Message in a Bottle

San Francisco banned the use of city funds to buy bottled water and is asking that local restaurants remove the beverage from their menus. Chicago instituted a 5-cent bottled water tax this year. The U.S. Conference of Mayors passed a resolution last month encouraging the phaseout of city spending on bottled water. The list of new policies targeting bottled water goes on amid concerns about the environmental

San Francisco banned the use of city funds to buy bottled water and is asking that local restaurants remove the beverage from their menus. Chicago instituted a 5-cent bottled water tax this year. The U.S. Conference of Mayors passed a resolution last month encouraging the phaseout of city spending on bottled water.

The list of new policies targeting bottled water goes on amid concerns about the environmental impact of the polyethylene terephthalate (PET) bottles that fill landfills and litter the environment. Meanwhile, consumer confidence in tap water is growing.

The U.S. Conference of Mayors' resolution, authored by San Francisco Mayor Gavin Newsom and sponsored by mayors from 17 major cities, aims to redirect taxpayer dollars to other city services.

“Cities are sending the wrong message about the quality of public water when we spend taxpayer dollars on water in disposable containers from a private corporation,” Newsom said in a statement. “Our public water systems are among the best in the world and demand significant and ongoing investment.”

Such efforts come as bottled water has doubled its volume over the last decade to become the second-largest beverage category by volume, following carbonated soft drinks.

In 2007, total U.S. bottled water volume approached 8.8 billion gallons, a 6.1% growth over 2006, according to consultancy Beverage Marketing Corp. Consumption exceeded 29 gallons per person in 2007.

Dollar sales of PET-bottled water were $3.4 billion in food stores for the 52 weeks ended June 15, a 5.3% increase from the same period in 2006, according to Information Resources Inc., Chicago.

But consumers are increasingly being encouraged to opt for a greener choice: tap water.

At issue are environmental concerns. According to the Container Recycling Institute, about 52 billion plastic bottles and jugs littered the environment in 2005, meaning they were not recycled, or they were sent to landfills or left on parks, fields or beaches.

Much of this is because the majority of bottled water is sold in portable sizes, including 10-, 12-, 16-, 20-, 24-ounce and 1-liter containers. These bottles are prone to being littered, and they have a lower recycling rate than any of the most common packaging materials, according to the CRI.

There are also financial reasons why bottled water is being targeted. In addition to promoting the reduction of bottled water waste, the Chicago tax, which went into effect Jan. 1, was designed to help close part of a $196 million budget deficit.

Art Potash, chief executive officer, Potash Brothers Super Mart, a three-store operator in Chicago, didn't support the tax when it was first proposed. But it has not hurt demand for bottled water since implemented in January.

“We haven't seen bottled water sales decrease,” he said.

That may be because his clientele buys mostly single-serve bottles, not multi-packs, so the tax isn't as much of a burden, Potash said.

“Stores that sell mostly cases will notice [the tax] more,” he said.

Nevertheless, the tax sends the wrong message about water, said Potash, who serves on the board of directors of the Illinois Food Retailers Association.

“Any tax seems like a penalty from a retailer's point of view, especially for something like water, which is healthy, as opposed to alcohol or cigarettes,” he said.

The backlash against bottled water is unwarranted, because it's a convenient, safe and healthy product that has a small environmental footprint when compared with other packaged goods, said Tom Lauria, vice president of the International Bottled Water Association, Alexandria, Va.

It shouldn't be singled out when it represents just one-third of 1% of the waste stream, he added.

Also, “People can't always stop at the tap and fill canteens with water,” Lauria said.

Still, the water industry has become more environmentally proactive by stepping up recycling education efforts, and by turning to lightweight bottle packaging, Lauria noted.

Coca-Cola's Dasani has lightened its Dasani water packaging by 30% since the brand's inception. It has also introduced a shorter cap across all Coca-Cola brands, thereby reducing plastic use by 5% last year.

The label is 30% smaller, and the bottle is 100% recyclable and more flexible so it's easier to crush.

Nestlé says the new packaging will save 65 million pounds of resin this year and will reduce its greenhouse gas emissions by 8%.

The Eco-Shape bottle is being used on all of Nestlé's PET water brands, including Poland Spring. Nestlé plans to convert all its PET packaging to Eco-Shape in the next 12 months, Kim Jeffery, president and CEO of Nestlé Waters North America, said at the Beverage Forum in May.

CHOICES IN STORES

As an eight-unit natural foods co-op, PCC Natural Markets in Seattle takes waste reduction seriously.

While it encourages tap water consumption, it also sells bottled water because of consumer demand. In fact, bottled water is so popular that six of PCC's Top 10 grocery items are bottled waters.

“Yes, some customers are concerned that we sell water bottled in plastic bottles, but it's also true that sales are strong in this category,” PCC spokeswoman Diana Crane told SN.

PCC encourages shoppers who are concerned about water purity, sustainability and health to install home water filtration systems, or buy bulk filtered water in plastic jugs.

It also recommends glass-bottled water, as well as stainless steel bottles, which it notes are non-breakable, reusable containers. To help in that effort, PCC's grocery manager is designing reusable stainless steel water bottles that will be sold at PCC.

Additionally, in a new store opening soon in Edmonds, Wash., PCC is considering placing bottled water next to bulk water, and merchandising the reusable bottles in between to encourage consumers to shift.

“We're looking not just at plastics in bottled water, but communicating with all vendors that the world does not need more plastic — it doesn't matter what category it's in,” said Crane. “We need to reduce our reliance on this packaging material everywhere, not just water.”

Jungle Jim's International Market, Fairfield, Ohio, hasn't received any negative feedback about bottled water, according to grocery manager John Eichler.

“Sales of our 24-packs have always been and continue to be good,” he said.

Eichler attributes that to the fact that Jungle Jim's buys bottled water in truckloads so that it gets good deals, which it passes on to customers in the form of aggressive prices. Every week, 24-packs of 16-ounce bottles are on special from $2.99 to $3.99.

“Bottled water is in our ads every week,” he said. “It helps get customers into the store.”

Just 18% of respondents to a Mintel survey said they are not buying bottled water because the plastic containers are bad for the environment.

Mintel said that while the percentage could increase over time as more people become aware of the issue, many consumers still do not see how their everyday actions adversely impact the environment.

Mintel's online study polled 2,000 people, 510 of whom said they don't drink bottled water. Of the 1,490 who do drink bottled water, 32% said they recycle, and 32% reuse the bottle.

“This means two-thirds are using some type of conservation method,” said Marcia Mogelonsky, a senior Mintel analyst.

Still, Mogelonsky predicts the market will flatten, and possibly decline slightly over the next few years — and not because of environmental reasons.

“It's a saturated market,” she said. “There's enough bottled water out there that it will be hard to launch anything new that will capture people's attention and have staying power.”

Mogelonsky doesn't anticipate a huge drop in sales, saying the convenience factor of bottled water is a major draw for the category.

BEVERAGE WATCH

Despite a drop in unit sales, a sharp rise in milk prices helped the category surpass CSDs in dollar sales.

CATEGORY $ SALES* % CHANGE VS. YEAR AGO UNIT SALES % CHANGE VS. YEAR AGO
Milk $12.204B 13.9 4.098B -3.9
CSDs $11.775B -1.8 5.749B -6.0
Beer/Ale/Alcoholic Cider $8.536B 3.5 1.051B 0.1
Bottled Water $4.394B 2.9 2.139B 3.5
Wine $5.590B 5.4 651.9M 2.6
SOURCE: Information Resources Inc.
* Sales in food, drug and mass outlets (excluding Wal-Mart) for the 52 weeks ending June 15, 2008