Bottled Water Strengthens Its Position in the US Beverage Industry
California drought
In May 2015, several bottled water manufacturers, including Nestle’s (NSRGY) business unit Nestle Waters North America, were heavily criticized for using California’s municipal water, as the state is facing severe drought. In the same month, Starbucks (SBUX) announced that over the next six months, it will move the production of its Ethos mineral water brand out of California and into Pennsylvania.
The International Bottled Water Association (or IBWA), which is a trade association of the bottled water industry, states that bottled water production uses less energy and water compared to other packaged beverages. According to IBWA, bottled water accounts for less than 0.01% of all the water used in the US annually and only 0.02% of all the water used in California.
Other environmental issues
Bottled water manufacturers like Coca-Cola (KO), PepsiCo (PEP), and National Beverage (FIZZ) are also blamed for the environmental impact of plastics used for bottles. Plus, bottled water is criticized for being expensive compared to tap water.
Coca-Cola, PepsiCo, and National Beverage together account for 1.4% of the iShares Russell 3000 ETF (IWV). Coca-Cola and PepsiCo together make up 9.3% of the iShares Global Consumer Staples ETF (KXI).
Ban in certain places
There have been several campaigns to ban bottled water in schools, colleges, and national parks. IBWA believes that the efforts to ban bottled water sales in educational institutions can lead to a rise in the consumption of other beverages that contain high sugar and other harmful ingredients. A study published by the American Journal of Public Health revealed that the ban on bottled water at the University of Vermont resulted in a 33% rise in the intake of sugary beverages and a 6% rise in the amount of plastic bottle waste.
In July 2015, the US House of Representatives approved an amendment to halt the National Park Service policy that allows for banning the sale of bottled water in national parks.
Competition from other categories
According to Beverage Marketing Corporation, the US bottled water volumes grew by 7.3% in 2014, trailing only ready-to-drink coffee, which posted a 10.7% volume growth. Aside from ready-to-drink coffee, bottled water also faces competition from other growth categories like energy drinks, sports drinks, and ready-to-drink tea.
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