Bottled water flowing off shelves

ROBERT EVATT
ARKANSAS DEMOCRAT-GAZETTE

"Nobody can be in good health if he does not have all the time fresh air, sunshine, and good waters." -- Flying Hawk, Sioux chief.

    Americans are taking Flying Hawk's advice to heart when it comes to "good waters." Nationwide, sales of bottled water rose from $1.8 billion in 1988 to $4.3 billion in 1998, according to Gary Hempill, a spokesman for the Beverage Marketing Corp. Consumption of bottled water in the United States has grown from 1.6 billion gallons to 3.6 billion gallons for the same period.
    For a variety of reasons, water has become the current "in" drink across the country. Hempill says the wholesale value of bottled water sold in Arkansas in 1998 was about $20 million.
    Retail analysts say water's percentage of the liquid consumption market -- referred to as stomach shares in the trade -- is rising, growing from 6.5 percent in 1998 to an estimated 8.6 percent in 1999, according to Davenport & Company, a retail analysis firm based in Richmond, Va. Sales of bottled water now exceed those of juices, tea, and wine.
    Grocers and convenience stores across the nation are pushing aside colas and fruit juices, traditional top sellers, to make room for large displays of single-serving bottles of water.
    "In the past we just carried a small amount of Evian, and that was it," said Larry Petigow, category manager of beverages for Williams Company convenience store chain, based in Nashville, Tenn. "Nowadays, you just about have to fill an entire cooler door [with water]."
    The Williams chain has 19 stores in Arkansas, selling in excess of 1,000 bottles of water a month per store, according to Petigow. The company runs Williams Travel Center and Williams Express stores.
    There is a message in those bottles of water that are selling like hot cakes -- make the bottles look cool and refreshing, and you can transform ordinary filtered city tap water into something appealing to the consumer.
    And that's just what the national beverage companies are doing. Two years ago, Pepsico Inc. rolled out its Aquafina line. This summer, Coca-Cola responded with Dasani.
    "We felt it was the right time to enter the market," said Kim Price, spokesman for Coca-Cola. "We picked a good summer to roll it out, considering the drought."
    Coca-Cola will have a challenge catching Pepsico. According to Pepsico, Aquafina sales jumped 80 percent in 1998, making it the nation's No. 1 selling bottled water. Neither Coca Cola nor Pepsico would break out sales figures for their bottled water.
    Before Coca-Cola and Pepsico entered the picture, the largest national water sales came from water bottled outside the United States. Naya, based in Quebec, and Evian, based in France, were the top two selling bottled water companies nationwide.
    Even though smaller local spring or bottled water companies are at a disadvantage competing against Coca-Cola or Pepsico, who have a nationwide distribution system in place, the local companies have at least one big advantage over nationwide marketers -- water is extremely heavy, making it hard to ship long distances.
    Arkansas-based water bottlers, like Mountain Valley Spring Co., are also benefiting from an increase in consumption of bottled water. Longtime Hot Springs fixture Mountain Valley has increased its sales and expects 1999 sales of bottled water to bring in $45 million.
    "We've seen a lot of growth in the past 10 years," said Mountain Valley President Tom Mitchell. Mitchell predicts that, at the current rate of growth, sales of their single-serving bottles will quickly outpace sales of their 5-gallon jugs, which have long been the staple of Mountain Valley.
    Even the University of Arkansas has lent its Razorback logo to a firm in the water business. Kansas City-based Culligan Water Conditioning bottles a line of "Collegiate Water," in which bottles sold near colleges bear the names and logos of their athletic mascots. Over 50 colleges have allowed Culligan to use their names, including Pennsylvania State, the University of Missouri, Notre Dame, and Texas A&M. UA's entry was dubbed Hogua, and featured both the UA symbol and the Arkansas Razorback. In 1998, Hogua paid the UA athletic department 7.5 percent of their sales, or $5,300, in exchange for granting the license. However, Culligan recently lost its contract due to a "failure to report back as prescribed on the licensing agreement," according to Roger Williams, vice-chancellor of university relations. Culligan officials declined to comment.
    Despite conventional wisdom, bottled water has become commercially successful with a bare minimum of advertising. Coca-Cola has no national ad campaign behind Dasani, leaving regional bottlers to put up displays in convenience stores on their own. Pepsico doesn't advertise Aquafina at all, aside from sponsoring sporting events such as the NCAA championships.
    Analysts claim that while the convenience and widespread availability of single-serving bottles now make it easy for consumers to buy water, more people are choosing to drink bottled water for a number of other reasons.
    "There has been an alternative beverage movement in the past decade," said Ann Gurkin, retail analyst for Davenport and Company. "It started with the increased popularity of bottled teas and juices, like Snapple. Coke and Pepsico soon followed on that trend as well. Now it's moved on to water. Consumers' tastes are changing, and they seek something different from the colas."
    One factor behind bottled water's success may be that Americans have become more health-conscious, and many have turned to water to help manage their weight. Nutrition labels on bottles of water show a statistical void: Total fat, zero percent; sodium, zero percent; total carbohydrates, zero percent.
    Often, bottled water is perceived as a higher-quality alternative to tap water, which contains trace chemicals from municipal purification processes. Despite state and federal water quality regulations, some people have adverse views of tap water.
    "Little Rock has good-tasting drinking water, but in a lot of smaller cities and rural areas, (local water) tastes nasty," said Guy Saylors, co-owner of Little Rock restaurant Slick's. "I drink a lot of bottled water because of that."
    Municipal water works insist that they ensure their customer's water is safe.
    "We consistently meet and exceed state and federal standards," said Marie Crawford, director of communications at the Little Rock Municipal Water Works. "Our water quality is recognized as one of the best in the nation."
    While many brands, such as Mountain Valley, are taken from springs and wells that are independent systems, most bottlers simply buy their water from municipal systems.
    Aquafina's water, for example, originates from the municipal system that serves the area in which the bottler is located. Bottles of Aquafina distributed in Little Rock originate from Pepsico's Memphis bottler, which uses Memphis municipal water.
    Since Arkansas' Coca-Cola products are bottled within Little Rock, local bottles of Dasani contain Little Rock tap water.
    Nearly all bottlers who use municipal water filter their water again in their bottling plants. The prevalent method is called reverse osmosis, in which water is passed through a semipermeable membrane that allows passage of the liquid but not of dissolved solids. Another widespread purification process by bottlers is ozonation, in which ozone is bubbled through water as a gaseous disinfectant. Unlike chlorination, ozone doesn't leave any chemical residuals.
    Besides filtration, many bottlers will add their own chemicals to the water to give it a distinctive taste. Dasani's water, as noted on its label, contains potassium chloride, magnesium sulfate, and salt.
    "If you take everything out of the water, you don't get the crisp, clean taste that consumers desire," said Kim Price, spokesman for Coca-Cola.
    Not all companies do this, however. Aquafina and Evian, among others, have made the purity of their product a selling point.
    "Our water is about as pure as you can get," noted Pepsico spokesman Dave DeCecco.
    Bottled water differs from tap water in another key area: The price. Most bottles can cost from $0.69 to $1.29. The majority, like Dasani, have an average cost of $0.99 for 17 to 20 ounces. By comparison, $1 will purchase over 600 gallons of municipal water at current rates.
    "It's kind of shocking," mused Petigow. "Who figured we would be paying so much for water?"
    Bottlers interviewed attributed their product's ultimate shelf price to the cost of packaging, shipping, and filtration.
    "Reverse osmosis is an expensive process," stated DeCecco.
    However, Warren Olvera, director of retail sales at Culligan, disagreed. "Reverse osmosis is expensive to set up, but once you get the equipment, ongoing costs are pretty nominal. It depends on how much you produce, but costs for reverse osmosis can be as little as 10 cents per case."
    The continual rise of bottled water sales indicates that many consumers don't mind paying elevated prices for water, which is good news for bottlers.
    "The [bottled water] companies won't discuss their profit margins," remarked Gurkin, "but they smile when you bring it up."
    

This article was published December 6, 1999