Bye-Bye, Bottled Water?

Malcolm Gladwell's influential book, The Tipping Point: How Little Things Can Make a Big Difference, describes how something can become very popular in short order, even if it's been around for a long time. Gladwell suggests that we should "think of them as epidemics. Ideas and products and messages and behaviors spread just like viruses do." It can be helpful -- and profitable -- to be able to notice such developments as they happen.

If we could have predicted the popularity of Apple's iPod and iPhone, for example, we might have made some good money.

We might also pay attention to quickly spreading sentiments that could send a stock downward. I've been wondering whether we're looking at such a situation today regarding bottled water, a $10.8 billion-a-year business.

Sales of Coca-Cola's (NYSE: KO  ) Dasani, PepsiCo's (NYSE: PEP  ) Aquafina, Nestle's (Nasdaq: NSRGY  ) Pure Life, Group Danone's (OTC BB: GDNNY.PK) Evian, and scores of other companies' offerings have been growing faster than sales of most other beverages. Americans downed some 8.2 billion gallons of the stuff last year, up from 2.2 billion in 1990.

There have long been detractors of the trend, pointing out how bad for the environment our growing reliance on disposable plastic bottles is. These folks have had many good points, but they just haven't caught on -- until now.

All of a sudden, the media is paying attention. For example:

  • A Philadelphia Inquirer article notes that, "Bottled water, once an icon of a healthy lifestyle, has become a pariah, the environmentally incorrect humvee of beverages. In recent months, dissent over the once innocuous bottle of Aquafina or Dasani has grown from a trickle to a tsunami."
  • A USA Today article notes that, "Backlash against bottled water is spreading, prompting bans on the plastic bottles at city-sponsored events in some communities, their removal from restaurant menus and campaigns urging the use of tap water instead. ... Chicago Mayor Richard Daley has endorsed a proposal to add a 10-cent tax to each bottle, which would bring the city about $21 million a year."

Will this backlash become powerful enough to depress sales and reduce the profitability of some big blue-chip companies? Danone's water portfolio accounts for around 25% of its total revenue. So at the very least, if you're an investor in the companies or want to be one, keep an eye out for further developments.

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