Posted 30 October 2009 - 21:53
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New York adds a deposit to bottled water, raises fees
Pushing back against plastic comes at a fragile time for beverage industry
By Christopher Hinton, MarketWatch
NEW YORK (MarketWatch) -- Bottled water drinkers in New York soon will be paying a higher price for their favorite drink.
Starting Sunday, New York state will add a 5-cent deposit for each bottle of water sold, matching a similar policy for bottled soda and beer. Proponents hope it will boost recycling and remove millions of plastic bottles from landfills.
New York is the 11th state to require a bottled-water deposit, and the list is expected to grow. Americans last year threw away an estimated 2.5 million bottles an hour, according to data provided by the Clean Air Council.
That equates to some 1,400 tons a day being tossed into the country's trashcans.
But the new law also comes at a rough time for the $11 billion bottled water industry, which has seen two years of anemic sales after a decade of double-digit growth. More people have returned to drinking tap water -- which some people argue is all bottled water is anyway -- to help cut expenses during the recession, while products such as enhanced water have stolen some market share.
In addition to the new deposit, the law also raises the handling fee that collection centers take from distributors to 3.5 cents from 2 cents a bottle. If bottled-water makers decide to pass the higher fee on to consumers, it could raise the price of a 24-pack by two bucks.
And in a new twist from past bottle-deposit programs, New York will now take 80% of unclaimed deposits from the bottling companies, amounting to $87 million in the current fiscal year ending in March. Though environmentalists had hoped the extra cash would be used for greening projects, the state will instead use it for general purposes.
All told, analysts figure New York bottlers have collected some $2 billion in unclaimed deposits in the 25 years after the original deposit bill was passed.
Not everyone is happy with the new law. In particular, Nestle SA (NSRG.Y 46.57, -0.48, -1.02%)
(NSRGF 47.15, +0.35, +0.75%) says the New
York law puts it a competitive disadvantage as it excludes sugar-water drinks like PepsiCo's (PEP 60.68, -0.71, -1.16%) Gatorade or Coca-Cola Co.'s
(KO 53.36, -0.73, -1.35%) Vitamin Water.
According to people with knowledge of the dispute, legislatures exclude sugar-water drinks at the request of grocery stores, which worried the sticky empties would attract vermin before being hauled away. But that reason is questionable because the stores already collect soda bottles, and some people think it's only a matter of time before the sugar-water products are included.
Nestle Waters is one of the largest water distributors in North America, with well-known brands such as Deer Park, Ice Mountain and Poland Spring.
No one from Nestle was available to comment Friday.
The International Bottled Water Association doesn't think there will be a long-term impact on sales.
"So many people are used to the deposit laws when it comes to beer bottles and soda pop bottles, we think most customers will accept it," said Tom Lauria of the IBA.
Along with Nestle, IBA had protested the new law, but for different reasons. The original submission had included adding a second bar code to deposit bottles so New York could exclude those purchased outside the state, a scheme distributors found burdensome.
More troublesome are taxes, such as the one passed two years ago in Chicago, meant to discourage the purchase of bottled water. The Midwestern city collects five cents for each bottle, putting the proceeds toward its municipal water infrastructure.
The tax is currently being challenged by food companies, which object to bottle water being classified as a "packaged food." Typically non-packaged food is untaxed.
So adding a deposit, governments are able to avoid the stigma of a tax and still reap some of the benefits. It also creates cottage industries around recycling, said Laura Haight of the New York Public Interest Research Group, which helped lead the pu7sh to pass the law.
"It reduces litter and creates a market for recycle material, a cottage industry of people who collect the bottles for the collection centers, and many charities also saw it as an opportunity to raise money," Haight said. "But we tend to focus on the litter benefit, as there are often twice as many water bottles on the beaches, parks and roads than [in] deposit containers.
According to NYPIRG, about 80% of deposit bottles are recycled, versus less than 20% of non-deposit bottles.
And bottled water could almost be described as a luxury item. In data released two years ago by New York City, which has been promoting its municipal water over bottled water, a person who drinks two liters of tap water a day will spend just 50 cents a year. People who drink two liters of bottled water a day will spend $1,460.
Christopher Hinton is a reporter for MarketWatch based in New York.
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gaudio, on 15 Jun 2009, 19:31, said:
