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But bottled water is washing away the palate trained to drain a bubbly
soda. By the end of this decade, if not sooner, sales of bottled water
are expected to surpass those of carbonated soft drinks, according to
Michael C. Bellas, chief executive of the Beverage Marketing
“I’ve never seen anything like it,” said Mr. Bellas, who has watched water’s rise in the industry since the 1980s.
Sales of water in standard lightweight plastic bottles grew at a rate of
more than 20 percent every quarter from 1993 to 2005, he said. The
growth has continued since, but now it has settled into percentages
within the high single digits.
If the estimated drinking of water from the household tap is included,
water consumption began exceeding that of soda in the mid-2000s.
That significant shift has posed a tough challenge for the Coca-Cola
Company and rival PepsiCo in recent years. While both companies sell
bottled water lines, Dasani for Coke and Aquafina for Pepsi, they have
had trouble establishing dominance in the more profitable business of
so-called enhanced waters — including flavored and carbonated waters and
those with added vitamins and minerals — where a horde of new beverage
companies like TalkingRain, Hint water and Fruit2O are giving them a run
for the money.
“Given where pricing has gone, I would assume that on the average 24
pack of bottled water, Coke and Pepsi are selling at break-even at
best,” said John Faucher, who tracks the beverage and household products
businesses at JPMorgan Chase. “The one thing keeping them in plain, old
bottled water is that both have a very large and highly profitable
single-serve business in it.”
Plain bottled waters are little more than purified tap water with a
sprinkle of minerals tossed in, which makes the business one of
producing bottles and filling them.
Factors as varied as innovations in bottling technology that have helped
drive down the price of water as well as continuing concern about
obesity and related diseases are also driving the trend. A recent study
by North Dakota State University, for instance, used dietary intake data
collected by the federal government to draw correlations between
decreased consumption of soda from 1999 through 2010 and improvements in
the biomarkers that indicated cholesterol and other chronic diseases.
A study by Coca-Cola asserted that the government’s data, the National
Health and Nutrition Examination Survey, was flawed, but that had not
stopped public health officials from encouraging greater consumption of
beverages with less sugar.
Last month, Michelle Obama heavily endorsed water, teaming up with Coke,
Pepsi and Nestlé Waters, among others, to persuade Americans to drink
more of it. Health advocates complained that Mrs. Obama had capitulated
to corporate partners by not explaining the benefits of water over the
sodas they sell and that her initiative promoted even greater use of
plastic bottles when she could have just recommended turning on the tap.
Bottled water has also grown cheaper, adding to its attraction. Cases of
24 half-liter bottles of store-brand water can be had for $2, or about 8
cents a bottle, and some grocery store chains even are using waters as
loss leaders to attract customers, teeing up shopping carts with a case
already on board.
Companies like Niagara Water, a privately held company that is the
largest private-label water bottler in the country, have a fully
integrated, highly automated production system that starts with plastic
pellets that are made into bottles and goes all the way through to
filling the bottles, making caps and screwing them on.
This poses a problem for the big beverage companies selling branded
waters. “Coke and Pepsi can compete in convenience stores where water is
being sold one bottle at a time, but they can’t make money on selling
cases at $1.99 apiece,” said John Sicher, publisher of Beverage Digest.
In a conference call with analysts last week, PepsiCo’s chief financial
officer, Hugh F. Johnston, said that the company had no plans to invest
in increasing its bottled water offerings. “We don’t think it creates
value over time,” Mr. Johnston said.
Some of the things that have made Pepsi and Coke formidable competitors
in the soda business work against them in water. The companies, for
instance, stock grocery store shelves directly off their trucks. That
gives them more extensive and timely information about how their
products are doing and greater control over marketing, but it also is
much more expensive than the distribution system used by companies like
Niagara and Nestlé Waters, which has a private label business in
addition to marketing brands like Poland Spring and Ozarka.
Those companies let retailers handle stocking, shipping pallets of their waters to warehouses.
Coke sold 5.8 billion liters of waters abroad and 253 million liters in
the United States and Canada from 2007 to 2012. Pepsi’s water sales in
North America actually declined by 636 million liters over that period,
but it still sold 4.7 billion liters overseas, according to Euromonitor.
Both companies’ soda sales fell in North America over that time but grew
internationally. Volume sales of soda, however, may be deceptive. “The
volume growth is there, but when we’re talking about international
markets like China, India and Latin America — prices are lower,” said
Jonas Feliciano, an industry analyst at Euromonitor.
The TalkingRain Beverage Company, a bottled water business that started
in the Pacific Northwest, is getting out of the plain water business
altogether because the economics are so bad. “The water business has
become very commoditized,” said Kevin Klock, its chief executive. “Folks
in that business have to produce high quantities at fast speed in very
light bottles, and it requires a huge investment to be in that game.”
TalkingRain makes Sparkling ICE, a bubbly water that comes in flavors
like kiwi strawberry and blackberry with no calories and “vitamins and
antioxidants.” The brand had developed strong consumer loyalty in the
company’s back yard, consistently generating about $10 million in sales a
year when Mr. Klock decided to bet big on it after taking the helm in
Last year, TalkingRain sold $200 million worth of Sparkling ICE, and
sales this year are on track to exceed $400 million, Mr. Klock said.
“There’s a large market out there that wants something sparkling,
something flavored, something without a controversial sweetener, and we
hit that market,” he said.
Now Pepsi and Coke are scrambling to dip their toes into it, too. They
are fighting back with investments in flavored and enhanced waters and,
in Coke’s case, packaging. Dasani, Coke’s primary water business, comes
in the company’s PlantBottle, at least 30 percent of which is made from
“First, consumers who purchase Dasani are looking for a high quality
product that delivers a high quality taste time and time again,” said
Geoff Henry, brand director of Dasani. “Beyond what the brand stands
for, we are looking to lead in packaging and sustainability because
those things also matter to our consumers.”
On Thursday, Coke introduced its first sparkling Dasani drinks in four
flavors, and Pepsi is expected to take the wraps off a premium bottled
water product called OM this year, according to Beverage Digest.
Coca-Cola has also been successful with Smartwater, which was part of
its $4.1 billion purchase of Glaceau, the maker of Vitaminwater.
Smartwater is little more than distilled water with added electrolytes,
but volume sales were up by 16.2 percent in the first half of this year,
according to Beverage Digest.
Dasani also has introduced Dasani Drops, with flavors like cherry
pomegranate and pink lemonade, which consumers add to the drink to fit
their taste, a quality especially prized by millennials.
A bumper crop of flavor drops has been coming onto the market ever since
Kraft introduced Mio in 2011. SweetLeaf and Stur, for instance, are
Stevia-based sweeteners for water that impart flavor. Pepsi recently
began selling Aquafina FlavorSplash drops.
Sales of most branded enhanced water, however, were down in the first
half of 2013, and whether giving consumers the option to flavor plain
water will change that equation remains to be seen. Vitaminwater’s
volume sales slid 17.3 percent, for instance, while SoBe Lifewater, a
line of flavored waters owned by PepsiCo, dropped 30.3 percent,
according to Beverage Digest.
On the other hand, Nestlé and bottlers like Niagara, which carry lower
prices, saw sharp increases in volume sales of their enhanced waters.
“Is it a great idea? Not necessarily,” Mr. Faucher said of the big
companies’ push into enhanced waters. “Do they have much of a choice?
Not necessarily. People want variety and so Coke and Pepsi are going
where the opportunity is. There aren’t a lot of other options.”
This was not the time to discuss the science of climate change, or ways to protect coastal cities against monster storms.
The development experts, journalists, policy wonks and investment professionals who gathered at the Center for Global Development in Washington this week were there to sort out a much thornier issue: How to mobilize and spend the $700 billion or so the world will need annually – above what’s already being spent – to slow and adapt to climate change.
Their consensus: Current levels of public and private finance won’t even begin to do the job.
Four years after advanced countries promised in Copenhagen to raise $100
billion annually by 2020 to fight climate change – in addition to the
$30 billion they pledged to raise through 2012 in “fast-start” financing
for developing nations – the road forward is murky at best.
Fiscal constraints make governments less willing, or able, to spend money on a long-term problem, no matter how critical.
“We should have no illusions that public money is going to come rushing
back to solve this,” said John Morton, chief of staff at the Overseas Private Investment Corporation, the United States development finance agency. “Therefore the role of the private sector is absolutely critical.”
So what will it take to get risk-averse, institutional investors with
trillions of dollars in clout to enter climate finance in emerging
A technology revolution? New investment strategies that take the risk
out of green projects? The elimination of $485 billion in fossil fuel subsidies and other policy reforms?
Or perhaps a pact between those forward-looking countries that are
willing to set a price on carbon, once and for all? By banding together,
they could create the size market investors are looking for.
The U.S., the world’s second-largest emitter of greenhouse gases, likely
won’t be leading such a coalition effort any time soon. But China
Xueman Wang, team leader for the World Bank’s Partnership for Market
Readiness, noted that five cities and two provinces in China are now piloting emissions trading systems with the goal of eventually building a national market.
It’s also working with South Africa, which is planning to implement a
carbon tax in 2015. South Africa wants to position itself as a leader in
a new world where polluters must pay for each kilo of carbon dioxide
they emit into the air, Wang said.
In all, the Partnership for Market Readiness is working with 16 emerging
economies that are looking to emissions trading, carbon taxes and other
instruments to scale up their greenhouse-gas mitigation efforts.
A price on carbon, as leaders of the World Bank Group and the OECD
noted this week, will send a signal to private investors that renewable
energy and low-carbon projects are, in fact, very profitable. It may be
the game changer everybody’s waiting for.
FOR the past two years, my colleagues and I have been training dogs to
go in an M.R.I. scanner — completely awake and unrestrained. Our goal
has been to determine how dogs’ brains work and, even more important,
what they think of us humans.
Now, after training and scanning a dozen dogs, my one inescapable conclusion is this: dogs are people, too.
Because dogs can’t speak, scientists have relied on behavioral
observations to infer what dogs are thinking. It is a tricky business.
You can’t ask a dog why he does something. And you certainly can’t ask
him how he feels. The prospect of ferreting out animal emotions scares
many scientists. After all, animal research is big business. It has been
easy to sidestep the difficult questions about animal sentience and
emotions because they have been unanswerable.
By looking directly at their brains and bypassing the constraints of
behaviorism, M.R.I.’s can tell us about dogs’ internal states. M.R.I.’s
are conducted in loud, confined spaces. People don’t like them, and you
have to hold absolutely still during the procedure. Conventional
veterinary practice says you have to anesthetize animals so they don’t
move during a scan. But you can’t study brain function in an
anesthetized animal. At least not anything interesting like perception
From the beginning, we treated the dogs as persons. We had a consent
form, which was modeled after a child’s consent form but signed by the
dog’s owner. We emphasized that participation was voluntary, and that
the dog had the right to quit the study. We used only positive training
methods. No sedation. No restraints. If the dogs didn’t want to be in
the M.R.I. scanner, they could leave. Same as any human volunteer.
My dog Callie was the first. Rescued from a shelter, Callie was a skinny
black terrier mix, what is called a feist in the southern Appalachians,
from where she came. True to her roots, she preferred hunting squirrels
and rabbits in the backyard to curling up in my lap. She had a natural
inquisitiveness, which probably landed her in the shelter in the first
place, but also made training a breeze.
With the help of my friend Mark Spivak, a dog trainer, we started
teaching Callie to go into an M.R.I. simulator that I built in my living
room. She learned to walk up steps into a tube, place her head in a
custom-fitted chin rest, and hold rock-still for periods of up to 30
seconds. Oh, and she had to learn to wear earmuffs to protect her
sensitive hearing from the 95 decibels of noise the scanner makes.
After months of training and some trial-and-error at the real M.R.I.
scanner, we were rewarded with the first maps of brain activity. For our
first tests, we measured Callie’s brain response to two hand signals in
the scanner. In later experiments, not yet published, we determined
which parts of her brain distinguished the scents of familiar and
unfamiliar dogs and humans.
Soon, the local dog community learned of our quest to determine what
dogs are thinking. Within a year, we had assembled a team of a dozen
dogs who were all “M.R.I.-certified.”
Although we are just beginning to answer basic questions about the
canine brain, we cannot ignore the striking similarity between dogs and
humans in both the structure and function of a key brain region: the
Rich in dopamine receptors, the caudate sits between the brainstem and
the cortex. In humans, the caudate plays a key role in the anticipation
of things we enjoy, like food, love and money. But can we flip this
association around and infer what a person is thinking just by measuring
caudate activity? Because of the overwhelming complexity of how
different parts of the brain are connected to one another, it is not
usually possible to pin a single cognitive function or emotion to a
single brain region.
But the caudate may be an exception. Specific parts of the caudate stand
out for their consistent activation to many things that humans enjoy.
Caudate activation is so consistent that under the right circumstances,
it can predict our preferences for food, music and even beauty.
In dogs, we found that activity in the caudate increased in response to
hand signals indicating food. The caudate also activated to the smells
of familiar humans. And in preliminary tests, it activated to the return
of an owner who had momentarily stepped out of view. Do these findings
prove that dogs love us? Not quite. But many of the same things that
activate the human caudate, which are associated with positive emotions,
also activate the dog caudate. Neuroscientists call this a functional
homology, and it may be an indication of canine emotions.
The ability to experience positive emotions, like love and attachment,
would mean that dogs have a level of sentience comparable to that of a
human child. And this ability suggests a rethinking of how we treat
DOGS have long been considered property. Though the Animal Welfare Act
of 1966 and state laws raised the bar for the treatment of animals, they
solidified the view that animals are things — objects that can be
disposed of as long as reasonable care is taken to minimize their
But now, by using the M.R.I. to push away the limitations of
behaviorism, we can no longer hide from the evidence. Dogs, and probably
many other animals (especially our closest primate relatives), seem to
have emotions just like us. And this means we must reconsider their
treatment as property.
One alternative is a sort of limited personhood for animals that show
neurobiological evidence of positive emotions. Many rescue groups
already use the label of “guardian” to describe human caregivers,
binding the human to his ward with an implicit responsibility to care
for her. Failure to act as a good guardian runs the risk of having the
dog placed elsewhere. But there are no laws that cover animals as wards,
so the patchwork of rescue groups that operate under a guardianship
model have little legal foundation to protect the animals’ interest.
If we went a step further and granted dogs rights of personhood, they
would be afforded additional protection against exploitation. Puppy
mills, laboratory dogs and dog racing would be banned for violating the
basic right of self-determination of a person.
I suspect that society is many years away from considering dogs as
persons. However, recent rulings by the Supreme Court have included
neuroscientific findings that open the door to such a possibility. In
two cases, the court ruled that juvenile offenders could not be
sentenced to life imprisonment without the possibility of parole. As
part of the rulings, the court cited brain-imaging evidence that the
human brain was not mature in adolescence. Although this case has
nothing to do with dog sentience, the justices opened the door for
neuroscience in the courtroom.
Perhaps someday we may see a case arguing for a dog’s rights based on brain-imaging findings.
Gregory Berns is a professor of neuroeconomics at Emory University
and the author of “How Dogs Love Us: A Neuroscientist and His Adopted
Dog Decode the Canine Brain.”