The Business Of Clean Water

Water crises of various forms have plagued the United States in recent years. The West is still recovering from persistent droughts and dam destruction, and communities nationwide are battling rusting pipes and tap-water pollution. Scott Pruitt has accordingly listed water infrastructure as a priority for the Environmental Protection Agency.

Despite the deluge of issues, the water industry is surging faster and more forcefully.

The Rising Tide Of H2O

Whether the high-end brand name or the generic case sold at Wal-Mart Stores Inc (NYSE: WMT), bottled water has supplanted soda as the American drink of choice.

Ten years ago, consumers imbibed a mere 21 gallons of bottled water per capita. In 2016, that figure hit 39.3 gallons, which, for the first time, surpassed the fluid quantity of soda (38.5 gallons).

In some cases, the consumption was a necessity. Tap-water contamination in Flint, Mich., Toledo, Ohio, and other areas of the country prompted distribution of bottles for both drinking and bathing.

The limited resources and accelerated droughts in certain regions bolstered bottled water sales in the short term — but they may have harmed the industry in the long run.

Resistance To Groundwater Access

Global regions formerly generous to water sellers are pushing a conservation-based environmental agenda that directly conflicts with beverage business.

Most recently, in drought-suffered India, PepsiCo, Inc. (NYSE: PEP) and The Coca-Cola Co (NYSE: KO) have been boycotted by the India Resource Center and trade organization Vanigar Sangram, which claim the companies have exploited Tamil Nadu’s limited water resources.

Similarly, Michigan residents have appealed to Michigan Citizens for Water Conservation to oppose Nestle SA (ADR) (OTC: NSRGY) (VTX: NESN)’s use of county groundwater for its Ice Mountain brand. MCWC Vice President Jeff Ostahowski told the Metro Times that Nestlé had nearly dried the state’s Sanctuary Springs, and a county circuit court judge ruled that the corporation caused significant environmental harm.

While some take ecological issue with Nestlé’s Michigan venture, others have opposed its evasion of financial responsibility. The company pays the state $200 a year for paperwork fees — no taxes, no licensing fee and no royalty for sales of the natural resource. Only the city of Evart, which supplies one-fourth of Nestlé’s Michigan water, charges for its wells. The municipal fee is $2.30 per 1,000 gallons.

The issue has been up for public comment for months, with the state offering additional extensions on the comment period. The next public hearing is scheduled for April 12.

A Boost From The Soda Crash

Even as the water industry struggles under ecological strains, it continues to benefit from consumer trends favoring healthy options and skirting recently enacted sugar taxes. Various levies have threatened the soda industry, and related businesses are turning toward the calorie-free, sugar-free, artificial-flavor-free market. Essentially, they’re taking on water.

The movement began with National Beverage Corp. (NASDAQ: FIZZ)’s LaCroix, which exploded in recent years and doubled in sales. New Castle Equity Research and Credit Suisse have asserted beliefs in the carbonated water’s continued expansion.

Considering the drink’s success, PepsiCo, Coca-Cola and Dr Pepper Snapple Group Inc. (NYSE: DPS) began pushing their own lines of sparkling and classic water.

As long as they continue to adjust to trends and get along with local well owners, beverage companies and manufacturers such as Cott Corporation (USA) (NYSE: COT) are poised to ride the tide of the bottled water craze.

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