Bottled Water Industry Update

WQP: How is increased bottled water taxation (excise, sales and severance taxes) affecting the bottled water industry?

Henry R. Hidell, III: The bottled water industry has been operating in a very price-competitive market for several years now. The levies, fees and taxes that have been suggested or even approved in certain states have had a serious impact on the economic performance of water bottlers. It is most difficult on the small, local bottler who operates in a state that has passed such fees and taxes, while their larger competitors, who may operate in multiple markets, may not feel the “pinch” as much since some markets may not have such taxation.

The trend of taxing water bottlers is based on a misconception by certain public bodies that the bottlers are taking a resource that belongs to everyone and wasting it or selling it at very high profits. Water bottlers are very small users of the water resource. This is particularly true when compared to beer and soft drink manufacturers. Until there is universal application to all industry users of water resources, it is my opinion that bottlers will continue to resist such fees, levies and taxes.

WQP: How is the increase of legislation regulating groundwater withdrawals affecting bottled water manufacturers?

Hidell: Those bottlers that use groundwater resources are not opposed to groundwater management regulations and stewardship obligations to assure reasonable use of the resource. Again, if there is resistance to such regulations from bottlers, it is a result of the bottled water industry being targeted while other food processing industries may use considerably more but are exempt from such regulations. The water bottler is in favor of water resource management regulations.

WQP: Given the small percentage of groundwater used by bottled water manufacturers, why do you think groundwater withdrawal legislation has been targeted at the bottled water industry?

Hidell: Bottled water is a favorite target to many vested interests including green groups, public water supplies and individuals who believe that no one has a right to the water resources except the public. The industry is an easy target for such groups in the same way gasoline prices drive legislative committees to “investigate the petroleum companies” for price gouging. It’s an emotional issue for the public. The reality is something else altogether.

WQP: What is the importance of and current situation with the National Uniformity for Food Act?

Hidell: The bottled water industry supports the National Uniformity for Food Act, which would amend the Federal Food, Drug and Cosmetic Act (FDCA) to prevent any state or political subdivision from promulgating regulations that are not identical to the specified FDCA provisions where interstate commerce is involved. Water bottlers ship across state boundaries, as do many major food manufacturers, and as such, must be able to do so without limitation. If the manufacturers must produce products for regional markets because of regional regulations regarding quality or packaging, the cost to the consumer for all food products would rise significantly as well as create confusion in the consumer’s mind about any one product from market to market.

WQP: With an increasing number of bottled waters being sold internationally, what are some of the potential issues with regard to water quality and safety?

Hidell: The international trade of bottled water is not as great a volume as one may suspect. However, the World Trade Organization (WTO) has accepted the World Health Organization’s (WHO) “Codex Alimentarius” as the world food code, and as such, all bottled water and food products that comply with the Codex standards shall be free to be traded internationally under the regulations of the WTO between those countries that recognize the WTO. In general, bottled water quality in compliance with the Codex should not experience quality problems.

WQP: What are the potential impacts for bottled water manufacturers if WHO experts decide there is a relationship between health and calcium and magnesium in drinking water?

Hidell: This debate will rage on for years. It is too early into the debate to infer any impacts one way or another on bottled water products. In my own opinion, this has a lot more to do with certain political issues in Europe as opposed to real health issues on a global scale.

WQP: In what geographic regions is bottled water consumption growing most quickly?

Hidell: I would say that growth in volume is most impressive in Asia and India, but overall, growth is being experienced on a global scale. Today, it is very expensive to have massive infrastructure projects for supplying water and wastewater systems region-wide. Many emerging economies are faced with providing safe drinking water to massively expanding urban populations that have confounded the existing urban systems, and as such, consumers are turning to packaged water, which includes bottles and poly bags. Safe drinking water is a major concern for governments.

WQP: What other issues are affecting the bottled water market currently or may become important in the future?

Hidell: The future of bottled water remains strong in terms of continuing volume growth. It is one of the most efficient means to get safe, healthy drinking water to all consumers. Little water is wasted in the process and by the consumer during the act of consumption. In addition, in many areas, it is the only source of safe water. So, as we bear witness to the shift in global populations from agrarian societies and regions to urban centers for job opportunities, I expect we will see the importance of packaged water remain very dominant.

For more information, contact Henry R. Hidell, III at hidell@hidelleyster.com.

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