industry: North Americans have started to buy cheaper bottled water such as those sold by Coke and Pepsi (Dasani and Aquafina) Many top producers are starting to create nutrient-enriched waters in the hopes to create a new growth frontier for the industry. The most widespread industry trend is flavored bottled water. (Beverage Marketing Corp) .. I took the black line off the side photos. I think this help keep a nice consistency with the cleanliness of the title slides. Also, I changed the photos to match the colors of the slides. The faucet is great, but I’m not sure it works with every color in the pallette?

Major Suppliers and Marketing Approaches

Major Suppliers Leading Global Suppliers: Nestlé Danone Coca-Cola PepsiCo

Major Suppliers Popular Bottled Water in the U.S. (no particular order): Fiji Water – Paramount Citrus product Poland Springs – Nestlé product Evian – Danone product Aquafina – PepsiCo product Dasani – Coke product

Marketing Approaches Overview: “There's no question about it: Fiji is far away. But when it comes to drinking water, "remote" happens to be very, very good. Look at it this way. FIJI Water is drawn from an artesian aquifer, located at the very edge of a primitive rainforest, hundreds of miles away from the nearest continent. That very distance is part of what makes us so much more pure and so much healthier than other bottled waters.”

Marketing Approaches Marketing Slogans/Strategies: “Untouched by man” Soft smooth taste that is healthy for you; infused with calcium and magnesium, fluoride, silica, pH and bicarbonate Plan to be Carbon Negative in 2008 Reducing the amount of packaging used by 20% over 3 years “Far from pollution. Far from acid rain. Far from industrial waste.” Working with Conservation International to protect the Fiji rainforest

Marketing Approaches Overview: Poland Springs Natural Spring Water started as a world-renowned spa in Main in the 19th century. It started bottling its water in 1845. Marketing Slogans/Strategies: “Just may be the best tasting water on earth” “Sweetness is overrated – keep your kids healthy and hydrated.” No fat, no calories, no cholesterol Sip smarter, live longer

Marketing Approaches Claims made: Water comes from ancient aquifers created by a retreating glacier 20,000 years ago Continuously fed by water from rainfall and melting snow the water percolates through layers of fine sand and gravel to produce spring water with a clean, crisp, refreshing taste Screened for 200 possible contaminators, which is more than the FDA and state regulations

Marketing Approaches Claims made: “Each drop of Evian Natural Spring Water starts off as rain and snow high up in the pristine peaks of the French Alps, traveling through a vast mineral aquifer deep within the mountains before emerging at last at the spring in Evian-les-Bains. This amazing journey is the secret to Evian’s purity and takes over 15 years.” “When you drink Evian, you drink what the Alps has given it.”

Marketing Approaches Marketing Slogans/Strategies: “Untouched by man perfect by nature” Limited edition bottles are available to “dress up your table”. Other terms used: luxury, pure, balanced, miracle of nature.

Marketing Approaches Overview: Aquafina water comes from public water sources and then goes through a state-of–the-art HydRO-7 step purifying process. Marketing Slogans/Strategies: “Pure Water, Perfect Taste” Aquafina Alive is a nutrient enhanced water beverage “Water brings things to life, including you” Produced in 40 locations so that water does not need to be transported long distances

Marketing Approaches International Bottled Water Association (IBWA) Ads:

Marketing Approaches International Bottled Water Association (IBWA) Ads:

Marketing Approaches International Bottled Water Association (IBWA) Ads:

Marketing Summary The bottled water companies listed above don’t make any direct claims toward tap water. They indicate that their water has consistently good taste and high water quality. Bottled water is made to be seen as an exotic and healthy alternative to tap water. Bottled water is marketed for its convenience and lifestyle. It is associated with fit, healthy and attractive individuals (i.e. models and MLB players)

Counter Marketing Counter marketing claims Mostly driven by cost and the environment Bottled water can cost more gallon for gallon than gasoline, and 1,000 times more than tap water. 2.7 million tons of plastic were used to bottle water as of 2005 (Bottled Water: Pouring Resources Down the Drain - http://www.earth-policy.org/Updates/2006/Update51.htm) In the US alone more than 1.5 million barrels of oil are consumed in making the bottles. (http://www.sierraclub.org/committees/cac/water/bottled_water/)

Regulations and Standards

Regulations and Standards Bottled water is regulated by the Food and Drug Administration (FDA) as a food product Interstate commerce only (30-40% of U.S. sold bottled water) States can regulate local production 40 states do Washington State adopted federal language Reportedly low staff levels for inspection and enforcement at federal and state levels Low priority, lack of resources lead to infrequent inspections Tap water regulated by EPA or states with primacy Washington State DOH has primacy

Regulations and Standards

Federal Regulations and Standards Bottled Water specifics: Subject to Good Manufacturing, Quality, and Labeling standards Weekly coliform testing, annual chemical testing – results only public if inspected by FDA FDA very similar to EPA for IOCs, VOCs, SVOCs, and SOCs More stringent on lead (15 ppb vs. 5 ppb) Can have coliform up to a limit Can sell water that fails coliform and chemical tests, if labeled as such (who would buy this?) No mechanism for international plant inspections Tap Water specifics: Extensive coliform testing, quarterly chemical testing More stringent on bacteriological testing Subject to “Right to Know” annual reports Source water protection required Standards include phthalates Required to test for Crypto and Giardia

State and Industry Regulations and Standards State of Washington: Both bottled and tap regulated by the Department of Health Bottled regulation matches federal rules International Bottled Water Association Voluntary membership that covers approximately 80% of U.S. supply Standards generally as strict or more strict than FDA and EPA regulations, but no real enforcement mechanism Annual third party inspection for members, reporting of results unclear

Water Quality Studies

Water Quality Studies National Resources Defense Council (NRDC) Study, March 1999 Tested 1,000 bottles from 103 brands. Tested against Federal, State (strict California), and Industry standards Found 22% violated CA standards, mostly for arsenic and synthetic organic compounds 17% exceeded industry guidelines for heterotrophic plate counts (HPC) – FDA does not consider heterotrophic bacteria to be of public health significance 4% exceeded federal standards for fluoride or excessive coliform, but passed when the same brand was retested 1 sample exceeded the tap water standard for phthalates (no bottled water standard) … changed the Bullet font from Arial to Knockout30. ( I think Arial is too close to Gotham)

Water Quality Studies Case Western Reserve University Compared 57 bottles to Cleveland tap water 39 bottles purer than tap 15 significantly higher bacteria All safe to drink Kansas Department of Health and the Environment Tested 80 bottled water samples All had detectable levels of various regulated constituents 46 had phthalates, 12 exceeding federal safety levels

Plastic Packaging

Plastic Packaging What is PET? Polyethylene terephthalate Petroleum product 30% of world’s supply of this compound goes to bottles 60% to clothes Relatively easily recycled PET denoted by the #1 recycling symbol Consumer Recycling Institute says 86% end up as litter or in landfills 2.7 tons (world), 1.5 millions barrels of oil (U.S.)

Plastic Packaging Phthalates Family of plasticizer chemicals Used in production of a wide variety of consumer products EPA standard of 6 ppb; no FDA standard DEHP is one of the most common – used in PVC manufacturing Low water solubility Possible carcinogen and endocrine disruptor Amount of possible leaching, and effects are unclear NRDC study did not find major incidence of DEHP in bottled water. Leaching from the bottle or present in the source?

Plastic Packaging Bisphenol A Endocrine disruptor Can leach from polycarbonate containers, including water coolers and outdoor bottles. Most concern about polycarbonate baby bottles, baby food containers Canada recently announced plans to ban it for baby-related products Nalgene announced April 19 that they will phase out bottles containing Bisphenol A over the next several months

Plastic Packaging Urban Legends? E-mails about risks from heating/freezing bottles Freezing may actually slow leaching down, although unlikely to be a big impact either way Heating less certain, still under debate The greater actual risk: Bacteria growth in open/reusable bottles, particularly “single-use” bottles, since they tend to have irregular surfaces that are difficult to clean.

Implications for Municipal Water Purveyors

Implications for Municipal Water Purveyors Bottled water and tap water are both generally of high quality Important that the public value tap water Play the PR game – resist implications that tap water is inferior or unsafe Be aware of and address as possible the “consumer choice” factors Talking points: Cost of water, environmental factors, energy/material/transportation efficiency, good quality, sustainability(!) Consider selling/distributing bottles or stickers with Utility/District name – market as a local source of pride Make use of available resources – see links

Implications for Municipal Water Purveyors Seattle Times, March 13, 2008: To cut down on trash and help the environment, the city of Seattle will stop buying bottled water, Mayor Greg Nickels announced Thursday (March 13). The city could save as much as $58,000 a year, officials said, by not purchasing bottled water for events or water-cooler jugs for its workers. "It is to really highlight the fact that Seattle has one of the best municipal water supplies in the country," said Marty McOmber, the mayor's spokesman. "When you look at the cost of bottled water, both in terms of financial costs and costs on the environment, it's a pretty clear choice that using city water is a much better choice."

Personal Use Tips

Personal Use Tips Don’t reuse single-use bottles – hard to wash Do use bottles designed to be reused, and wash regularly to avoid bacteria growth (non-polycarbonate plastic, stainless steel, other) Leaving open/reusable water bottles in a hot car or other warm place encourages bacteria growth – avoid that If you don’t care for the taste of your local water, try a filter

Links For more information: FDA: www.fda.gov EPA: www.epa.gov IBWA: www.bottledwater.org NRDC: www.nrdc.org AWWA: www.drinktap.org Take Back the Tap: http://www.foodandwaterwatch.org/water/pubs/reports/take-back-the-tap Tap into Goodness: http://www.doh.wa.gov/ehp/DW/tapwater.htm

Questions?