Why Bottled Water May Be Back In 2010

By Ryan C. Fuhrmann | December 14, 2009 AAA

Bottled water sales had experienced rapid growth for more than a decade, as consumers embraced water over soda and other high-calorie beverages. Growth rates have slowed in recent years, due to market saturation, and have taken a more recent tumble on environmental concerns that millions of plastic bottles enter landfills every day, as only a small proportion of them ever reach recycling bins. Plus, why ship water across the globe when it can be affordable when consumed from a local tap?
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Concerns About Tap Water
A shift back to bottled water may take place soon, because a recent New York Times study detailed that "more than 20% of the nation's water treatment systems have violated key provisions of the Safe Drinking Water Act over the last five years." It also relayed that "since 2004, the water provided to more than 49 million people has contained illegal concentrations of chemicals like arsenic or radioactive substances like uranium, as well as dangerous bacteria often found in sewage."

A Shift Back to the Bottle?
Pepsi (NYSE:PEP) and Coca Cola (NYSE:KO), with their respective bottled-water brands of Aquafina and Dasani, have relied on water to offset declining sales of their namesake and other soda brands and may again see a boost to these brands if health concerns continue to plague local utility water sources. This would also benefit their bottlers. Pepsi is in the process of acquiring two of its largest bottlers, while Coca-Cola Bottling (Nasdaq:COKE) and Coca-Cola Enterprises (NYSE:CCE) will remain somewhat independent of Coca Cola.

The Bottom Line: Another Way to Profit
Mueller Water Products (NYSE:MWA), which sells water infrastructure produces and services, could also benefit from years of underinvestment in water infrastructure in the United States. Underinvestment internationally is a similar phenomenon and could benefit Veolia Environment (NYSE:VE), which operates a sizable segment to help drinking water plants run more efficiently. It remains to be seen if the current Times study leads to another consumer backlash, but it may prove enough to stem the current unpopularity of bottled water. (Learn more about investing in Water, see: Water: The Ultimate Commodity.)

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