The Water Bottle Market in the
United States
Greta Fails and Ludovic Rajibe
Experimental Economics 488
Fall 06
Overview of the Bottled Water Industry
The cost of bottled water compared to other
products:

Cost of a gallon of gasoline : $3.19
Cost of a gallon of milk : $2.99
Cost of a gallon of Fiji water : $ 9.46

Cost of a gallon of tap water: $0.01

3.7854118 liters/gallon, Fiji is $2.50/liter


Revenues from Bottled Water
•
The market has been expanding exponentially
• 154 billions liters sold worldwide in 2004
• Revenue of $26 billion in the US
• Sales increase 7% annually
sales/millions of gallons
Un
i
te
d
30
25
sales/millions of
gallons
20
15
gallons pre capita
Sp
ai
n
Fr
an
ce
ly
Ita
na
10
Ch
i
St
at
es
8,000.00
7,000.00
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
gallons per capita
5
0
2001
2002 2003 2004
2005
Types of Bottled Water
There are three main types of bottled water:
•
Natural mineral water - which is found underground and which is characterized by a
constant level of minerals
•
Spring water - is obtained from underground water that flows naturally to the surface
•
Purified water - can come from any source, including spring water, well water,
seawater, or municipal water. This source water is then processed and purified.
Purified water contains no dissolved solids.
Water quality in the US is regulated by the Food and Drug Administration.
Major Categories of Bottled Water Distributors
•
•
Firms that sell a particular brand like Evian and Fiji
Soft drink companies like Pepsi and Coca Cola that have entered
the market – Coca Cola sells bottled water under the Dasani brand
name and Pepsi under the AquaFina brand
Market for Bottled Water
•
•
54 % of Americans drink bottled water
More than half of the bottled water consumed is purified water
(basically filtered tap water)
gender classification of buyers
age classification
9%
19%
18-24 Years Old
14%
42%
58%
25-34
Male
35-44
Female
45-54
19%
19%
55-64
65 and older
20%
What drives the sales of bottled water in the
US market?
•
•
•
•
Taste
Perceived quality differential between tap and bottled water
Health reasons – less calories than soda
Convenience and availability – sold in every store
Hypothesis
•
Taste is the main driving factor behind the sales of
bottled water.
• People buy bottled water that tastes the best.
• Within their budget limit, people are going to buy the
bottle of water that tastes the best.
Predictions
•
The majority of customers will claim that the most
expensive bottled water tastes the best.
• Tap water, which is free, will be perceived as the
worst.
Experiment
•
The experiment was divided into two parts:
•
A branded taste test and a blind taste test
•
In the branded test, students were given 5 types of
water and asked to taste and compare them. They
knew the brand of the water they were tasting as they
completed questionnaires.
•
In the blind test, students repeated the same
experiment, but this time were not told the identity of
the water they tasted. Their answers to the
questionnaire in this round were based on taste alone.
Results – Question 1: Tasting a Difference
BRANDED
ID#
NO
BLIND
YES
NO
ID#
YES
14
2
8
3
7
15
1
9
3
7
17
4
6
4
6
19
0
10
3
7
21
5
5
4
6
23
2
8
1
9
24
4
6
4
6
26
6
4
4
6
28
0
10
1
9
31
1
9
1
9
35
3
7
1
9
37
3
7
3
7
39
0
10
3
7
41
4
6
0
10
Tot
35
105
35
105
PS/E
PS/D
PS/T
PS/F
E/D
E/T
E/F
D/T
D/F
T/F
14
Y/Y
Y/N
N/N
Y/Y
Y/Y
Y/Y
N/Y
Y/N
Y/Y
Y/Y
30%
15
Y/Y
Y/N
Y/Y
Y/Y
Y/Y
Y/Y
Y/Y
Y/N
N/N
Y/Y
20%
17
Y/Y
Y/N
N/Y
Y/N
N/Y
Y/N
N/Y
Y/Y
N/N
Y/Y
60%
19
Y/Y
Y/N
Y/Y
Y/N
Y/Y
Y/Y
Y/Y
Y/Y
Y/N
Y/Y
30%
21
N/Y
N/N
N/Y
N/N
Y/N
Y/Y
N/Y
Y/Y
Y/N
Y/Y
50%
23
Y/Y
Y/Y
Y/Y
Y/Y
N/Y
Y/N
Y/Y
Y/Y
Y/Y
Y/N
30%
24
N/Y
N/N
Y/Y
Y/N
N/Y
Y/N
Y/Y
Y/Y
Y/N
N/Y
60%
26
N/Y
N/Y
Y/N
N/N
N/Y
Y/N
N/Y
Y/Y
N/N
Y/Y
60%
28
Y/Y
Y/Y
Y/Y
Y/Y
Y/Y
Y/Y
Y/N
Y/Y
Y/Y
Y/Y
10%
31
Y/Y
Y/Y
Y/Y
Y/Y
Y/N
Y/Y
Y/Y
Y/Y
N/Y
Y/Y
20%
35
N/Y
Y/Y
Y/Y
Y/Y
N/Y
Y/N
Y/Y
Y/Y
N/Y
Y/Y
40%
37
N/Y
Y/N
Y/N
Y/N
N/Y
Y/Y
N/Y
Y/Y
Y/Y
Y/Y
60%
39
Y/Y
Y/N
Y/N
Y/Y
Y/Y
Y/Y
Y/Y
Y/Y
Y/N
Y/Y
30%
41
N/Y
Y/Y
Y/Y
N/Y
Y/Y
Y/Y
N/Y
N/Y
Y/Y
Y/Y
40%
Analysis: Question 1 – Tasting a Difference
On average…
 Participants were able to taste a difference 2/3 of the
time
 This statistic was consistent across the tests
Yet, on the individual level…
 39% of responses switched between rounds
 No single person’s answers remained consistent
 Participants switched anywhere from 10%-60% of their
responses
 Significance of the switches (YES to NO, and NO to
YES)
Results: Question 2 – Ranking Preferences
ID#
14
15
17
19
21
23
24
26
28
31
35
37
39
41
POLAND
5
5
5
1
2
1
1
3
4
3
2
4
4
2
EVIAN
4
3
3
4
4
2
1
1
2
1
3
2
2
3
DASANI
1
2
2
2
5
2
1
3
3
4
4
3
3
5
TAP
2
4
4
5
3
5
4
5
5
5
5
5
5
4
FIJI
3
1
1
3
1
4
5
2
1
2
1
1
1
1
POLAND (E)
1
3
3
3
5
2
1
3
3
3
5
1
3
1
EVIAN (D)
2
1
4
4
1
4
5
4
5
1
3
5
5
5
DASANI (B)
3
2
1
1
3
2
1
2
1
4
4
3
1
3
TAP (C )
5
4
5
5
4
5
4
5
2
5
1
4
1
4
FIJI (A)
4
5
2
2
2
1
1
1
4
2
2
2
4
2
Analysis: Question 2 – Ranking Preferences
Branded Test Rankings
1.
2.
3.
4.
5.
Fiji
Evian
Dasani
Poland Spring
Tap
Blind Test Rankings
(1.9)
(2.5)
(2.9)
(3.0)
(4.4)
1.
2.
3.
4.
5.
Dasani
Fiji
Poland Spring
Evian
Tap
(2.2)
(2.4)
(2.6)
(3.5)
(3.9)
 Preferences differ between tests, providing evidence that
taste is not the only factor at work
 Range of average ranks
 Only one person maintained the same rankings between
tests
 36% of participants changed all their rankings
 93% changed at least 2 rankings
 62% of all rank changes were greater than a 1 rank difference
(switch from a 5 to a 3 or better)
Results: Question 3 – Identification
Number of individuals who
correctly identified the
brand
CORRECT
RESPONSE
14
15
17
19
21
23
24
26
28
31
35
37
39
41
POLAND
E
C
A
C
A
D
A
E
E
C
E
B
C
C
A
3
EVIAN
D
D
E
E
D
B
B
A
A
A
D
C
A
A
B
3
DASANI
B
A
B
A
B
E
E
B
D
E
B
A
B
B
D
6
TAP
C
B
C
D
C
C
C
C
C
D
C
E
D
E
C
9
FIJI
A
E
D
B
E
A
D
D
B
B
A
D
E
-
E
2
1
1
0
3
2
1
3
2
0
5
0
1
1
1
Number of correct responses
Analysis: Question 3 – Identification

Only one person able to correctly identify all the cups
 Tap and Dasani were easiest to identify (~50% correct
responses)
 Fiji, Evian, and Poland Spring only identified 15%-20%
of the time
 Able to identify the extremes but unable to delineate
the middle
Conclusions
Inconsistencies across students’ responses provide
evidence that taste preferences are not solidified and
that students’ in fact claim to prefer brands when they
actually rank others higher
 Taste differences are negligible and unidentifiable
 The influence of the brand name, and all that it
connotes, is the driving factor when purchasing
