Tony Clarke, November 29, 2007, The Toronto Star -
Last week, Toronto Mayor David Miller and the city council came under fire for entertaining a motion to place a 5-cent tax on each bottled water product sold in the city and a 10-cent tax on all bottled water imported from outside the province.
The bottled water industry promptly unleashed a barrage of email letters and public statements demanding that the proposal be flatly rejected. By week's end, the mayor appeared to be backtracking on the idea, proposing instead that the matter be reviewed.
In the midst of all the furor, the central issue may have been lost. After all, the bottled water industry is arguably the fastest growing and certainly the most profitable component of the entire beverage industry. Moreover, it is reputed to be one of the least regulated industries in the country.
Indeed, bottled water companies pay next to nothing for the water they bottle and sell. Take Ice River Springs near Feversham, Ont., which provides bottled water for Wal-Mart, Loblaws and Shoppers Drug Mart. Ice River Springs has a 10-year permit to withdraw up to 1 million litres of water a day for its bottled water operations. Yet, the company paid the Ontario government only $3,000 for the right to pump this seemingly unlimited supply of freshwater.
Nestlé, the world's largest food conglomerate and the leading bottled water company, pays a paltry fee to withdraw millions of litres of water from rural springs and aquifers in Ontario. Earlier this year, when Nestlé applied to renew and expand its water takings permit in Guelph, more than 5,000 citizens sent protest letters calling on the municipal government to reject the company's bid, mainly because the community was experiencing serious reductions in local water tables.
Meanwhile, the world's two other leading bottled water makers, Coca-Cola and PepsiCo, take the water they bottle directly from the municipal tap system for a minuscule fee. Not only do they pay a fraction of what household residents pay for their water takings, but Coke and Pepsi are able to take advantage of the municipal water services for the production of their Dasani and Aquafina brands, which have already been developed and paid for by local citizens and taxpayers.
The Coca-Cola bottled water plant in Brampton is a case in point. A one-litre bottle of Coke's Dasani usually sells for around $1.70. It has been estimated that for the same $1.70 Coca-Cola can obtain up to 34,000 litres of water from the public tap water system in Brampton for its bottled water plant. In other words, the municipality of Brampton is providing Coca-Cola with a huge subsidy.
What other industry in this country gets away with paying next to nothing for the primary resource it uses in the production of its products? At least the petroleum, mining and forestry industries are required to make royalty payments to governments for the raw materials they extract.
For consumers, this also raises the issue of price gouging practices by the bottled water giants. A 1.5 litre bottle of Pepsi's Aquafina, for example, costs around $2.70, but the same amount of water taken from the Montreal tap system costs only 1/500th of a cent. In fact, publicly delivered tap water costs only a tiny fraction of the price paid for bottled water, depending on water rates, which vary from one jurisdiction to another. What's more, public tap water is tested much more frequently than bottled water and there is no evidence to suggest that bottled water is safer and healthier than tap water.
According to industry analysts, after all the production, packaging and advertising costs are taken into account, the profit margins for convenience sized bottled water sales are a whopping 35 per cent. For the large home and delivery containers, there is an estimated 60 per cent profit margin. And, for the soft drink giants, bottled water is now twice as profitable as their carbonated drinks.
Little wonder that city officials want to slap a tax on bottled water sales. But such a tax should not be levied on the product itself. As critics have pointed out, the city would have to create a new additional tax-collecting bureaucracy, which would, in effect, defeat the purpose.
Instead, the City of Toronto would do well to call on Queen's Park to levy a special and effective surtax on the excessive profits of the bottled water corporations with the proviso that the revenues generated are earmarked for the retrofitting of municipal water systems and water conservation.
Equally important, Ottawa should be taking action on behalf of the public interest to rein in the bottled water industry by legislating strict health standards (such as required testing for bacteriological, chemical and radiological contaminants) and environmental standards (regarding water conservation, the use of plastic containers and recycling) for bottled water production in this country.