David Allen and Raúl Eguía. Professors. Instituto de Empresa
25 May 2004
The authors examine the Dasani pure-water law and the universal commercial water situation.
Almost at the same time it became public that Coca Cola was bottling purified tap water under the brand name of Dasani, NASA demonstrated that “once upon a time, water flowed on Mars.” According to scientists, the water on Mars evaporated over thousands of years. Now it is present only as an icecap on the planet’s south pole. That’s the official theory. But what if it’s not quite right?
The earth has 14,000 cubic metres of water. At least 1 percent of that is fresh water on the planet’s surface. It is cheap and easily accessible; i.e., it’s a market. What is more, it’s a market with various levels of quality marketed under labels such as spring water, tap water and more recently, pure water.
But exactly what is Dasani pure water? It is purified tap water; in other words, it is filtered and elements are added and taken out. This type of water sells well. So much so, in fact, that water is a big market in countries such as the United States, whose top brands, Aquafina (Pepsi) and Dasani (Coca Cola) - launched in 1999 - are purified waters. One interesting fact: in the last year, Dasani increased its sales 13 percent, while the Coca Cola market came to a standstill.
Now Dasani has turned its attention to Europe and begun its conquest with a 10-million euro campaign in the United Kingdom, a market that consumes 28 million litres and spends 1,500 million euros each year. A second phase will launch Dasani in France (140 million litres per year), but with water taken from a spring: the Astrid spring in Belgium.
Good business plan
Coca Cola is investing big-time, and it’s not hard to see why. All you need to do is look at matters in Dasani water language: you take 500 ml of ordinary water at a cost of 0.03 pence (the price charged by the British company Thames Water) and you sell it at 95p. That’s 3,167 times what it costs!
On the face of it, as lecturers in strategy, we should look on this as a really sound business idea. After all, is there anything wrong in buying something cheap, adding value and selling it expensive? So why are some consumers angry? The answer has to do with what water is and what it represents.
Throughout history, humanity has searched for a reliable and cheap way of supplying water. Both the Romans and the Moors brought us their innovative ideas, but it wasn’t until the 20th century that we managed to take quality water to urban areas at low cost. Europe and the United States developed large supply companies to manage our fresh-water resources in a way that was efficient enough to provide water of high quality.
However, lately this great achievement by 20th-century civil society has been turned into the up-and-coming sector in soft drinks. Water sales increase at an annual rate of 15-20 percent, due to the general public’s opinion that tap water quality has started to sink.
We believe in a public service run by a private company. But this idea is now being confused with that of a public asset replaced by a mass commodity product. We are of the opinion that the Dasani Law adds to this confusion, and as such, it could cost Coca-Cola dear. Especially if the trend for headlines such as “Coke sells tap water for 95p a bottle” (The Mirror) catches on.
Whatever happens, the question hangs in the air as to why Coca Cola has decided to adopt a different strategy in France; i.e., changing tap water for spring water. We suppose the answer can be put down to the whims of the French market, but that is not really the issue. The real question is whether or not there is a rule that states selling tap water as pure water, no matter how it’s been treated, is simply nonsense. Is there any ethical norm to tell us that public assets such as water, air, the sea or rain shouldn't be turned into consumer products?
We need to stop and think about the Dasani Law. Is it necessary? Perhaps it is - at least to start a debate that could be called “Public assets: the march towards consumer goods.” It is true that CocaCola has withdrawn Dasani from the U.K.; but not, as one might expect, because of the damage selling purified tap water might cause to its reputation. It pulled the product because it contained more bromate than British regulations allowed.
This debate might have been proposed somewhere else in the universe, thousands or millions of years ago. Perhaps ultra-purified tap water was discovered on Mars, the Dasani Law was created, the 3167 factor applied, the debate proposed and a decision taken. Perhaps… What does seem clear however, is that the planet drew the shortest stick; now it is a grim place with hints of its watery past lingering on its poles. At this time of writing, it is quite probable that a number of water-selling Martians are wandering around the universe with a 3167-factor in their wallets.