Soda ban makes room for America's first love: water
While New York wrestles with the legality of the soda ban, sugary drinks are quietly being edged out in favor of good, old-fashioned water.
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Because of concerns that plastic bottles create too much waste, experts say bottled water could be hit by a public backlash similar to the one that has whipsawed the soda industry with pushes for bans and taxes.Skip to next paragraph
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New York City was preparing for a ban on cups of sugary drinks that are larger than 16 ounces starting on Tuesday. But on Monday — a day before the ban was to begin — a judge invalidated the regulation. Mayor Michael Bloomberg, who originally proposed the ban, vowed to appeal the judge's ruling.
Bottled water already is starting to face similar opposition. The town of Concord, Mass. earlier this year banned the sale of water bottles that are less than a liter. And the University of Vermont became the first public university to ban the sale of bottled water last year.
Meanwhile, other cities are waging campaigns to promote tap water. New York City, which touts the high quality of its tap water, offers portable fountains at events around the city.
"Good old marketing has convinced people that they should spend a lot of money on bottled water," says Salome Freud, chief of New York City's distribution water quality operations.
Although companies such as Coca-Cola Co. and PepsiCo Inc. would rather have people buy bottled waters, they're even more invested in getting people to drink more soda again.
That's because soda and other drinks that the companies make, such as sports drinks and juices, are more profitable than bottled water. With bottled water, people tend to buy whatever is cheapest. That's a habit that forces companies to keep prices relatively low, which eats into profits.
It's why companies are investing so heavily in developing nations such as China and India, where the appetite for soda continues to grow.
In the U.S., annual soda sales are more than five times as big as bottled water at $75.7 billion a year, according to Beverage Digest. In terms of volume, soda is only twice as big as bottled water.
At Coca-Cola, the No. 1 soda maker, three-quarters of its volume in gallons comes from soft drinks, compared with 8 percent for its bottled waters including Dasani. PepsiCo, the No. 2 soda maker, gets 64 percent of its volume from soft drinks and only 7 percent from its Aquafina bottled water.
It's why Coca-Cola, which holds 13 percent of the bottled water market compared with PepsiCo's 10 percent, doesn't seem to think bottled water will ever overtake soda. In an emailed statement, the Atlanta-based company noted that soft drinks remain a far larger category than bottled water and that it sees "upside" for sodas over the next several years.
However, the company added that it saw "great potential" for bottled water. Like its competitors, Coca-Cola said it's focusing on growing its portfolio of bottled waters profitably by offering brands such as Smartwater and its flavored vitaminwater, which fetch higher prices.
In the meantime, the chairman and former CEO of Nestle Waters North America, Kim Jeffery, is waiting for bottled water's moment in the spotlight. Nestle, the Swiss company that makes Poland Spring, Nestle Pure Life, Deer Park and other brands, has nearly half of the share of the bottled water market.
At a beverage industry conference late last year, Jeffery noted that bottled water is "the elephant in the room."
And given the growing warnings over drinking too many calories — including from juice, milk and other sugary drinks — Jeffery said he's confident that water will continue to grow in popularity.
"For thousands of years, water was beverage of choice for human beings," he said. "Now we're reverting back to that."
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