Bottled Water, Essay Example

The situation with bottled water is very interesting because it was not until a little over a decade ago that the phenomena of bottle water sales began to rapidly increase.  The late 1990s showed instances, such as the case in Wisconsin where the safety of public municipal drinking water caused the illness and deaths of hundreds of citizens in a local town.  The cleanliness of public drinking water caused many people to look to alternative sources, especially in the offices of many different businesses.  This is where sales of water began to grow because people started purchasing the 5-gallon jugs of water with dispensers and paper cups, especially in doctor’s offices and areas where there were meeting rooms.  This was the growing trend in the United States, while the trend of bottled water had already hit internationally in European countries and in Mexico.

Studies began to come about that showed the added benefits that individuals would receive from drinking water.  Workers were shown to have increased amounts of energy and focus when drinking water.  A health craze came about in the United States that promoted drinking water and sports drinks along with people’s active lifestyles.  Individuals that would work out were now seen drinking bottles of water or sports drinks to give them added energy and hydration during their most active periods during the day.  This caused a large demand for bottles of water over the large 5-gallon containers.  Bottles of water, just as bottles of soda, were more efficient means for people to purchase a drink and carry it with them while they moved about in their busy lives.  The demand for bottling water caused a major change in the economic background of the market and it also led to additional contractual developments and analyses that were performed by government regulation committees and organizations such as the FDA and EPA.

The Nestle Company became the largest seller of bottled water in the United States and internationally in 2006.  They held the largest share of profits in the bottled water and non-alcoholic drinks markets.  Coca-Cola, PepsiCo Inc., and Group Danone are three of the next largest distributors of bottled water in the United States and internationally.  These companies have the added benefits of being able to purchase their own reservoirs, springs, or distillation plants.  Many bottle distributors are likely to charge these companies around 5 cents per bottle for extremely large, or recurring purchases, which is what these four companies can afford to purchase.  However, smaller companies that may be independent or regional companies may not have the means to make such large purchases so they are forced to pay upwards of 15 cents per bottle.  In addition to the costs of the actual bottles, many of the large four companies are able to negotiate contracts with schools, sports stadiums, gymnasiums and stores to have their products be the only products of bottled water or sports drinks available in their locations.  This can put a major strain on the smaller companies and some stores even charged a fee for shelf space because of the demand for bottled water distribution in their stores.

These trends make it clear that the overall growth of demand for bottled water stems from the poor quality of municipal drinking water, the necessity to hydrate, and the portability of bottled water that makes it easier to stay hydrated with such active lifestyles.  The competition within the bottled water market is skewed mainly towards the big four companies, with Nestle Company leading the way.  These companies hold many of the top contracts that keep their products on the shelves, while the smaller companies are left behind without the financial benefits or resources available to compete.  The FDA and EPA made it difficult to enter the bottled water industry requiring accuracy of the labels, particular cleanliness of the water and frequent maintenance to check for chemicals and substances within the water.  This made it easier for the bigger companies with substantial resources to follow the procedures, while smaller companies did not have the finances to perform the necessary measures.  Few companies will really be able to compete with the top four companies and this makes the market extremely difficult to succeed.  This can also drive up the total cost of bottled water, although these companies are looking to separate themselves as much as possible from the competition, so they do so with higher quality of water, strong appearance of the product, and low prices, something that smaller companies cannot do.