Mark Ritson on branding: Bottled water beware: tap is back

Few categories can match the explosive growth of bottled water.

Since 2000, sales have increased by 60% and the industry is now worth in excess of £2bn a year. Drinks consultants are predicting that global consumption of bottled water will soon overtake carbonated beverages and one analyst has taken to calling the sector 'blue gold'.

However, I can tell you exactly where I was when I realised that this business was in big trouble. I was having dinner with friends in a posh restaurant in Chelsea. Our conversation was interrupted by the waitress asking us about what kind of water we wanted for the table. Sparkling, still or tap? Everyone, in unison, replied 'tap'.

You may well have had a similar experience recently. It's a perfect example of Gladwell's 'tipping point'; a contemporary illustration of Ted Levitt's 'marketing myopia'. It's the moment when a hugely profitable industry populated by billion-pound brands starts to falter in the face of changing customer needs. There are three enormous problems looming for the bottled water industry. First, its product is an environmental disgrace. It takes millions of barrels of oil each year just to make the bottles. Then there are the three to five litres of water that it takes to actually produce a single litre of water to fill your bottle. Next comes the environmental impact of transporting your water bottle from France or Scotland to your door. Finally, most of these bottles will go on to create solid waste in a landfill.

A recent estimate suggests that every bottle of Fiji Water imported into the US produces 250g of CO2 emissions (93g for making the bottle in China, 4g to transport it to Fiji and 153g to ship the full bottle to your table). Compare that with the invisible environmental footprint of a glass of tap water and you can see why Friends of the Earth regard bottled water as 'environmental madness'.

To be fair, we still engage in enough environmentally insane consumption choices (outdoor patio heaters?) to reassure the bottled-water companies that their profits will prevail. Unfortunately, however, their business model is peculiarly vulnerable to the new environmental realities. Their distribution model, target market and competition are all about to line up against them. The modern bottled-water boom really started with restaurant sales - initially in the US - and it is here that the most overt rejection of the product is beginning. Influential restaurants are dropping it from their menus and replacing it with filtered tap water. 'It makes sense to us to not have to use all the energy and resources to bottle water in Italy, truck it to our restaurant and deal with the recycling,' said Mike Kossa-Rienzi, general manager of California's famed Chez Panisse.

The situation is further complicated by the target segment for bottled water. Younger, healthier, environmentally savvy consumers are the heaviest consumers of the product: the very people most likely to be concerned about the environment and to act accordingly are the ones drinking bottled water in the first place.

The third problem is the competition. Tap water costs 1/10,000 of the price of bottled, is much less likely to be tainted with impurities and has a distribution network that even Starbucks would be proud of. All of this has not been enough to hold back the growth of bottled water. But times change. Thanks to the ridiculous environmental footprint of bottled water and the sustainable, recycled attractions of tap water, the market is about to reverse.


- Between 2002 and 2006, bottled water was one of the fastest growing categories in the UK soft-drinks sector. This year, volumes are expected to reach 2.26bn litres, with a value of almost £2bn, according to Mintel.

- Volvic is the top water brand, selling 199m litres in the off-trade in 2006 - a 16% share of the market. Evian is the second biggest with a 14% share, while Highland Spring has 7% of the market.

- The number of 11- to 16-year-olds drinking bottled water has leapt from 45% to 65% since 2003.

- Still water outsells sparkling water and, while sales of still water reached £1.4bn in 2006, sales of sparkling variants lanquished at £177m. Sales of still water are up £277m since 2003, while sparking sales are down £11m.

- The market is predicted to reach a value of £2.6bn by 2012, up 30% on 2007, or 19% when inflation is taken into consideration.