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Analysing the environmental and industrial factors:
Bottled Water Industry and Aquafina
The bottled water industry has shown a rapid growth in the United Kingdom during the past 15 years. At present the demand for bottled water is so huge that it has become a multimillion-peso business in the world. In the UK, the great increase in consumption of bottled water has moved the product beyond the small market and into the mainstream as bottled water has now almost become necessary.
According to Gleick and fellows (2006), for more than half population of the United States bottled water is major source of drinking water. Another reason of the boom in the consumption of bottled water is its taste because a large number of people prefer its taste to that of tap water. This paper will analyse environmental and industrial factors emerging for bottled water industry and Pepsi’s Aquafina in the current economic situation.
The paper will have a PESTEL study of the industry and a concluding SWOT analysis. The paper will examine the significance of the negative effects that bottled water brings into the world and evaluate facts, statistics, and general justification to advise Aquafina some healthy practices which is suffering from negative imagery for some years because of its practices to the manufacture of battled water onto the environment.
As mentioned, the obvious environmental problems lie within three main ideas that are outlined in this report. Firstly, it is explained that the production of bottled water results in a pathetic use of energy and water. Next, it is revealed that there is a large cost associated with shipping and procurement costs which eventually lead to the extreme emissions of fossil fuels and gas.
And secondly, the mass generation of solid and plastic waste that polluted environment of the planet with plastic bottles overpopulating landfills. In the end, these findings will support Aquafina’s motivation to whether or not accept or reject proposal, which this paper will present, into making their decision.
Introduction
Meeting changing requirements of customers by offering the right products or services has been an ongoing marketing test for retailing in competitive global markets.
Consumers may select particular products or brands not only because these products offer the functional or performance benefits expected, but also because products can be used to express consumer’s personality, social status or affiliation or to fulfil their internal psychological needs, such as the need for change or newness. The bottled water industry identifies this variation in the requirements of consumers and has a wide variety of products which cater for all types of consumers.
Rivalry within the industry
Today, bottled water has become a necessary part of contemporary society where we notice an abundant number of bottled water throughout our every day routines; whether they are on the ground or people drinking from it. With the increase in demand a number of new players are entering the industry.
This topic is essential for discussion because it raises levels of ethical consciousness between consumers and the bottled water industry. For example, in 2008 it was expected that the bottled water industry would produce revenues of around 146.5 billion dollars and would continue to grow by 4 percent each year following (IBISWorld, 2008). As the bottled water is such a cheap source, it is being sold at a cheap rate, in bulk, and with low-cost packaging materials.
But, soft-drink manufacturers that market bottled water do not regard that cheap rate. For something that is very narrowly similar, the price margins are different. In most developed states, bottled water can range from $500-$1000 per cubic meter as compared to $0.50 from municipal tap sources (Block, 2008). At this rate water cost more than gasoline, absurd? No, in reality, consumers completely knowing the circumstances of this situation they are still willing to buy the product.
PESTEL
Political and Legal Environment: In entering into emerging and developing markets, legal and political conditions set the parameters. In strategic business agreements with local bottlers, for example, organizations must stick to particular governmental rules and regulations with which such agreements will be defined.
Different copyright and anti-trust laws in every state also define how these organizations are to operate locally. In addition, political conditions such as civil unrest, governmental changes and restrictions bring adverse results into the organization.
Economic Environment: Operating in a world scale, organizations are exposed to unstable and varied foreign exchange rates and state of economies. With economies in depression, market spending level is at a lower rate and therefore, sales for organizations are at a trough. But, with some economies, such as the populous market of China and India opening up to the world market, possibilities of entering these markets pose positive views.
Social Environment: Social changes in the environment present players in the bottled water industry with unpleasant situations that should be answered instantly for it to sustain its position in the market. The present favourite shift of the market towards an improved lifestyle proves to be one of these predicaments.
This happening may partly be attributable to the fact that the baby boomers have reached the age where long life is of significance. With this, organizations should be able to offer products that are natural, low in calorie, fat, sugar, and caffeine, or even with none of these harmful components present in its products. “What plays a vital role in shaping the myth of bottled water in the social collective unconscious is the concept of ‘purity’.” (Holst-Warhaft & Steenhuis 2010, 76)
Environmental consciousness also presents issues that must be combated by players in the bottled water industry. With waste management at hand, organizations in the industry are recommended to lead recycling movements to lessen solid wastes brought by the bottles and aluminium cans which have been described to have longer period of degradation.
Technological Environment: Innovative developments in machineries came from technological advancements have provided organizations with developments in their operations. Those organizations that adopt and utilize technological advancements successfully bring progress. The same case is with the bottled water industry. Bottled water companies are able to produce more outputs than they have before, increasing their production and keeping up with the growing demand of the market.
Environmentally unfriendly problems
In the bottled water industry the plastics being used to produce and package is the cause of a lot of harmful wastes. “In March 2009 the Independent reported that 2008 restaurant sales of bottled water in the United Kingdom dropped 9 percent compared with 2007 and that an increasing number of people request tap water when they eat out.” (Gleick 2010, 146) However, the sales of bottled water had registered an increase in previous years.
It had soared to highs of $58 billion in 2006 (Milmo, 2006). This was because of very excellent marketing by saying that bottled water is safer and cleaner than regular tap water. However, with these tremendous profit margins for bottled water manufacturers, including Aquafina, have yet to understand that their product is very unethical to the environment. These implications have harshly targeted Aquafina’s brand image and could impact badly on its sales in future.
The three environmental implications of bottled water industry that are being analyzed are: 1) Excess use of energy and water, 2) Large shipping and procurement cost, and, 3) Solid and plastic waste generation.
At the end of the suggestion Aquafina will have an assessment to make in regards to, a) Why should it use environmentally suitable materials to encourage a clean and safe environment for its consumers and decrease on energy levels being wasted? b) Why should the company add more water purification plants and warehouses worldwide to lessen emissions on gas because of transportation cost? c) Why should the company encourage recycling plans to the customers to avert excess and unnecessary waste?
Threat of substitute products
As the overall worldwide consumption of bottled water is on a steady rise, it creates a number of moral questions in regards to the use of energy that is being generated to make the bottles. Firstly, it takes a major amount of resources in order to make a bottle of water. The plastic used to make most of these bottles is identified as polyethylene terephthalate (PET).
If we examine the amount of water bought in United States in the past five years, we will find that it has shown a great increase. And for meeting the demands of Americans’ desire for bottled water, manufacturers are using millions of barrels of oil on an annual basis, which can clearly fuel more than 1 million cars for a whole year. This is the main contributing factor as to why certain customers have begun to devalue the image of bottled water manufactures, including Aquafina.
Bargaining power of customers
When customers begin to feel more environmentally conscious, it will establish a chain reaction to local governments within states and provinces to either ban or strictly limit the sales of bottled water. For example, the Waterloo region had banned the sales of plastic bottles in its schools starting in 2009, and in August 2008, London, Ont., voted to ban all bottled water in city offices, recreational centres and parks. Another prominent resource being used in the creation of bottled water is water itself.
Threat of new entrants
Companies tend to over-extract water from large bodies of water. According to some experts, this can grant negative impurities on nature as it changes the flow of rivers, streams, ecosystems, and the natural habitat of under watered species. “Removing water for bottling is considered to be consumptive use of water. This means water is withdrawn from a source and not returned to its local ecosystem.” (Aitchison suite101.com)
One more contributing factor that damages the image of bottled water manufacturers is idea of wrong advertising. In the case of Aquafina when consumers look at its bottles they see snowy mountings, which gives an impression that the water comes from a fresh spring up north. Although, there are some reports that Aquafina drinking water is taken from public municipal sources then is processed in a seven steps of filtration for customers. (Lempert today.msnbc)
As a result, it takes approximately three litters of water to produce one litter of bottled water. Plants and trucks involvement on the extraction process have their own stories. The movement of a number of trucks and other vehicles, which are coming in and out of the extraction area, creates some noise and pollution to the environment.
Therefore, the energy output being used to make these bottles is gradually but certainly depleting earth’s natural resources and becoming a cause of unnecessary pollution to preserved natural areas. The answer of the question that why should Aquafina use environmentally friendly materials to support a clean and safe environment for its customers is that the company should take all these measures to develop a positive corporate image for itself.
The excess shipping and procurement costs
With the improvement in awareness about healthcare people are seemed more concerned about clean drinking water. “Bottled water is widely regarded as a necessity – it’s important to ensure that you are adequately hydrated at all times.” (BBC Home) It is eminent that the global consumption of bottled water had doubled between the period of 1997 and 2005.
It is seen that people who purchase bottled water think that the water is cleaner than normal tap water. With this boost on demand, it develops added pressure for Aquafina and others bottled water manufacturers to fill those demands. For meeting all these requirements companies will need to export water on a global basis.
Bargaining power of suppliers
All issues, including exporting, transporting, and storage, should be considered when transferring bottled water. Exporting and transportation techniques being usually used are: trucks, boats, planes, and trains. On the latter, storage costs include expenses of warehousing and refrigerator. While a number of companies participate on these processes, they differ then those in the bottled water industry.
Water is extremely cheap and water is extremely heavy! It is obvious that water will cost a lot of money to transport and that will raise arguments on cost and emission of gasses onto the environment. Whether bottled water manufacturers, including Aquafina, are transporting their products by truck, air or rail they are still burning huge fossil fuels. It is said that around five trillion gallons of bottled water is shipped worldwide.
For instance, people in San Francisco can now buy water from Fiji which is about 5,500 miles away to satisfy their demand for Fiji water. In the viewpoint of Canadians, perhaps they have the clearest and purest tap water that anybody can possibly drink. Some environmental experts are of the view that buying bottled water is not a right decision and it would be nuts to be shipping water all way across the world and because people in Canada are so bloody wealthy that they are eager to buy water that comes from Europe.
Hence, with the movement of bottled water being so common in today’s society it creates a huge emission of pollution because of the trucks and planes involved with the transportation of the product. The answer of question that why should Aquafina add more water purification plants and warehouses on a worldwide scale to reduce emissions on gas because of transportation cost is that the company should help contribute to the environment. The helps contribute to the reduction of usage of fossil fuels.
Solid and plastic waste generation
Environmental experts believe that bottle water is a total unnecessary product. “The arguments against bottled water interlock: at least one-third of the bottles end up in the garbage, and the rest have to be recycled; it’s hugely wasteful as one more unnecessary product.” (Hern 2010, 201) Aquafina and other water bottle manufacturers are still ignorant or not taking more action to the largest cause that devalues them.
Hern (2010) says that a number of bottled water if full of contaminants. “The omnipresent Coke and Pepsi brands (Dasani and Aquafina, respectively) just use municipal tap water anyway.” (Hern 2010, 201) This negative issue is the plastic waste generation that bottle water gives to the society. It is clear that people in United States spend billion of dollars per year on bottled water and in that process they contribute to the generation million of tons of plastic bottles.
Even with a 30 percent decrease in the amount of PET that goes into each bottle, it is apparent only 15 percent of bottles are recycled while the remains end up in landfills where they take over 1000 years to degrade. This is not the bad part, even if people were to recycle their bottled water, it is still branded as a waste of resources because of their energy emission needed to produce the product.
The global consumption of bottled waster is on the rise. It is increasing about 12 percent in the United States and as much as 50 percent in markets such as India. This product is accounted for the single largest growth area among all beverages that include juice, soft drinks and alcohol. It is acknowledged that bottled water is consumed far away from homes, where recycling cannot take place.
The shocking effects of these plastic bottles on the environment are very clear. Can anybody tell what will become of these landfills in the coming years? There is no doubt that the picture does not precisely paint a beautiful meadow, at least not with these statistics. Thus, to answer question that why should Aquafina promote recycling programs to the customers to prevent excess and unnecessary waste is that it should do it to promote a very healthy and well-off recycling cycle amongst bottled water drinkers.
SWOT Analysis of Pepsi’s Aquafina
The Table presents the internal and external factors which are affecting the market opportunities for Aquafina.
Conclusion
As a result of these findings it is considered that there is an excess use of energy, a heavy shipping cost, and lastly a lack of morals in regards to waste management.
The outcomes pointed out that the following arguments are factual to the sense that bottled water is polluting the global environment and making the planet a soiled atmosphere to live in. More results that can be illustrated are: there is a speedy rise on the consumption of water, in spite of all the negative objectives about bottled water, people are still ready to contribute to the source.
Pepsi’s Aquafina requires to speedily act in order to substitute change into the world to eventually making it a more suitable environment to live. The implications of the findings is that the results are collected from global resources, these results might be difficult to interrupt for the reason that the majority of Aquafina’s market share lies strictly between North American boarders.
The further steps that Aquafina must take are collecting more information about United States which is considered its strongest market and start to implement change in there. It would be cheaper to put into practice the change in one geographic region rather than many at once, afterwards the company needs to understand the results to see what most important changes need to be made and start to work worldwide.
Reference
Aitchison, Christin (2008) Bottled Water and Water Shortages: Impact of Extracting Water on Aquifers and Ecosystems. Web.
BBC Home, Bottled Water. Web.
Block, Ben (2008). US Bottled Water Demand Slowing. World Watch, 21(6), 5. Web.
Gleick, Peter H., (2010) Bottled and Sold: The Story Behind Our Obsession with Bottled Water, Publisher: Island Press, Washington.
Gleick, Peter H.; Heather Cooley; David Katz (2006) The world’s water, 2006-2007: the biennial report on freshwater resources, Publisher: Island Press, Washington.
Hern, Matt (2010) Common Ground in a Liquid City: Essays in Defense of an Urban Future, Publisher: AK Press, Oakland.
Holst-Warhaft, Gail; Tammo S. Steenhuis (2010) Losing paradise: the water crisis in the Mediterranean , Publisher: Ashgate Publishing, Ltd., Surrey, UK.
IBIS World (2008). H20 = Big Business in a Bottle. Web.
Lempert, Phil (2011) Is your bottled water coming from a faucet? Web.
Milmo, Cahal (2006). Environmental insanity’ to drink bottled water when it tastes as good from the tap. The Independent. Web.
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