Tapped Out?

By Linda Lisanti

Between Chicago's new 5-cent bottled-water tax; the bevy of consumer campaigns calling for a switch to tap water; cities banning public-funded purchases of bottled water and removing it from community events; and restaurants taking the beverage option off their menus, it's clear bottled water is getting a bad rap these days.

Opponents' criticism stems from the fact that unlike tap water, bottled water requires the use of oil and other fossil fuels to be produced and shipped. Then, once people drain the bottles, they are rarely recycled and fill up the country's landfills.

Making enough bottles to fulfill Americans' bottled water demand in 2006 required more than 17 million barrels of oil -- enough to fuel more than 1 million U.S. cars for a year -- and generated upwards of 2.5 million tons of carbon dioxide, according to Tappening, a new advertising campaign and Web site that urges consumers to drink tap water instead.

Tappening, a group founded by two advertising and communications executives after being inspired by a documentary on garbage, also claims that 96 percent of bottled water is sold in single-size polyethylene terephthalate (PET) plastic bottles, and about 4 billion PET bottles end up in the waste stream each year, costing cities millions of dollars in cleanup and landfill costs. Such condemnation of bottled water is nothing new. The popular product has long been a target of environmentalists. However, the backlash seems to be spreading lately.

"In recent years, Americans have become more interested in the environmental impact of everything they do, and I believe this is an offshoot of that general environmental consciousness," said Joe Doss, president of the International Bottled Water Association (IBWA), based in Alexandria, Va. "This has caused not just our industry, but other industries as well, to be looked at in terms of our environmental impact."

Compared to other consumer packaged goods, though, the bottled water industry is being unfairly targeted, according to Doss, who said any actions discouraging consumers from drinking a "healthy and safe product" are not in the public's best interest.

"The bottled water industry wants to be involved in comprehensive efforts to improve environmental resource policies, but any efforts to reduce packaging impact has to go across all consumer packaged goods, not just bottled water," he added. "PET single-serve bottles account for just one-third of 1 percent of the waste stream in the U.S."

For convenience store operators, the most pressing question is whether all this controversy is causing a drain on bottled water sales at the retail level. In 2007, total bottled water volume in the U.S. was 8.8 billion gallons, a 6.9 percent gain over 2006. Per-capita consumption increased nearly two gallons from 27.6 gallons to 29.3 gallons, according to research conducted by the IBWA and Beverage Marketing Corp.

Among c-stores only, Convenience Store News' just-released 2008 Industry Report found bottled water accounted for 13.8 percent of packaged beverage sales in 2007, with sales per store increasing 14.2 percent over the previous year.

A look at this year's numbers so far shows bottled water is still growing, but not at as rapid a pace. When asked if the slowdown in sales could be attributed to the negative attention the category has been receiving, bottled water companies, such as Evian and Nestle Waters, explained that it's not possible to isolate just one cause.

"It's really tough to tell because our business is multi dimensional. There are so many factors," said Elio Pacheco, president of Evian Natural Spring Water. "Certainly, from a category perspective, bottled water -- not including enhanced waters -- is in single-digit growth for the last few months. But it's still growing. There's still a demand."

Nestle Waters North America spokeswoman, Jane Lazgin, noted that it's not only bottled water that has experienced a slowing in sales the first quarter of this year, but all categories of packaged beverages. "It's hard to attribute what's causing this, but bottled water still represents about 29 percent of total beverage consumption in the U.S.," she said.

C-store retailers are aware of the disapproval that has been swirling around bottled water recently, but said they've yet to see it impact sales of the product in their stores.

Even in Seattle, where city mayor Greg Nickels has made it his personal mission to get Seattleites to stop buying bottled water for the good of the Earth, Leschi Food Mart co-owner Steve Shulman reported that his bottled water sales remain strong.

And it's not that Seattleites aren't environmentally conscious. More so than most parts of the country, Shulman said the city's residents do care about the environment and tend to be committed recyclers -- he has two separate recycling receptacles in addition to a 40-foot bin just for cardboard. But Seattleites also like their bottled water, he said.

It's convenient for on-the-go consumption, and he's found a lot of people feel that since the containers are 100-percent recyclable, the product does not hurt the environment.

"People come in the store and they shake their heads at what [the mayor] is proposing," Shulman said. "I can understand why he wants to do what he wants to do, but I think this is going a little overboard. Seattle tap water isn't as great as [the mayor] says it is. We have pretty good water, but I can taste the mold in it March through October."

At Quick Chek Food Stores, a more than 100-unit c-store chain based in Whitehouse Station, N.J., bottled spring water isn't performing as well as it has in previous years, but the chain's senior category manager, Bill Tencza, said it's not environmental backlash weakening the segment.

"What's hurting bottled spring water is the growth of enhanced waters and, to a smaller degree, flavored waters," Tencza explained. "We're having a good year in beverages so far, but if you look at water, bottled spring water is down, on average, 24 units per store per week, while enhanced waters, which includes flavored, is up, on average, 94 units per store per week. People just want flavor in their waters."

Lightening Up
Though not in direct response to critics, bottled water companies are making changes to reduce their environmental footprints -- particularly, using lighter plastics and less material to make bottles. Over the last five years, the amount of resin used in PET bottles has been reduced by roughly 40 percent, according to IBWA's Doss.

Among the earth-friendly efforts, PepsiCo last month introduced its lightest 500-milliliter, flavored, non-carbonated bottle to date, which reduced plastic in the packaging by 20 percent. FIJI Water, meanwhile, pledged to reduce its greenhouse gas emissions 25 percent by 2010, and said it will do so by reducing its packaging 20 percent; using renewable energy to supply at least 50 percent of the energy used at its bottling facility; and seeking out more carbon-efficient modes of transportation.

For the first time, Nestle Waters this year undertook a carbon mapping of its business, looking through the entire lifecycle process, and discovered the most positive impact it could have on greenhouse gases was going to a lighter bottle, Lazgin said, noting that in 2008, Nestle Waters will reduce its plastic use by 65 million pounds.

To achieve a lighter weight, the bottles have been redesigned, down to reducing the paper used for labels and the cap size. She said the company is looking to go even lighter across all its bottle sizes in the coming years, and is also exploring the use of bottles that would be biodegradable and not made of petroleum-based resin. "People really like their bottled water products, but they don't know enough that bottles are being produced and delivered to them in a responsible way," Lazgin said.

Evian, too, has continued to improve its business model in regards to sustainability by being the first to debut PET bottles, the first to launch collapsible bottles and now adding recycled PET to its product mix, Pacheco stated. Its 1-liter SKU and new 750-milliliter sport cap in the U.S. will be produced using 25-percent recycled PET.

"We've been working on our sustainable development all the way back since 1926," he said. "I welcome, from my personal perspective, a challenge to do better from an environmental standpoint because only through the challenge, do you get better." Even with these efforts, the environmental rumblings around bottled water are not likely to stop. As Pacheco noted, there will always be "militant environmentalists who just don't get why people should pay for bottled water."

Despite this, convenience store retailers and bottled water companies are optimistic about the category's continued growth. "Bottled water is a very good seller for us, especially in the summer," Leschi's Shulman said. "We've seen no impact, and I don't expect sales to be impacted going forward, either."

Longer term, though, the situation could change as younger generations become the core c-store shopper. Today's high school and college students are more attune to the environmental impact of products than the older generations, Tencza observed. "I've been in our stores, and heard kids talking about it. They think, 'this is really going to affect us.' So, if anyone is going to change their buying habits, it would be them."
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