Coca-Cola Co. (NYSE: KO) and PepsiCo Inc. (NYSE: PEP), which are betting that people's thirst for bottled water will continue to grow, would probably prefer that the public ignore an experiment that Penn and Teller did on their Showtime series a few years ago.
Using hidden cameras, the magicians videotaped unsuspecting people at a restaurant who were being served glasses of what they thought were expensive bottled water by a steward. What they didn't know was that their beverage came from a hose. The program is called "Penn and Teller [explicative deleted]," which is exactly how I feel about the bottled water business.
The hype around popular brands, including Vitaminwater, whose corporate parent Glaceau Coke recently agreed to buy for $4.2 billion, fizzes upon closer inspection.
While there are people with bad water and unsafe water, most Americans have perfectly fine water coming out of their taps. In fact, as FastCompany points out, the two leading brands, Pepsi's Aquafina and Coke's Dasani, are purified municipal water. The Natural Resources Defense Council and other experts have repeatedly pointed out that bottled water isn't as strictly regulated as tap water. An NRDC study actually found that 33% of the waters it tested "violated an enforceable state standard or exceeded microbiological-purity guidelines, or both, in at least one sample."
"There are very few differences between the health benefits of bottled and tap water except in isolated circumstances," said Greg Kail, a spokesman for the American Water Works Association, a trade group representing operators of water systems, in an interview. "In North America, we all enjoy some of the safest drinking water in the world."
None of this matters to most bottled water consumers, who are convinced that the H2O in the small plastic jugs that they buy in their supermarket and convenience stores is better for them. It certainly is convenient, which is why I buy some of the stuff myself. There is plenty of room for the industry to grow.
Kim Jeffrey, the CEO of Nestle SA (OTC: NSRGY)'s water business in North America, who oversees US sales of Perrier, San Pellegrino and Poland Spring worth about $4.5 billion this year, told FastCompany that the bottled water business is only about half of the size of the carbonated beverage industry -- but with only 15% of its marketing budget.
That's remarkable considering how much water sales are rising while soda sales are falling. An exception to the rule has been Hansen Natural Corp. (NASDAQ: HANS), whose stock has jumped more than 36% this year. Hansen recently signed a distribution deal with Anheuser-Busch Cos. (NYSE: BUD), which like the soda makers is struggling to revive flagging sales. The stock of another trendy soda company, Jones Soda Co. (NASDAQ: JSDA), has soared more than 41% this year even though it was dropped by Starbucks Corp. (NASDAQ: SBUX).
So look for more over-priced, over-hyped beverages to come to your grocer's cooler soon and for big companies to continue to snap up the companies that make them.
More Vitamin Water news
Beth Gaston Moon: High school vending machines getting more eclectic
Zac Bissonnette: PepsiCo plans a lower-calorie Gatorade
Zac Bissonnette: Experts doubt Snapple will satisfy Coke
Zac Bissonnette: Will Coca-Cola gulp down Snapple?
Joseph Lazzaro: Coke's catching up in the health drink segment
Zac Bissonnette: Coke swallows Vitaminwater
Zac Bissonnette: Coke wants vitamin water
Zac Bissonnette: Coke Zero is no zero, it's a big hit
Sarah Gilbert: Fuze acquisition pits Coke v. Pepsi in ritzy juice war
Ray of light: U.S. temp worker hiring increased by 34k in October
Closing Bell: Bulls gutting bears (ATVI, EWBC, GE, JASO, ENZN, MCD)
Goldman Sachs CEO Lloyd Blankfein pulls a Jeff Skilling in an interview
Reader Comments (Page 1 of 1)
7-12-2007 @ 5:05AM
BRAD WHITTINGTON said...
louisiana resident needs to talk water,brad whittington,504 494 1111
7-12-2007 @ 12:22PM
JOHN PETERS said...
MOST BIG CORP. IN THE WORLD SELL DRUGS. COCA COLA SELL A CAFFINE AND SUGAR DRUG. GENERAL MOTORS SELL BIG SUV AND TRUCKS TO LITTLE INSECURE PEOPLE. CK OUT THE NEXT PICKUP DRIVER AND HIS GLORIOUS MOUSTACHE NOT TO MENTION ONLY BEING 5' 6" LETS NOT GET INTO THE ADDICTION TO CELL PHONES. STARBUCKS ANOTHER DRUG NO TALENT COMPANY AND IT FRIGHTING TO THINK OF ALL THE LOSERS THAT THEY HAVE FOR CUSTOMERS(LEMMINGS).
7-20-2007 @ 11:02PM
Cindy said...
I agree with John Petersstatements.
When I was a child we drank from tap water (well water). Then the cities put out warnings about contamination, which brought fear to everyone. So, everyone turned to bottled water. Are you saying tap water is safe now?
7-27-2007 @ 8:45AM
Andy McFarland said...
I was in agreement with the idea that tap water is as safe as bottled spring water until I read an article this year about solvent contamination of the municipal water supply in Victor, NY. The articles were in the Democrat and Chronicle newspaper in Rochester NY. I believe as a general rule that tap water is probably as safe as bottled water. However, the solvent contamination story kind of spooked me. I tried to do some research on testing of water from public water supplies, and what I read was inconclusive. I am not enough of an expert on water quality to really do this research myself, but I couldn't deny the information about the contamination of the Victor water supply, which evidently went undetected for at least a decade, according to the article in the paper. My generally feeling is that the environment is gradually becoming more polluted from all kinds of chemical contamination, and that trying to avoid that contamination is more and more difficult. I can't afford to purchase the "designer" water in the small bottles, but I do buy the gallons of spring water from the grocery store. I know there is no guarantee that it is any healthier than the local tap water, but when I start to doubt the wisdom of purchasing bottled spring water, I think back to the newspaper story about Victor.
7-27-2007 @ 8:35AM
Andy McFarland said...
I was in agreement with the idea that tap water is as safe as bottled spring water until I read an article this year about solvent contamination of the municipal water supply in Victor, NY. The articles were in the Democrat and Chronicle newspaper in Rochester NY. I believe as a general rule that tap water is probably as safe as bottled water. However, the solvent contamination story kind of spooked me. I tried to do some research on testing of water from public water supplies, and what I read was inconclusive. I am not enough of an expert on water quality to really do this research myself, but I couldn't deny the information about the contamination of the Victor water supply, which evidently went undetected for at least a decade, according to the article in the paper. My generally feeling is that the environment is gradually becoming more polluted from all kinds of chemical contamination, and that trying to avoid that contamination is more and more difficult. I can't afford to purchase the "designer" water in the small bottles, but I do buy the gallons of spring water from the grocery store. I know there is no guarantee that it is any healthier than the local tap water, but when I start to doubt the wisdom of purchasing bottled spring water, I think back to the newspaper story about Victor.
12-17-2007 @ 10:01PM
Mark Trapman said...
Greetings
Water may be created the same, but capture and distributing is not, municiple or commercial. Our spring is located and captured at 6500 feet in Oregon. Within 40' of the source we add organic flavorings and vitamins and it is bottled. Making it one of the purist forms of drinking water. Delivered to your local outlet. There is a differance.
Spirit Springs Mining Co.
9-22-2007 @ 3:40AM
Betty J Stohler said...
Would people be consuming too many vitamins,
since many processed food contain vitamins?
What if low sugar fruit preferred water, help kick their sweeth tooth be more healty?
I'm thinking of pomagrante cranberries and mangos could be a piblic surprise.
How would you feel about this?
I'm stll a coca cola share owner.
9-22-2007 @ 8:01AM
Betty Stohler said...
WHERE WE ARE THERE IS SPRING WATER. ONE PROBLEM IS, TOO MUCH SALT IS BEING ADDED TO ALL OUR FOODS. HOW BOUT SOME PINE NUT WATER, ALSO?