China’s Bottled Water: Boom Or Bust?

By Dawn McGregor, Hongqiao Liu 15 October, 2015

CWR's McGregor & Liu share highlights from CWR's report on bottled water in China. See what it means for you

Today, bottled water is part of everyday life of many Chinese people and so not surprisingly is one of China’s fastest growing Fast Moving Consumer Goods. China’s bottled water consumption has exploded from a mere 2.8 million m³ in 1997 to 39.5 million m³ in 2013. This means that it has only taken China two decades to become the world’s largest bottled water consumer. Concern over drinking water safety is one of the key drivers of this rapid growth.

In our last report “China’s Long March to Safe Drinking Water” (March 2015), we examined the challenges and opportunities for China to reach safe drinking water. In the 12 FYP China’s ambitious plans and actions have led to significant improvement in water quality and water supply security in the last decade. However, at the same time, more and more Chinese are turning away from tap water towards bottled water. A 2014 survey showed that only 59% of urban residents drink tap water (after being boiled), the rest drink bottled/carboy or that from filtration systems. 

Continuing our investigation into China’s drinking water situation and given this preference for bottled &/or carboy water, we took a closer look at the status of the nation’s bottled water market,  its water & energy use and what the future holds in our new report “China’s Bottled Water: Boom or Bust?”

We found that China’s bottled water stands at a fork in the road. The industry has big expansion plans but key risks are not being addressed, raising concerns for China’s already limitedand polluted water resources.

Central government policies point to realigning the industry with reduced bottled quotas. Moreover, mismatched central & provincial policies add to this uncertain future. We expect the government to move to re-align such mismatched policies in the future, which will impact the industry. The report looks at three specific cases of such misaligned policies.

Given the above, should the bottled water industry be allowed to continue its explosive growth? Our answer is no. We share 5 key risks from the report below. For the full overview access the report here (available in Chinese as well).

Key risks to bottled water in China

71% of packed water production lie in water scarce & water stressed regions exposed to physical & regulatory risks

As we show in the report, 71% of packaged water production (bottle & carboy) lie in water scare & water stressed regions  – regions with water resources comparable to Jordon &  Oman. Does China have enough water resources to support the industry currently let alone any future growth?

Currently, most of the policies in China are aimed towards the reduction of water use in energy, textiles & agriculture and yet bottled water consumption is expected to grow faster than the national water quota.

Most of the policies in China are aimed towards the reduction of water use…
Bottled water consumption is expected to grow faster than China’s national water quota

The govt. is moving to protect water with various plans
The bottled water industry will be impacted

The government is moving to protect water through various plans like the Water Ten. This will impact the bottled water industry – more details in the report.

We also expect that contradictory national & provincial actions will be realigned like 20% of China’s packaged water (bottled & carboy) being produced in the dry & agricultural heartland of China – the North China Plain – and exporting some of China’s highest quality water to Japan & South Korea.

High environmental cost – high water, energy & plastic use

Bottled water production comes at a high water & energy cost. The production of one bottle of bottled water can require up to almost three additional bottles of water + ¼ bottle of oil. The industry also uses one Jinmao Towers of plastic a year of which most is just thrown away with very minimal recycling. This waste plastic is creating ‘plastic walled cities’.

All of the above ‘costs’ could actually be higher as only 506 packaged water companies are listed in the statistical yearbook but there are 12,000 licensed facilities. It’s important to know what you are drinking, more on this & the ‘costs’ here.

Will glacier water bottling face clamp down after COP 21?

Bottled water is also being produced in the Qinghai-Tibetan Plateau and other ecologically vital & sensitive regions like Changbaishan Mountain. But already the glaciers in the Qinghai-Tibetan Plateau have shrunk 15% over the last three decades. Will this glacier water bottling be clamped down on after COP 21? More in the report.

Government realigning mismatched policies whilst improving public water system

Central government policies and provincial policies are mismatched. We expect future policies to re-align the contradictory provincial policies to those of central government. The report takes a look at three specific cases in details:

• Bottling in the parched North China Plain
• Jilin Province & the Changbaishan Region – an ever-lasting source of mineral water
• Glacial & spring water: botting upstream at the headwaters of Asia’s major rivers

Moreover, the government is also introducing new policies manage the nation’s water resources which will also impact the industry and more are likely to come.

If all related policies are enforced the industry may face much higher costs & more stringent monitoring

If all related policies including the Three Red Lines & the Water Ten are enforced then the industry may face much higher costs and more stringent monitoring on water source conservation as well as quality control. How many of the 12,000 facilities will survive this new regulatory environment?

Moreover, so far in the 12FYP, RMB700 billion has been invested into the public water supply system. An extra RMB570 million is expected to enter the water space following the recent Water Ten Plan. With investment like this it seems that the government will continue to focus on public water on the road towards safe drinking water.

Risks moved beyond CSR – consumers in the dark & business exposed

Clearly risks have moved beyond CSR. Brands, domestic & international, fail to disclose pretty much any information regarding water. This includes water quality of their products, water use of their operations, any water stewardship programmes they have & more.  Nestlé for example discloses some of this information on its US operations on its US website but nothing for China. As a result, consumers are left in the dark. They don’t know the quality, source, ingredients of the water they are drinking – there have been many cases of substandard products (‘fake’ water, antibiotics & hormones in the water & others – Know what you are drinking with our overview here).

However, some of this darkness will be lifted by the ‘Food Safety National Standard on Packaged Drinking Water’ (GB 19298-2014) standard – seeks to clarify bottled water labelling & control water products with misleading titles. More on this in report.

Industry should work towards increased disclosure and better water management. This should allow the industry to evolve in accordance with the direction of the government – water caps, increased monitoring & stricter regulations, which will clearly impact their operations & costs. This will help the industry re-assess current and future investments, which it needs to do.

China cannot afford one Jinmao Tower of plastic a year, let alone four

Despite being the No.1 global bottled water consumer China’s per capita bottled water consumption of 30 litres is 19% lower than the global average of 37 litres. Moreover, to match Mexico’s level of consumption, China would have to grow 8.5x and closer to home, to match Hong Kong it would need to grow fourfold. So, even if China spends billions on delivering tap water, the bottled water market could still in reality boom or as some have said, “has yet to awake“.

However, China cannot afford for the market to ‘awake’ as currently bottled water production in China uses one Jinmao Tower of plastic, most of which ends up in waste piles due to poor recycling programmes and challenges with collection at scale. As a result, ‘plastic walled cities’ are forming. The country cannot afford more cities. See report for details.

To match Mexico’s level of bottled water consumption, China would have to grow 8.5x and to match Hong Kong 4x

This is why some say the industry has “yet to awake”

In need of a bottled water revolution

It should be clear from the above that bottled water should not be China’s solution to safe drinking water. However, concerns over drinking water quality and the matter of convenience & lifestyle factors will continue to drive bottled water.

Bottled water should not be China’s solution to safe drinking water but quality issues, convenience & lifestyle factors will continue to drive it

The Chinese government is taking action to protect its water resources & improve public drinking water (as shown above) but it also needs to challenge the convenience & lifestyle factors of bottled water. This includes rolling out education programmes about the real cost of bottled water – the heavy environment impact, the shrinking glaciers and the need to protect our water sources.

We could see the government implement ‘back to the tap’ campaigns, like New York City, to overcome the convenience & lifestyle attributes of bottled water.

With a degraded environment the regulatory landscape is shifting. as shown in the report. Consumers can have a big role, including corporate consumers as often they provide water for their employees/customers. See the report for examples of actions taken by corporates, including SOEs. In a country with not a lot of water, the future of bottled water could look very different.

Further Reading

• Bottled Water: Drink Responsibly -Know your bottled water – is it “fake water”? Is bottled water regulated? What is each bottle’s environmental footprint? Those “in the know” may be more inclined to go back to the tap. Hongqiao Liu walks you through how to drink responsibly
• Are You A Responsible Consumer? – With waste levels already sky high and set to grow, China Water Risk’s Dawn McGregor mulls over the challenges of being a responsible consumer from fashion to food to plastic. Whether as an individual or corporate, see what action you can take
• Plastic Waste: The Vector For Change – USD13billion is the annual cost of impact of plastic pollution to our oceans. Doug Woodring, founder of Ocean Recovery Alliance, shares challenges ahead and strategies for a plastics-free ocean
• Unwrapping Packaging Water Risks – China’s paper packaging industry discharges wastewater similar to its entire coal industry. Explore the dirty secrets behind paper & plastic packaging with China Water Risk’s Feng Hu. Also, see how shifting consumer attitudes can bring about new innovations

• Hong Kong’s Thirst For Bottled Water – Hong Kong has a plastic waste issue & consuming less bottled water can help this. Why then is Hong Kong still thirsty for bottled water? Mandy Lao explores consumer attitudes towards these
• China Water Risk special report: China’s Long March To Safe Drinking Water

• SABMiller on Beer & Water – SABMiller’s Head of Sustainability talks with China Water Risk about its global approach to mapping and reducing its water footprint
• Corporate Water Reporting in China – CDP’s report shows potentially inadequate water risk assessment by Chinese companies & those with HQ’s in China. CDP’s Gillespy on their latest report and why it’s time to report on water risks
• Consumers Willing to Pay More for Water – Lu Shuping, President of Xylem China, shares key findings of a survey of six Tier 1 & 2 cities. Do consumers understand China’s water crisis? Are they ready pay more for safe drinking water?