Commodity Chain Analysis Water Commodity Term Paper

Excerpt from Term Paper :

Though municipal untreated tap water can be used for premix (as opposed to post mix when soda syrup was mixed on site) that comes from the beloved soda fountain in most restaurants the marketing of the Aquafina brand is still likely to be present and bottled Aquafina is often sold there. If on the other hand an individual asks for a cup for water and then pours water from the "water" bypass tap on the soda fountain they are getting municipal tap water, usually unfiltered.

Endorsements are often developed in a similar way to those associated with other types of soft drinks and sports endorsements are common in the bottled water industry as even the Aquafina spin off products that contain the Aquafina (seven step) water and additional flavorings and sweeteners are considered by many to be healthier than soda, but to some degree this remains to be seen. As an example:

Aquafina is the "official" water of the Major League Baseball. In addition, Aquafina is the "Official Bottled Water" of the PGA of America (including the PGA Championship, PGA Grand Slam, U.S. Ryder Cup and Seniors' Championship), the Atlantic Coast Conference (ACC) and the Arizona Diamondbacks baseball team. (Aquafina Website: Help/FAQ)

Individual celebrity endorsers often come from these sports and seek sales to demographics, associated with their fan base

Municipality of the local bottling site provides the raw materials for the product, i.e. The water. While the plastic and labeling aspects of the product are usually subcontracted to either an outside provider/manufacturer or an inside company production line that has a more central location (likely only 1 or 2 in the U.S.). Pepsico has responded to environmental concerns about the lack of biodegradation of their plastic bottles by coming out with a new bottle that is said to use 50% less plastic than the 2002 bottle (Eco-Fina, and independent trademarked label), but has failed to respond to concerns about product distribution and localization of services and logistics.

Conclusions and Connections to the Global, Cultural Political and Economic Landscape

Following any commodity or product from beginning to end offers a greater level of insight with regard to the nature of that product as well as its ultimate total impact on the broader environment. Initially there was little concern regarding the environmental impact of producing and distributing bottled water and many believed it was fundamentally better for health to drink it, as opposed to other alternatives. This may be the case but packaging, manufacture, filtering and treatment all have some impact on the environment and there is also some evidence that water which has not been filtered of essential nutrients is likely much better for health than that which has been. There has also recently been a significant public outcry regarding the serious environmental degradation that is caused by the non-biodegradability of the packaging used to provide the product. Nestle' Water of North America recently commissioned a study that demonstratively shows that bottled water has a far better environmental impact than other beverage choices, but due in large part to packaging and logistics of distribution that impact is still greater than tap water. A brief glance at one of the most strenuous comparisons made to date on this issue shows that tap water, as a choice of beverage has significantly less impact, with regard to water use, use of non-renewable energy and climate change or carbon footprint than bottled water or even filtered tap water (owing to the production and distribution of filter systems). Bottled water on the other hand scored significantly lower than coffee or tea, both highly utilized beverages in the U.S.

Figure a-1: Comparison of climate change impact, non-renewable energy use, and water use for a variety of beverage options (* indicates results from the present study; ** indicates results from public pre-existing sources, with the exception of iced tea, which is not publicly available). (Quantis 2010, p. 4)

This information is a fundamentally important demonstration of the need for consumer awareness, especially with regard to seriously high impact products, but it is also important to develop the realization as consumers that there are many issues yet to be addressed and yet to be resolved, especially regarding the issue of local vs. national distribution practices. The study also notes some important issues and distinctions with regard to environmental impact of beverages:

For example, consumption of water of all types (both bottled and tap) provides 41% of beverage consumption, while producing only 12% of the associated impact on climate change. In comparison, the combination of milk, coffee, beer, wine and juice provide just 28% of the volume of beverages consumed but are associated with 58% of the climate change impact. These observations show that it is essential to consider the full scope of beverage consumption when considering impacts of any given product, as increases in consumption of one product are likely to result in the decrease of another product and vice-versa. In considering switching beverages, there are both health-related and environmental considerations that should be considered, and the present project examines only the environmental aspects. (Quantis 2010, p.4)

Another issue that is of significant importance with regard to sustainability is the fact that millions of people throughout the developing nations go without readily available clean drinking water and nothing in the current study or the literature I have found associated with it address the disproportion of water consumption or availability in developing nations. This issue is likely to be a timely issue on a larger scale with regard to corporate social responsibility and globalization in the very near future, as trucking even more packaged water to these regions is unsustainable and municipal water projects and non- governmental organizations (NGOs) have been attempting to help resolve this issue for decades, but the culpability of individuals and industries must someday be addressed in addition to the environmental degradation caused by bottling and packaging so many ready to consume products.

The Quantis peer reviewed study on the impact of water, commissioned by Nestle also addresses the fact that only a portion (30%) of those who normally drink bottled water will choose tap water if no bottled water is available. Most will choose another bottled beverage. Given the extreme commitment that most municipalities, in the developed world have to provide clean and abundant drinking water through the taps of our homes and businesses it seems extravagant to continue to believe that the best thing for us is bottled water, which has simply been filtered from another municipal water source. (2010, p. 4)

Also it is important to note that all the major bottled water brands that are popular in the U.S. are bottled and distributed by multi-billion dollar food and beverage companies, who already have the lion's share of business in this area. Local water brands are few and far between and do not market extensively or frequently share shelf space with the big guns. Here are a number of reasons for this many of which are well outlined by Brown in his relatively comprehensive article about his interest in a local water bottling brand in the Washington state area. The reasons he gives have been briefly touched upon in the above work but are fundamentally explained here:

1) Access to consumers -- During due diligence I discovered that & #8230;a local bottled water could only hope to get on the shelves in maybe 20% of the local outlets that sell bottled water. The reason for this is two-fold. In many convenience stores -- where Coke and Pepsi are very strong -- the Big Two lock out all water competition with exclusive contracts. Even the local Nooksack Valley High School here has an exclusive contract with Coke for all its beverages…Meanwhile, in supermarkets -- the other big retail arena for bottled water -- "slotting fees" imposed by the stores frequently prevent superior local products from ever getting on the shelves. According to distributors, it costs tens of thousands of dollars in slotting fees to get an unknown, untried product into a regional supermarket chain

2) Retail split -- 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. Here's how it works. Of that $1.19 you paid for a 20 fl. oz. bottled of water at the C-store or supermarket, the bottler gets around 29 cents, the distributor gets around 38 cents, and the store gets 52 cents. That's roughly 25% for the manufacturer, and 75% for the middlemen. Suffice it to say that it is very difficult to make as profit in ANY business where you only get 25% of the retail price…

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