One of the great marketing triumphs of the late 20th century was bottled water. Turning a commodity into a retail product uncapped huge revenue for companies such as Coca-Cola (NYSE:KO) and Pepsico (NYSE:PEP). The question now, however, is how fragile is the business? A troubling trend has top restaurants taking bottled water off of their menus due to environmental concerns.
According to CNN Money's Martinne Geller, New York's Del Posto restaurant and other restaurants owned by Joseph Bastianich are discontinuing bottled water, citing the resources squandered in transporting waters long distances. Perrier, for example, must be shipped from its source in Vergaze, France. 86% of all water bottles end up in the landfill. A study by the Pacific Institute's Peter H. Gleick and Heather Cooly found that bottled water required up to 2,000 times more energy to deliver than tap water.
Nestlé has already seen a 4.1% decline in its top-end brands, Perrier and S. Pellegrino, in the first quarter of this year. Ironically, the downturn has been most severe in Western Europe, relatively near the source of these waters. The International Bottled Water Association reports that U.S. consumption of bottled H20 dropped by 1% in 2008, but this was only half the decline suffered by the overall beverage industry. Water now has a 28.9% market share of the packaged beverage industry.
I anticipate that, if these trends continue, we'll see a new production and marketing approach by large-scale water vendors, promoting water that is locally sourced. I'll be interested to see what message they use to differentiate it from water flowing out of the nearest tap.