Analysing Aquafina Bottled Water

Aquafina bottled water is bottled around the country in 33 different locations from municipal tap water. It is both filtered and purified in a process that involves seven separate steps called the HydRO-7 Purification System. Included in the steps are processes such as filtration, exposure to high intensity light, osmosis, polishing, and ozonization. What results is water that has a Total Dissolved Solid (TDS) content of 4 parts per million (ppm), 2.5 times lower than the Food and Drug Administration (FDA) maximum amount.

The packaging of the water goes through a long process and creates some muda. Many of the Pepsi bottling processes are outsourced. For example, the bottles are manufactured by Amcor PET Packaging North America. The process is also very detailed and complicated in order to ensure both safety and a reliable product. We will also be explaining every material in the packaging process.

Additionally, we will be discussing the recent boom of the water industry and its environmental implications over the last decade. The amount of natural resources being used to produce the entire bottled water package, is extraordinary, and causing a real problem. The environment is also being contaminated on a daily basis with a majority of the bottles being thrown away as opposed to being recycled. Along with the destruction of our planet, plastic bottles and the water contained within them are starting to be seen as a serious health threat.

For the economical part of this paper, we will touch on Aquafina’s numbers over the past few years and try to predict the future. We will also make suggestions on how to gain a bigger market share, and how to make safe products in a business perspective. Pepsi-Cola’s Aquafina, which has reigned as the number-one brand for several years, has become the U.S. bottled water business’s first billion-dollar brand in 2004 has sustained strong growth in 2005 when wholesale dollar sales neared $1.3 billion.

Introduction

Bottled water is one of the biggest selling beverages in the world due to its convenience and quality taste. Whether due to the uneasiness of the safety of tap water or the convenience of the bottle, bottled water continues to gain profit share for companies in the industry. Specifically for busy college students such as ourselves, it has become increasingly important for us to be able to drink water when not near a water source.

Hence, the product we chose to study is Aquafina bottled water. When one purchases a bottle of Aquafina, he will receive the purified water and the bottle in which it is contained including its label, nutrition facts and ingredients, and a sealed cap. Although the Aquafina water bottle is only meant for one use, many choose to refill their bottle with ordinary tap water.

Because Pacific Lutheran University contracts its beverages and vending machines through Pepsi, Aquafina is the most consumed bottled water for our campus. This report is the study of the Aquafina bottled water process, value stream, muda, and economic evaluation of the bottled water that is widely circulated not just on our campus but around the world.

The HydRO-7 Purification System

Purifying the Water

Achieving Aquafina water is a complex and complicated process. Aquafina bottles water in 33 different municipal locations around the country from underground formation springs, the same location as our tap water. Whereas tap water is merely filtered and treated to remove bacteria and contaminants, Aquafina takes an extra step by purifying the water using the Hydro-7 purification system which removes substances according to the Food and Drug Administration (FDA) standards. Creator of the “state-of-the-art” purification system, the HydRO-7 removes substances in seven different steps. The Aquafina website provides the consumer with information related to the filtration and purification steps of its product (www.aquafina.com).

Prefiltration

In this first step, the system removes tiny particles in the water through a filter.

Polishing filter

Here, this first polishing filter (of 2) catches any particles that were missed in the previous step.

High-intensity light

A burst of high energy light imparts energy into the water stream to eliminate naturally occurring organic substances in the water.

Reverse Osmosis (R.O.)

Here, the system uses pressure and a hyper filter to remove 98% of Total Dissolved Solids (TDS) and organic compounds from the water. The TDS is the sum of all dissolved solids in water in parts per million. This step uses semi-permeable membranes with smaller pore sizes than micro filtration, ultra filtration, and nano filtration to remove substances such as sodium and chloride from the water.

Charcoal Filtration

This step isolates the elements that affect the taste of the water in a charcoal filter.

Polishing Filter

This is where the system polishes the hydrogen and oxygen elements in the water to make the water clear.

Ozonization

The system passes purified, oxygen-rich air through a generating cell. Here, three oxygen molecules are brought together to keep unwanted particles away. When they have done their job, they revert back to double oxygen molecules.

Here is a standard Aquafina nutrition facts label found either on the bottle or the packaging.

More important than what is in Aquafina water is what has been removed. The Aquafina website suggests that everything that the system removes from the water is unnecessary and perhaps harmful to humans (www.aquafina.com). The Environmental Protection Agency (EPA) requires a maximum of 500 ppm (parts per million) of TDSs in spring water and the FDA requires 10 ppm in purified water. Aquafina, a purified water, bottles water at 4 ppm, 2.5 times lower than the FDA standard (Mosko, 2004). The process removes the following trace compounds from the water:

• Carbonates
• Bicarbonates
• Chlorides
• Sulfates
• Phosphates
• Nitrates
• Calcium
• Magnesium
• Sodium
• Potassium
• Iron
• Manganese

Calcium and potassium are necessary for the human body, but they are still removed. Aquafina claims that the minute levels in the water have little effect on human health and removing them only delivers a more “pure” water (www.aquafina.com). However at the end of the purification process, ¼ of the bottled water that Aquafina bottles is tap water (Mosko, 2004).

Aquafina claims to have the purest water in the industry, but even more “pure” and containing less TDS is Penta water, which goes through a rigorous 11-step process and distributes water with 0.5 ppm TDS. Penta’s website also explains the process and the advantages of Penta in detail (http://www.pentawater.com/what.shtml).

The Aquafina system at the plant in Austin, Indiana, for example, has bottles 32,000 gallons of water an hour. The system is computer monitored and keeps track of which valves are open and closed and how much is in each tank. The Aquafina system is also used for bottling soft drinks at the plant. All the water is carbon-filtered in one of two tanks; the same process is used for all the water that is used in soft drinks, only the Aquafina water goes through the extra step of ozonization (Investing, 2004).

Pepsi/Aquafina Bottling

The Bottle

Pepsi Bottling Ventures LLC (PBV)

In July of 2002 the first products were being produced at PBV’s new small-bottle PET line in Raleigh, NC in a 200,000 sq ft production/distribution plant. This was a $40 million investment for PBV that gave the company the ability to increase production. PBV has bottling rights for Pepsi products covering most of North Carolina and a portion of Long Island, NY. One of the facilities that upgraded to the PBV production bottling plant was the Raleigh location with the primary goal being the production of bottled water under the Aquafina label, one of the fastest growing products within Pepsi. The need for this upgraded production facility from PBV offers Pepsi the ability to be competitive and cost-conscious (Mans, 2003).

Features

Individual sanitary enclosures are designed and manufactured by ICS Intl. These contain washing/capping/filling systems on the PET (Polyethylene Terephthalate) lines. The fillers are housed in one room, with a common heating, ventilating and air conditioning system. The PBV plant features an individual sanitary enclosure for each filling system with monobloc filler guards that are integrated into the face of the enclosure. The enclosures have an epoxy floor that is sloped to a stainless-steel drain, vision panels and a complete air-quality control system. The walls and ceiling are made of insulation sandwich panels consisting of inside and outside stainless-steel panels filled with polyurethane foam. The clean rooms come complete with lighting, doors, an air filtration unit, air conditioning, and an air exhaust system. The air-filtration units maintain pressure in the enclosure to prevent outside air from entering (Mans, 2003).

Bottles

Aquafina uses bottles that are produced by Amcor PET Packaging-North America. Amcor uses PET to make plastic containers for Pepsi products. Amcor’s website states that this plastic material is manufactured from various by-products of the oil and gas industries, especially ethylene glycol and terephthalic acid. PET consists of carbon, hydrogen and oxygen and can be incinerated without residues for energy recovery. PET is the most valuable of the recyclable plastics. It offers the ability for the container to be lightweight, shatter resistant, resealable and recyclable. The formation of a bottle is blow molded which involves blowing air into a molten plastic tube and then forcing the material to follow the shape of the mold. Injection molding is also involved which is the process of converting plastic pellets by using heat and pressure to inject the molten material into a water-cooled mold. Amcor’s website explains this technology (http://www.amcor.com/Default.aspx?id=505).

Filtration/Sanitation/Air Quality

The units have three filtration stages. These stages involve roughing filters, bag filters and HEPA filters for an average air quality of Class 1,000. ICS added an air extractor that sucks the air from the enclosure and ducts it outside the plant to avoid discharging air loaded with sugar or ozone into the surrounding area inside the plant. Air quality is optimized through the limits that are placed on the filler. This also allows the operator to stand outside the room and control the machine (Mans, 2003).

Bottling

Pre-labeled bottles are delivered to an automatic depalletizer on pallets with cardboard slipsheets between the layers. The depalletizer raises the pallet one layer at a time. A sweep carriage equipped with suction cups swings over and automatically removes the slipsheet and deposits it in a bin for return to the bottle supplier. The depalletizer then indexes the layer of bottles up, and the carriage sweeps the bottles onto a mass bottle conveyor.

The bottles on the small-PET (Polyethylene Terephthalate) line are then conveyed in mass to two Lanfranchi high-speed bottle scramblers which have rotating turrets that orient the bottles in an upright position. Level sensors in the hopper of each unscrabler turn delivery elevators on and off to maintain bottles in the hoppers. The bottles from both unscramblers converge in single-file and are injected into the neck-guided air-conveyance system, where the bottles are supported by rods beneath their neck finishes. The bottles are then pushed along the chamber by air blowing. The depalletizing workcell includes three depalletizers and is designed to allow two operators to feed containers to three production lines.

Empty bottles are conveyed directly via air conveyor into the sanitary enclosure and the infeed star of the monobloc rinser/filler/capper. All bottle-handling within the monobloc is accomplished by supports under the neck rings of the bottles.

The bottles are delivered to the gripping heads of the 108-station rinser through the entrance starwheel, and are turned upside down as the unit rotates. Purified water is sprayed into the bottles through nozzles affixed to the gripping heads, and then drains out as the unit continues its rotation. This solution contains ozone for maximum cleaning efficiency when producing Aquafina. Bottles are then turned upright and discharge through a starwheel that also serves as the delivery starwheel to the filler.

The filler for these bottles is an isobaric-volumetric machine with 144 filling valves. Each filling valve is connected to the central tank through a product pipe and two gas pipes connected to the carbon dioxide supply. One pipe is used for the bottle pressurization and the other pipe for the pressure stabilization between the tank and the filling valve. When running Aquafina, the system uses nitrogen instead of carbon dioxide. The level inside the filling cylinder is essentially the same as the level in the central tank, and changes in the quantity of fill for different bottle sizes is accomplished by changing the level in the central tank. A piston in each cylinder is adjusted by an external magnetic coupling to set the exact volume to be filled to an accuracy of ±2 mL. This is done from the operator panel (Mans, 2003).

Capping

From the filler, bottles travel through another starwheel into the 36-head Arol CSD screw capper. Caps are supplied by Alcoa and are sorted and delivered to the capper by a system from SIDEL, Packaging Systems Div. Caps are loaded into a hopper located outside of the enclosure. Then a nearly vertical belt carries the caps to the top of the enclosure. Caps are contained on horizontal cleats on the belt and if any caps improperly orient they fall back into the hopper. The belt discharges the caps onto a track that carries them down to the capper. A transfer star picks the caps from the track and places them on the capping head, which then rotates synchronously above the bottle turret. The capping head lowers and screws the cap onto the bottle as the unit rotates.

Capped bottles leaving the enclosure pass through an Industrial Dynamics Filtec x-ray fill height inspector. The capped bottles then pass two Videojet Excel ink-jet printers that print a freshness date on the bottle cap tamper ring. The plant has installed two of these units to provide redundancy in case one unit malfunctions. For added security a Domino laser printer applies production codes and a freshness date to the bottle. After being coded the bottles then travel onto a multichain mat-top conveyor that slows their transport speed from 350 to 40 ft/min and accumulates the bottles from single-file to mass (Mans, 2003).

Label/ Glue/ Packing /Packaging

A HiCone machine produces six-packs of 16- and 24-oz, and 500-mL bottles. The bottles are delivered to the machine in two lanes. The two lanes separate six bottles and apply the plastic carrier material. The material is delivered in a continuous web to a large vertical wheel rotating above the bottles. The wheel pushes the web down onto the six bottles, and it is then cut to separate the six-pack. The packs are then diverted into two lanes and fed to a Hartness 2650 continuous-motion case packer that places four six-packs into reusable plastic crates for delivery to the PBV warehouse for distribution.

Bottles can also be conveyed to a packing installation incorporating a Model MW7 multipacker and a Model TDL tray former/loader and shrink wrapper, all supplied by Douglas Machine. Each of these servo-driven machines has its own control panel, with intuitive touchscreen interfaces with real-time production data, maintenance scheduling and changeover settings.

Bottles are delivered to the multiwrapper where groups of six or 12 bottles are then wrapped in registered film. This is a dual-stream machine that wraps two parallel groups of bottles simultaneously. Bottles are delivered in mass to the machine and are separated into either six or twelve bottle groupings by a proprietary pinless metering system. The groups are then delivered into the wrapping section. The film is placed around the bottle group and the package is conveyed through a heated shrink tunnel.

Four six packs or two twelve packs are then delivered to the tray former/loader. The machine forms a tray from a paperboard blank, pushes the wrapped packs onto the tray, and then seals the open sides with hot-melt glue. This glue is applied by a Nordson glue system. Some 500-mL bottles, as well as 20- and 24-oz bottles of all products can bypass the multipacker and be delivered directly to the tray former/loader. After these are placed on the tray, it travels through a shrink wrapper/heat tunnel.

Once the products are packaged, they are conveyed past a Videojet ink-jet case coder for application of production codes and then overhead to an automatic palletizer. Each sku is individually palletized to a designed stacking pattern. Individual packages are delivered to the upper level of the palletizer and are assembled into layers. After each layer is completed the platform is then lowered so the next layer can be assembled. Finished pallet loads are released at floor level and are transported by pallet conveyor to an Orion stretch wrapper. PBV uses plastic pallets that have improved palletizing efficiency and eliminated the debris and floor damage that are usually caused by wood pallets (Mans, 2003).

Finished Products/ Reductions of Plant Costs

Finished products are stacked two or three high, without pallet racks, and are rotated by code dates. The warehouse has been designed to have twin-load pallet racks in the future that will accommodate four-high stacking. The forklifts are also responsible for placing empty pallets into the palletizers.

The PBV plant was specifically designed to allow all raw materials and finished goods to be handled on double forklifts. These forklifts allow two pallets to be picked up at a time and greatly reduce loading and unloading time of the production equipment. The dock equipment was engineered to allow the movement of these extra-wide and heavy loads in and out of the building.

The double-fork trucks are also used to load trailers with finished products going to the sales centers, unload return trailers with empty plastic pallets and shells, store empty shells and pallets, and feed empty shells to the three lines. Double-fork trucks greatly reduce the number of forklifts and total travel distance in high-volume beverage plants (Mans, 2003).

The Need for Water Vs. The “Need” for Bottled Water

Water is a precious resource and the source of life. It’s one that many people take for granted on a daily basis, and because of that, a water crisis has been developing over the last few decades. According to a study done in the year 2000, “346,800 million gallons per day (mgd) of freshwater and 61,200 mgd of saltwater” were used in the United States (Water, 2006). Based on these numbers, it’s figured that the typical American single family home consumes, on average, 69.3 gallons of water per day (Water, 2006). Our daily needs include hydrating ourselves, using in food preparation, flushing toilets, showering, kitchen and bathroom sink purposes, and washing clothes and dishes. These uses attribute to the amount of water consumed, both for purposeful reasons, as well as for wasteful and unnecessary reasons. While hydrating ourselves to keep our body functions working properly does not consist of a large portion of the daily water usage among Americans, it is still an amount that is being used and will never decrease. Human beings need, on average, eight to twelve cups of water per day to replenish the approximately ten cups of water lost each day due to body functions, varying either more or less depending on activity level (Lempert, 2004). Because of this physical need, someone realized that they could profit. This profit realization turned into a multi-billion dollar business we now know as the bottled water industry.

The thought that one day human beings would spend money on a bottled version of something that they can get from their own home for a fraction of a cent for the same amount, is mind-boggling but has become the norm. Nothing is created without a need or a want; hence, bottled water was created. Since the U.S. is becoming a more on-the-go society each and every day, Americans rely more and more convenience items. One example of this is the rise of fast food restaurants, which happens to be a factor in the current obesity epidemic in America. So, because of this “go, go, go!” mentality, many just do not have the time to walk to a sink and fill up a glass with water. They instead need to have it right by their side, only needing to open up a cap and just toss it to the side when it is empty and open up the next that’s right there. Another beneficial aspect is in times of emergencies, such as a hurricanes or earthquakes, the water supplies to those areas are usually shut down and/or contaminated. In which case, bottled water is needed for consumption. Besides the convenience and emergency factors, Americans seem to think that bottled water is a safer, and sometimes, tastier, alternative to tap water. Some people fear coming down with gastrointestinal illnesses, while others fear contaminants, such as pesticides, to enter their bodies (Terry, 2005). People live under the impression that all bottled water is safer to drink than tap water because of a typical misconception, the idea that if it is bottled or packaged by a beverage or food company, then it must be safe. This is an idea that can be argued back and forth.

Consumption, Recycling, Physical Harm, and Muda

The amount of bottled water being purchased is growing almost exponentially each year. According to a bottled water study, based on the year 2004, Americans consumed 6.76 billion gallons of the pricey beverage (Falcone, 2006). This total amount averaged out to 70 million one-serving bottles being drank each and every day (Falcone, 2006). Consuming that many bottles of water everyday is incredible, and it is no wonder that entrepreneurs are coming up with new ideas all the time on how to get into the bottled water industry. A big reason for the increasing amount of bottled water drinkers is because of, as mentioned earlier, the convenience. It is a lot easier to grab a couple of bottled waters from the refrigerator before going somewhere. Aside from the convenience or laziness factor, the rise in bottled water consumption has begun to have a serious impact on our environment.

With the amount of bottled water being produced everyday, there is a high amount of left over product once the water has been drank that must be dealt with. That portion left over happens to be the plastic bottle, something that is not the most earth-friendly item. Of the daily amount of bottled water being consumed, 70 million, 60 million are never recycled (Falcone, 2006). On a daily basis, that means that approximately 86% of bottles are thrown away and sent to a landfill, hurting our environment. This also means that 60 million new plastic bottles have to be created each day to replace those that are thrown in the trash, which amounts to more natural resources being used and more future muda being produced. What is more disturbing is that once these bottles are taken to a landfill, they can take up to 1,000 years to fully decompose (Falcone, 2006). First of all, how is someone able to compute that amount, because, after all, bottled water is a fairly new concept? And secondly, with 60 million bottles being added to dumps each day all over the U.S., where are the bottles going to be taken to in ten years, when most likely the amount of bottled waste has doubled, or even tripled?

So why is it that the majority of plastic bottles are not being recycled? Many experts say that it is because vehicles are not equipped with recycling receptacles (Falcone, 2006). Since a majority of Americans who purchase bottled water are on-the-go all the time, they have less patience and desire to hold onto their empty plastic bottles until they get to a location where a recycling bin is present. It is easier to just throw them in the trash or on the street. It seems ridiculous that it is easier for people to throw a bottle in the trash as opposed to recycling especially when many places are placing recycling bins next to trash cans. This laziness and lack of patience is causing an extreme amount of harm on the environment. To put this idea into perspective the amount of muda in California created ten years from now would “create a two lane, six-inch deep highway that stretches the entire coast of California” (Wilson, 2003).

During the rare 14% of the time when empty bottles of water are recycled, a lot of good can come from them and it is a step in the right direction in helping the environment. The raw materials used to make the plastic bottles can be saved and used for numerous items which helps to save resources from being destroyed to make new products. By looking at California only, it is estimated that one billion plastic bottles get thrown away over the course of a year (Wilson, 2003). This amount calculates to almost three million bottles being thrown away each and every day (Wilson, 2003). That is an incredible, as well as, disturbing, amount of unnecessary trash. If instead of being thrown away each and every one of those bottles were recycled, the materials reused could produce either “74 million square feet of carpet, 74 million extra large T-shirts, or 16 million sweaters” (Wilson, 2003). It is incredible to think that a plastic bottle could be turned into other useful items and help save the environment by not using as many natural resources. Some other interesting information about the recycled material is that five recycled bottles can produce one extra large T-shirt, polyesther carpets can be created from the resin contained within the bottles, and the materials of the bottle can be “spun like cotton candy” and produce filling for quilts and pillows (Recycling, 2006). By looking over these types of statistics, it paints a wonderful picture of how recycling so much can be saved.

Many precious fossil fuels are wasted in this process. The transportation of bottled water to other parts of the U.S. as well as being shipped to other parts of the world uses large amounts of fuel on a yearly basis. This fuel is being wasted on a daily basis for a product that a majority of Americans can get for almost nothing just by turning a knob in their own home (Arnold, 2006). Besides wasting fuel on transportation costs, this same precious resource is being consumed during the packaging process. Polyethylene terephthalate (PET) is the type of plastic most commonly used to produce bottles and just so happens to contain crude oil (Bottled, 2005). According to research, 1.5 million barrels of crude oil is used over the course of a year to be able to produce the amount of bottles Americans demand (Bottled, 2005). Putting this amount into perspective, 1.5 million barrels would be enough to fuel approximately 100,000 cars for an entire year in the U.S. (Bottled, 2005). It is no shock that our world is currently dealing with a fuel crisis. By wasting such an extreme amount of oil on the production of bottles and transporting the finished product, we are not only hurting the environment but we are ruining the future for the next generations.

Previously mentioned was the apparent safeness of bottled water as opposed to tap water. While in some cases this may be true, tap water can be just as good as bottled and it may even be safer. Many scientific studies have been conducted on bottled water over the years and some of the information found is disturbing. Unlike tap water, which is regulated by the Environmental Protection Agency (EPA), bottled water is classified as a food. Hence, it is regulated by the Food & Drug Administration (FDA) (Mosko, 2004). The two groups have different standards in which companies are to follow otherwise harsh consequences result. Some differences are that the FDA does not require products to be tested for coliform bacteria whereas the EPA specifies “that no confirmed E.coli or fecal coliform contamination is allowed in tap water” (Howard, 2003). Also unlike the EPA, contaminants are not required to be listed after testing whereas additives are required (Mosko, 2004). Since 1990, findings of chemical contamination and fecal coliform during testing have caused 11 major recalls of bottled water (Mosko, 2004). According to a study done by the World Wildlife Fund, “bacterial counts in bottled mineral water can jump 1,000-fold after one week in storage” (Mosko, 2004). When bottled water is stored in an un-refrigerated environment for a long period of time, the amount of microorganisms that begin to develop are far greater than the amount contained within tap water (Mosko, 2004). Some water companies, including Aquafina, do not use NSF-certification which tests bottled water for 144 dangerous contaminants (Mosko, 2004). Besides the water being unsafe in many cases, the plastic bottles can also cause a health threat to consumers. When bottled water drinkers notice a taste difference between brands, some of that difference can be attributed to the type of plastic used for the bottle. If the type of plastic used can have an effect on the taste of the water, shouldn’t that make a person wonder as to what else the plastic is doing to the water microscopically? One such chemical used in PET bottles, known as Bisphenol-A, is a known endocrine disruptor and carcinogen (Mosko, 2004). This chemical found through testing mixes with the water contained inside the bottle (Mosko, 2004). It is one thing for a person to be inhaling smoke from cigarettes and knowing the possible cancer they are creating within their body. But it is absolutely ridiculous and uncalled for when a person unknowingly harms their body on a daily basis by drinking a product they are told is healthy and necessary for survival. With all of these findings from studies, just how good is that three-dollar bottle of water looking to a person now?

Economical and Environmental Analysis in the Business Process

First, some numbers on PepsiCo and Aquafina: According to the New York Times, The Pepsi Bottling Group posted better-than-expected profit April 18th as strong sales of Aquafina bottled water and Lipton Ice Tea brands in North America offset rising costs for raw material and fuel (Pepsi, 2006). The company had net income of $34 million, or 14 cents a share, compared with $39 million, or 15 cents a share, in the period a year earlier. Earnings were 3 cents ahead of analysts’ average forecast of 11 cents a share, according to Reuters Estimates. Excluding stock option expense, Pepsi Bottling’s profit was 18 cents a share. The company, which is 43 percent, owned by PepsiCo Inc., said revenue rose to $2.37 billion from $2.15 billion. In the United States, sales of noncarbonated beverages, excluding water, grew more than 20 percent in the quarter while sales of Aquafina water grew about 35 percent. Pepsi Bottling said first-quarter sales by volume, a crucial gauge of performance in the beverage industry, rose 6 percent worldwide as well as in the United States and Canada. The company said worldwide net revenue per case grew 4 percent, fueled by price increases in the United States that helped offset a 9 percent jump in selling, delivery and administrative expenses (The New York Times, April 18th 2006). Here are the worldwide facts of the bottled water industry (Beverage Marketing Co.):

According to the Container Recycling Institute, a California-based group, about 90 percent of PET bottles tossed out by Americans end up not in recycling centers but in landfills, at a rate of 30 million a day. Aquafina has a market share of 11.3 percent, and that means that more than 3 million Aquafina bottles are being thrown out in the landfills every day. This raises the question of the environmental and economic benefits of recycling (Container Recycling Institute, 2006).

Recycling programs that are run well cost less to operate than waste collection, land filling, and incineration. The more people recycle, the cheaper it gets. Two years after recognizing recycling as a $40 million drain on the city, New York City leaders realized that a new redesigned, efficient recycling system could actually save the city $20 million and they have now signed a 20-year recycling contract. Recycling helps families save money, especially in communities with pay-as-you-throw programs. Well-designed programs save money. Communities have many options available to make their programs more cost-effective, including maximizing their recycling rates, implementing pay-as-you-throw programs, and including incentives in waste management contracts that encourage disposal companies to recycle more and dispose of less. Recycling creates a total of 1.1 million U.S. jobs, $236 billion in gross annual sales and $37 billion in annual payrolls. Public sector investment in local recycling programs pays great dividends by creating private sector jobs. For every job collecting recyclables, there are 26 jobs in processing the materials and manufacturing them into new products. Recycling creates four jobs for every one job created in the waste management and disposal industries. Thousands of U.S. companies have saved millions of dollars through their voluntary recycling programs. They would not recycle if it did not make economic sense. If companies lose money on recycling, they are not likely to do it. They would rather take a fine, and throw their garbage everywhere. In today’s business world, it is all about money (The National Recycling Coalition, 2006).

The non-carbonated market:

Losing the cola wars was the best thing that ever happened to Pepsi. It prompted Pepsi’s leaders to look outside the confines of their battle with Coke. “They were the first to recognize that the consumer was moving to noncarbonated products, and they innovated aggressively,” says Gary Hemphill of Beverage Marketing Co. PepsiCo embraced bottled water and sports drinks much earlier than its rival. Pepsi’s Aquafina is the No. 1 water brand, with Coke’s Dasani trailing; in sports drinks, Pepsi’s Gatorade owns 80% of the market while Coke’s Powerade has 15%. Throughout the past five years under Reinemund, the company has deftly moved with every shift in consumer tastes. “He’s thinking about what the products should look like in the future,” says Victor Dzau, a director of PepsiCo. For example, as COO in 2000, Reinemund had a hand in Pepsi’s acquisition of Sobe, buying the company a critical foothold in an emerging category of New Age drinks–the business now pulls in an estimated $200 million a year. Through a partnership with Starbucks, PepsiCo now dominates the bottled-coffee market; this year it will sell over $300 million of Frappuccinos. (CNNMoney.com, 2006)

Bottled water is a billion dollar market:

Beverage Marketing Co. concludes that Pepsi-Cola’s Aquafina, which has reigned as the number-one brand for several years, became the U.S. bottled water business’s first billion-dollar brand in 2004 and the brand sustained strong growth in 2005 when wholesale dollar sales neared $1.3 billion. In 2005, Coca-Cola’s retail PET brand, Dasani, joined Aquafina with sales greater than $1 billion (although Aquafina remained the leading brand). Both companies now offer flavored iterations of their brands. Currently, these account for a small part of their sales. A detailed analysis of the 2005 bottled water market by Beverage Marketing’s editorial director, John Rodwan, will appear in the April/May edition of Bottled Water Reporter, a publication of the International Bottled Water Association (IBWA).

Who gets the money out of the $1.19 bottled water?

Another indication of the middlemen’s power in the American bottled water business is the split — or share — the bottler, distributor and store each take of the final retail price. Of the $1.19 you pay for a 20 fl. oz. bottled of water at the convenience store or supermarket, the bottler gets around 29 cents, the distributor gets around 38 cents, and the store gets 52 cents. That is roughly 25 percent for the manufacturer and 75 percent for the middlemen. Suffice it to say that it is very difficult to make as profit in ANY business where you only get 25 percent of the retail price of your product. (Astonisher.com, 2006)

Recommendations and Conclusions

Although Pepsi has been enjoying substantial profit margin increases by introducing Aquafina to the global bottled water market over the last decade, there is still room for improvement not only economically, but also environmentally and procedurally.

First, we feel that Aquafina should belong to organizations, such as International Bottled Water Association (IBWA), so that better standards are followed when creating the bottled water product. The IBWA and other such organizations would benefit Aquafina greatly, because they would then be seen as a safe brand of bottled water worldwide. Also, by being a part of these organizations, it can show to both Aquafina’s customers and potential customers that they care about the quality of the water they are selling.

Second, Aquafina should conduct more research on all aspects of the bottled water process. Discovering safer materials for the plastic that don’t seep into the water would ultimately improve the safety of the consumer. Additionally, a more natural plastic might be more cost effective over both the short run and the long run. The water itself could be even more pure than what they currently produce. Penta water, in comparison, only has a TDS level of 0.5ppm which is significantly less than Aquafina water. Aquafina could redesign its purification process to eliminate more substances in the water to produce an even purer product. Although extra steps in the purification process would slow down the turnover of the product, a quality product is always more important than the quantity of the product created.

Third, as is a problem with most companies, Aquafina needs to work on reducing muda and the waste streams it creates within its processes. One way to reduce muda is to examine the effectiveness of the packaging. The bottle itself could include a recyclable cap or a mechanism for the consumption of the water that does not require an extra component to the bottle, such as a cap. Another component that could be eliminated from the bottle is the label. Because the facts on the label are so important, the label itself cannot be eliminated altogether. However, there could be a better way of showing this information, such as printing it directly onto the bottle. This would not only save an extra step and materials but it would also save the environment from extra waste.

Fourth, Aquafina needs to take some initiative in helping to promote the recycling of empty bottles. They could do this through a marketing campaign that focuses on the benefits of recycling or develop a system that rewards consumers for recycling their empty Aquafina bottles. These methods have several benefits to the company. Primarily, the cost of producing bottles that are recycled is less than it is to produce a completely new bottle. Secondly, the impact on the environment, by not using up the natural resources, would be significantly less. Lastly, this would make Aquafina look good in the eyes of consumers because they would be exercising their corporate social responsibility.

Finally, in the business perspective, Aquafina has great opportunity to expand their market to Europe. Even though it seems a bit special to ship bottled water overseas to Europe, you want to do it if you can make some money out of it. The price of one bottle of water (.5 liter; Aquafina) in a gas station like Texaco here In Parkland is $1.29, but that is cheaper compared to the prize of one bottled water in Norway (Imsdal), which is $3.12 (20 NoK). A problem is that the other bottled water products in Europe have been around for a long time. San Pellegrinos’s from Italy started bottling water in the early 70’s. Their name is well known, and it would be hard for Aquafina to beat that brand because of its recognition. Another factor worth mentioning is that a lot of the water sold in Europe is carbonated water, a product Aquafina does not offer.