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25 July 2011
10 Products With Big Markups
www.thestreet.com Bottled Water
Water, water everywhere ... but expect to pay through the nose for it.
The popularity of bottled water has meant windfalls for the big three of its industry, Nestle, Pepsi(PEP_)and Coca-Cola(KO_), as well as for brand names such as Poland Spring, Fiji Water and Evian.
The problem is that, no matter how exotic the liquid within may be described, you are basically paying for the bottle, not what's in it. Tap water costs about $0.002 a gallon; bottled water sells at around $2 for a mere 16 ounces.
A big part of what accounts for the markup is that, according to Food & Water Watch, an advocacy group for affordable food and water, more than 17 million barrels of oil are needed each year in the U.S. to make all those plastic bottles.
The bottled water industry has passed milk, coffee and juice in number of gallons sold, putting it behind only beer and soda, according to the Columbia Water Center at Columbia University.
Odd as it may seem, cutting back on water may be part of the new, post-recession frugality.
"Until the mid-2000s, the U.S. bottled water market seemed unstoppable," says a recent report by Beverage Marketing, a research and consulting firm for the global beverage industry. "In 2008, however, bottled water market suffered an unprecedented setback, and another, larger decline in volume occurred the following year. "
Bottled water volume declined by 1% in 2008 and by 2.5% in 2009. Bottled water wholesale dollar sales in the U.S. first exceeded $6 billion in 2000 and by 2007 topped $11.5 billion. But category sales declined to $11.2 billion the following year and to less than $10.6 billion in 2009.
No one is exactly going thirsty, however. BMC estimates that, on average, Americans still drink nearly 28 gallons of bottled water a year.
