October 2, 2007, BusinessWeek - Is there room on the market for yet another high-priced water in a designer bottle? How about one whose source is in a pristine but ecologically threatened environment? Florida businessman Jeff Moats believes so. Early next year, if a factory and production line are completed on time, his $12 million privately financed startup plans to start selling a superpremium brand of water called Equa in upscale restaurants and trendy food stores like Whole Foods Markets (WFMI). While environmentalists might be concerned, the allure to consumers, Moats believes, will be Equa's purity and minimalist bottles shaped like rain droplets. His source? Brazil's Amazon rainforest, which Moats calls "probably the last place on Earth that holds boundless mystery and mystique."
Smart design and marketing and an exotic pedigree have worked well for bottled-water brands before. After all, the torrid growth of the $10.8 billion U.S. bottled-water industry -- part of the estimated $60 billion global market -- is due in part to the savvy marketing message that bottled water is inherently better than tap. Drinking it defines us as sophisticated and sexy. It might even help us lose weight, some bottled-water ads claim.
Moats, 54, is no stranger to doing business in Brazil. A former sales executive for the former Digital Equipment Corp., and a World Bank consultant to Brazil, he has in the past tried to export exotic fish and a type of cocoa bean from the region, but both enterprises eventually failed. Ten years ago, while looking for an alternative to cocoa beans, he stumbled on a spring near the equator that is now Equa's source. Moats found the water so pure he claims, "Science will be rewritten based on the natural purity of this artesian spring."
Heavyweights Crowd the Market
Purity, of course, is a major selling point for most waters. Equa's origins in the Amazon will be emphasized, since top-selling premium bottled-water brands come mainly from Europe and the U.S., as well as Fiji. "These brands evoke images of far-off places that contribute to the image and offer a point of difference in a crowded market," explains Gary Hemphill, managing director of Beverage Marketing, an industry research and consulting company in New York.
That's a lot more exciting than buying a two-gallon jug of Poland Spring at Costco (COST). Yet it's mass market brands like Poland Spring, Dasani, and Aquafina -- owned by industry heavyweights Nestle, Coca-Cola (KO), and Pepsico (PEP), respectively -- that are crowding the middle market for bottled water and battling it out on the price front. Appealing to bulk buyers has helped push global per-capita consumption of bottled water to a record 27.2 liters, up from 12.6 liters per capita in 2006, according to Beverage Marketing. But it has made the segment difficult to enter for newcomers.
By comparison, Equa will compete in the more rarefied high end of the market, where consumers seek waters that not only quench their thirst, but also convey a sense of style. Priced at around $2 or more per liter, brands such as Fiji [unusual square bottle, tropical South Pacific source], Jana [origins in the "picturesque Croatian village of Saint Jana"], and Voss [slim, cylindrical bottle, water from "the wilderness of Norway"] are designed to be savored rather than swigged after a gym workout. With luxury waters, "it's about making a statement," says Barry Nathanson, publisher of Beverage Spectrum, a beverage-trade publication in New York.
Bad Timing for Bottled Water
Equa's curvaceous bottle adheres to the formula. Moats asked the hot London design duo Barber Osgerby to create the bottle. He even sent Edward Barber, whose firm is known more for its furniture, to the jungle for inspiration. The result, Barber says, is an unadorned droplet shape without ribbing or any surface pattern. "There's practically nothing in the water, so we needed a pure shape," he explains.
All the same, introducing a new bottled-water brand from the Amazon could be tricky when the industry is under attack from a broad range of critics. Once regarded as a benign alternative to tap, bottled water is now portrayed as a sinful and ecologically unsound indulgence at a time when 1.1 billion people lack access to safe drinking water. Manufacturers are accused of littering landfills with discarded plastic and contributing to global warming by transporting water long distances to be sold in places where tap water is readily available.
Moats and the bottled-water industry dispute the allegations. They point out that, for the most part, water bottles are recyclable -- it's just that consumers drink water on the go and often can't find recycling stations. And they describe bottled water as a convenient, refreshing, and healthy alternative to sugary sodas and other drinks. Drinking bottled water, Moats says, is "about choice, and it is not in the public interest to discourage that."
Raising Green Eyebrows
So far, the negative publicity -- and calls by some city governments to curb bottled-water consumption -- hasn't dented sales, according to Beverage Marketing's Hemphill. But the anti-bottled-water campaigners might be making some headway in convincing some consumers to give up the bottle in restaurants. In an apparent attitude reversal, "It's now seen as cool to order tap, like driving a hybrid car," observes Marc Gobe, chief executive of Desgrippes Gobe, a New York branding firm.
For green activists, importing water from Equa's source -- a 3,700-acre site in the jungle about 120 kilometers inland from Manaus, where Moats is building a 45,000-sq. ft. factory in the dense rainforest -- raises eyebrows. They regard the Amazon rainforest as a fragile environment teeming with exotic species and flora. "One of the world's last frontiers," notes Janet Larsen, director of research at the Earth Policy Institute in Washington, a nonprofit involved with the anti-bottled-water campaign. "Going there to get a product has been done before, for oil, with troubling results," she adds.
For his part, Moats argues that he's not out to "rape the environment for an entrepreneurial project." He has made efforts to lessen the firm's overall ecological impact. The factory, which will churn out 10,000 recyclable PET bottles an hour, has a minimal footprint, he says.
The Price of Purity
Moreover, Moats says the factory has other benefits: It will employ up to 45 local people, who are mainly farmers and fishermen, and he will pay double the average Brazilian federal wage. Separately, Equa Water will contribute to educational programs in sustainable agriculture, to teach indigenous people about the need to preserve the rainforest.
"There's nothing wrong with making money," Moats adds -- and that's what he aims to do with Equa. After all, he explains, consumers are attracted to bottled water's purity, packaging, and branding. And, "They are willing to pay for it," he adds. Meanwhile, the source for Equa is cheap because the water comes out of the ground -- at the rate of 2 million gallons an hour -- and is not dependent on weather or labor.
Ultimately, Moats adds, the goal is to create a viable business and redirect some of the profits to help the people of the Amazon preserve their environment. While this alone won't save the rainforest, he says, "We want to use this as an example: You can make money and do good with it."
Still, that might not be enough to allay concerns about the environment. "No matter how green you package it, bottled water leaves a big ecological footprint in terms of extraction, transportation, and the waste stream," notes Gigi Kellett, director of the Think Outside the Bottle campaign of Corporate Accountability International, a nonprofit that monitors allegedly irresponsible corporate activity. "It's cheaper and better for the environment for people to get water from the tap."