The Irresistible Rise of Bottled Water - Thank You Marketing! - YouTube

In 2034, the World will spend more on  bottled water than it does on utility water.  

Five hundred ninety-eight billion  dollars a year, spent in Evian,  

Aquafina, or Dasani. That's more than the GDP of a  country like Belgium, but what does that tell us?

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The Holy Well Bottling Plant in the United Kingdom  is considered to be the first bottling water plant  

in the World. In 1622, they started filling glass  bottles with their mineral water and selling it.

The marketing promise behind this move was to  offer the medicinal value of that mineral water  

to people that had no access to the source.  That medical claim was the main selling  

point of water bottles that pharmacies mainly  distributed until the early twentieth century.

Today's point is not into the full details  of the bottling history, so I won't tell you  

too much about how Johan Jacob Schweppe  discovered how to carbonate water in 1783,  

or how Dupont patented Polyethylene terephthalate  in 1973, thus opening the market to PET bottles.

Indeed, bottled water could have  died long before the age of PET.  

Tap Water became much safer at the  beginning of the twentieth century  

when disinfection methods became  popular, notably ozone and chlorine.

And indeed, until the 1970s, bottled water was  much of a niche. At the beginning of that decade,  

only 1 billion liters a year of  bottled water were sold in the USA,  

a good chunk of it being the 5-gallon  bottles you could find in the offices.

But a revolution was cooking, and as often  with revolutions, it came from France.

In the late 70s, Perrier was a sparkling water  brand, essentially distributed in high-end  

restaurants. But they ambitioned to become much  more and to reach the mass market in the USA.

So, they hired Bruce Nevins and initiated  a market blitz with a wealth of TV ads,  

voiced by no less than Orson Welles. Some were  pretty classic. Some were quite... let's say edgy.

All the specialists were predicting a major  failure. "It's like selling canned air;  

why would people spend a fortune to buy what  they can get for a fraction at the tap!"

Well, that's where everybody was  wrong. Perrier wasn't really in  

the business of selling water.  They were selling a lifestyle.

Baby boomers had a strong desire  for status? Perrier was bringing  

it in a rounded green bottle. And the  taste of France, Terroir, and Fame,  

with all the stars and sports players posing  next to it, was swiftly making it a Veblen Goods.

Let me pause our story here to explain what a  Veblen Good actually is. And it's pretty important  

because what happened in the seventies is  currently happening again, so please bear with me.

You've probably heard a million times that  price is a result of demand. If many people  

want a good, the price tag increases, as  the offer may struggle to follow demand.

Well, a Veblen good is quite the opposite.  People get attracted by a high price tag,  

as it is an easy way to distinguish  themselves from the masses that cannot  

afford such a conspicuous consumption - to use  the term coined by Thorstein Veblen in 1899.

Sometimes also called the "snob effect,"  that cognitive bias is the one that enables  

Balenciaga to sell a white t-shirt 100 times  its real value by just applying its logo on it.

In a nutshell, it's all about stuff that's  expensive, and hence has to be superior.

That's how Nevin actually created a category,  positioning "pure Perrier" as the perfect  

mixer for the fanciest cocktails, as the  healthiest partner for your sport activities,  

or simply as your piece of France  in a bottle, that made you special.

And experts predicting a failure were somehow  right. It did not work. It SKY-ROCKETED! 

In 1980, Perrier had multiplied its sales by 70,  

then proceeded to acquire its main US competitor,  and reached 85% share of a booming market.

But wait, I see the doubt on your face. You still  don't believe that it's all about marketing,  

right? We're rational human  beings, after all. And if you  

ever tasted Perrier, you and I know  that it's simply better than tap water.

Well, in the 1980s, Perrier's CEO proceeded to  a blind test, where his own sparkling water was  

hidden among a dozen of other brands. And guess  what, he did not recognize his product and very  

honestly admitted that the value was in the brand,  not in the carbonated H2O inside the bottle.

So what's left if it's not better? Is it safer?  Well, in the 90s, a small number of Perrier  

bottles were found to contain benzene. Ouch.  Sure, sales plummeted, but not to the benefit  

of tap water, rather as transfer to Evian, or  the new brands created by Cocal Cola and Pepsi.

Today in California, 80% of people only drink  bottled water, and in a country of iconic soda  

brands, bottled water surpassed carbonated  drinks as the number one beverage in 2017.

But there comes our second Veblen Good. Because,  if bottled water now becomes a commodity,  

and you're still a hipster, wanting to  distinguish yourself from the masses.  

How do you deal with that?

You could return to tap water as your  grandparents did. Sure, it's vintage.

Or, you could open a brand new market  segment. And guess what happened...

Today, you can drink "Iceberg Water" - which  is guaranteed to come from a melted iceberg,  

thank you global warming. It will only  cost you about 140$ for one bottle.

Or you can go for BLK Water, a  water which is actually black,  

thanks to its high fulvic mineral content.

Sometimes its even more straightforward,  with for instance, Bling Water. I mean,  

if you're seeking a definition  of a Veblen Good, here it goes.

I think you got my point, so let's zoom out.  

Are all consumers of bottled water  victims of marketing? Well, sadly, No.

Remember my introduction? The investments in  bottled water may take over utility water in 2034,  

but today, apart from Mexico and a close  call in the US, utility is still ahead.

And if the World is on a track  to raise its bottled investments  

from one hundred twenty-three Billion  dollars in 2015 to $429 billion in 2030,  

it is widely because utilities will fail  to close the water gap themselves by then.

If you remember the UN Sustainable  Development Goal n°6 we already touched on,  

it boils down to enabling universal  access to water and sanitation.

Let's face it, we're far  from achieving this target,  

even on the water side. Utilities don't get  sufficient funding today in most places around  

the World to sustain their existing assets. This,  in turn, means that they're far from investing  

in the additional capacity that may  bring drinking water to every household.

And I'm not even addressing intermittent service,  

water scarcity, or non-revenue water here - we  would have to make a specific deep dive for that.

(and Spoiler, we will!)

Now it's hard to live without water.  

So bottled water is a safe and convenient  alternative if you can't find water anywhere else.

Safe. Convenient. But expensive. When  you spend 500 billion on bottled water,  

you don't get the same amount of water that when  you spend 500 billion on utility infrastructure.

Yet, I'm honestly not sure either that pushing  everywhere the traditional central utility  

approach would be a much better solution than  getting all our drinking water in bottles.

Large infrastructure comes with its own  caveats ranging from inefficiencies and  

high operating costs to heavy capital needs  through diverging incentives and even corruption.

But does it really have to be this blue  pill / red pill alternative? Well again, no!

I'm not sure it's a positive thing for the World  to let bottling companies and Utilites fight  

in a lose-lose war where utilities  only underline how cheaper they are  

while bottling companies create ads that  degrade people's trust in their tap water.

There are, in fact, dozens of other avenues to  explore. So, it's maybe time to be creative!

Let's pick only one for today,  

and let's take the World's number 3  as we speak: Point of Use treatment.

Indeed, Point of Use has a bit of  the beauty of the "in-between."  

The principle is to treat water, as  the name states, at its point of use.

In the developed World, it often takes  the shape of an under-the-sink unit,  

while in the developing World we see two  types of systems, table-top gravity-fed  

filters (remember my conversation with Sreenath  Bolisetty from BluAct) or small RO-UV devices.

We could also factor in here atmospheric  water generation - have a look at my  

discussion with Navkaran Singh  Bagga from Akvo to that extent!

When operated and maintained the right way,  all these units will deliver satisfactory  

drinking water quality. So, you can forget  about the trust issue in utility water,  

while avoiding the hassle of  collecting and disposing of bottles.

If you even want to reproduce the  taste of your favorite mineral water,  

that's possible - check my discussion  with Jacob Bossaer from Bosaq!

But what about the costs?

A typical "developed world" system costs  200 to 500 dollars for the unit along  

with a 60-80 dollars annual running cost.  Assuming a replacement every five years,  

the total yearly cost is thus 130 to 180 dollars.

Let's compare it to bottled water now. In a bulk  pack and in the western World, it costs 0.35-0.50  

dollars per liter (not accounting for  the time needed to do your groceries,  

the gasoline, and the maintenance of your car,  and assuming you don't go for iceberg water).

That brings our cost per capita for  bottled water to about 450 dollars  

and the annual cost for an average  2.5 people household to 1125 dollars.

So, we can estimate that Point of Use water  

is seven times cheaper than bottled  water in developed countries.

But how about the developing economy.  Gravity-Fed table-top units cost  

about 19-43 dollars, plus 5-10 dollars per  year to replace the cartridges. Assuming a  

three-year lifetime for your unit, the  total annual cost is 11-25 dollars.

Then, you could also go for RO + UV  units, which cost 75 to 190 dollars,  

with an annual running cost of 15 to  50 dollars. With a five-year lifetime,  

that makes a total yearly  cost of 30 to 90 dollars.

In a 20-liter jar, basic bottled  water costs about 90 rupee,  

which makes for 6 dollar cents per liter.  We thus get an annual cost of 77 dollars  

and an annual charge for the average  4.5 people household of 353 dollars.

Lots of numbers, right?

So let's compare: a simple table-top  cartridge unit costs 11 to 25 dollars per year  

and household. A more advanced RO-UV costs 30  to 90 dollars and the most basic bottled water  

353 dollars. So Point of Use is 4 to  30 times cheaper than bottled water!

Now "Point of Use" does not need to be  designed for single households neither.  

We could imagine winning additional  scale-effect and cross efficiencies at  

the district level. That would turn "Point of Use"  into decentralized treatments and micro-utilities.

Kind of a 21st-century re-interpretation of the  utility, leveraging the power of digitization  

while skipping the part where you have to  lay hundreds of kilometers of enormous pipes.

But that's a different story  we will cover another time!

Now, if there's something that the  aspiring solution shall copy from  

the bottled water industry,  it's for sure its marketing.

Here's a suggestion. Micro-breweries are  booming, right? So what if the next identity  

move for hipsters of all kinds was to support  the development of their local micro-utility?

And if you have a better marketing Idea of  how to promote tap or point of use water,  

come tell me in the comments.

See you soon!

Water? Reassuringly expensive!