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Executive Summary

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									                                        Aquafina Bottled Water 1




       Aquafina Bottled Water:

From Tap Water to the Vending Machine

          Thomas Pedersen

           Emma Coulson

             Stacy Stone

          Adrienne Semann

             BUSA 309
                                                         Aquafina Bottled Water 2
                                    Table of Contents

Executive Summary                                                  3

Introduction                                                       4



The Water

      Water Purification Process Flow Chart                        5

      Purifying the Water                                          6



The Bottle

      Bottling Process Flow Chart                                  9

      The Bottle Making and Filling Process                        10



The “Need” for Bottled Water and the Value Stream                  16



Economical and Environmental Analysis in the Business Process      22



Recommendations and Conclusions                                    26

References                                                         30
                                                                          Aquafina Bottled Water 3
                                      Executive Summary

       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.
                                                                          Aquafina Bottled Water 4
                                           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.
                                                          Aquafina Bottled Water 5
                The HydRO-7 Purification System

                                   Municipal
                                  Water source




Prefiltration




       Polishing Filter




                 High Intensity
                     Light



                            Reverse
                          Osmosis (R.O.)




                                   Charcoal
                                   Filtration



                                           Polishing Filter




                                                      Ozonization
                                                                           Aquafina Bottled Water 6

                                         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).


   1. Prefiltration

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

   2. Polishing filter

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

   3. High-intensity light

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

   4. 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.

   5. Charcoal Filtration

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

   6. Polishing Filter

       This is where the system polishes the hydrogen and oxygen elements in the water to
       make the water clear.
                                                                                     Aquafina Bottled Water 7

   7. 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
                                                                          Aquafina Bottled Water 8
       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).
                                                               Aquafina Bottled Water 9
           Pepsi/Aquafina Bottling
                            PET Bottles from
                            Amcor Packaging
                             North America


                                                                Air Sanitation


                                                           Pre-Labeling

                                                    Layer Bottles

                                              Bottle Scrambler
                                              Sorts Bottles Into
                                                 Single File


                                          Monobloc – Rinser,
                                           Filler, Capper


                                  Bottles Are Sprayed
                                  with Purified Water


                                   Fill


                            Cap


                      Date


                 Separate


         Multi-wrapper


    Shrink Wrapper
    and Heat Tunnel

  Codification



Stored
                                                                           Aquafina Bottled Water 10
                                              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
                                                                      Aquafina Bottled Water 11
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
                                                                       Aquafina Bottled Water 12
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
                                                                   Aquafina Bottled Water 13
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
                                                                     Aquafina Bottled Water 14
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
                                                                      Aquafina Bottled Water 15
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).
                                                                        Aquafina Bottled Water 16
                    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
                                                                         Aquafina Bottled Water 17
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,
                                                                      Aquafina Bottled Water 18
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
                                                                       Aquafina Bottled Water 19
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.
                                                                       Aquafina Bottled Water 20
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
                                                                    Aquafina Bottled Water 21
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?
                                                                        Aquafina Bottled Water 22
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.):
                                                                      Aquafina Bottled Water 23
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).
                                                                         Aquafina Bottled Water 24
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).
                                                                             Aquafina Bottled Water 25
U.S. BOTTLED WATER MARKET

Volume and Producer Revenues

2001 – 2005


Year Millions of Gallons Annual % Change Millions of Dollars Annual % Change

2001 5,185.3                  --                    $6,880.6               --

2002 5,795.7                  11.8%                 $7,901.4               14.8%

2003 6,269.8                  8.2%                  $8,526.4               7.9%

2004 6,806.7                  8.6%                  $9,169.5               7.5%

2005 7,537.1                  10.7%                 $10,012.5              9.2%




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)
                                                                        Aquafina Bottled Water 26
                               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
                                                                        Aquafina Bottled Water 27
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.
                                                                     Aquafina Bottled Water 28
                                             References

Arnold, E. (2006, February 2). Bottled Water: Pouring Resources Down the Drain.
       Retrieved April 24, 2006, from http://www.earth-policy.org/Updates/2006/Update51.htm

Bottled Water, a Natural Resource Taxing the World's Ecosystem. (2005, February 11).
       Retrieved April 24, 2006, from
       http://www.breitbart.com/news/2006/02/10/060210151009.9nrba2js.html

Brooker, K. (2006, Feb. 1). How Pepsi outgunned Coke: Losing the cola wars was
      the best thing that ever happened to Pepsi. CNN Money. Retrieved April 30 from
      http://money.cnn.com/2006/02/01/news/companies/pepsi_fortune/index.htm

Brown, B. (2006). On Bad Bottled Water. Astonisher.com. Retrieved April 29 from
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Economic Benefits of Recycling. (2005). The National Recycling Coalition. Retrieved
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Falcone, L.B. (2006, April 20). H2O-NO!: Our Insatiable Thirst for Bottled Water Puts
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Howard, B. (2003, August 28). What's in Your Bottled Water?. Retrieved April 24, 2006,
      from http://www.hartfordadvocate.com/gbase/News/content?oid=oid:30865

Investing in people and technology. (2004, May). Beverage Industry, 95, 44.

Lempert, P. (2004, July 21). Is Your Bottled Water Coming from a Faucet?. Retrieved
      April 13, 2006, from http://www.msnbc.msn.com/id/5467759/

Mans, J. (2003, April). Multipurpose Pepsi Bottling. Packaging Digest, 30.

Mosko, S. (2004, November). Health: What's in that Bottled Water Anyway?. Retrieved
      April 24, 2006, from http://www.earthresource.org/campaigns/capp/bottled-water.html

Pepsi Bottling Beats Analysts’ Estimates. (2006, April 19). The New York Times, pg. C.2.

Recycling Plastic Bottles. (2006). Retrieved April 13, 2006, from
       http://www.designboom.com/eng/education/pet/recycling.html

Rodwan, J. (2004, April/May). Bottled Water 2004: U.S. and International Statistics and
     Developments. Bottled Water Reporter.

Terry, L.E. (2005). Benefits of Bottled Water. Retrieved April 13, 2006, from
       http://www.aboutbeverages.org/Bottled-Water.htm?keyword=aquafina-bottled-
       water&engine=google&contextual=no

Water Use Statistics. (2006). Retrieved April 12, 2006, from
      http://www.awwa.org/advocacy/learn/conserve/RESOURCES/CONSERVATIONINFO.
      Aquafina Bottled Water 29
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