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Pricer’s Points: Why Does Bottled Water Cost Significantly More than Tap Water?
 | Elena Galli

More or less one month ago I was at the airport, heading back to Barcelona after having spent some days in my hometown, Ferrara, a little city in Northern Italy.

I was very thirsty so I headed to the first bar I saw and ended up spending an excruciatingly expensive price for my half a liter bottle of water. It wasn’t the first time that I was the victim of an inflated premium price. I knew buying in bulks was definitely cheaper and ended up wondering how much lower was the price of tap water.

I typed on google “how much more does bottled water cost than tap” and here it appears, a Business Insider article whose very self-explanatory title goes as follows: “Bottled Water Costs 2000x More Than Tap”. It hit me. I knew the margin would have been big, but my mind could not have foreseen a two thousand times higher price!

When I had to pick my Pricing Dilemma subject I had no doubt: it was such a simple product, water, yet I could not grasp the dimension of the problem, nor its causes.

When I had to pick my Pricing Dilemma subject I had no doubt: it was such a simple product, water, yet I could not grasp the dimension of the problem, nor its causes.

If you go on the Oxford Dictionaries’ website and type in “water”, you will get the following definition: “A colourless, transparent, odourless, liquid which forms the seas, lakes, rivers, and rain and is the basis of the fluids of living organisms”. It makes up from 50 to 65% of the human body and covers 71% of the planet’s surface. It is fundamental to life. And thanks to taxpayers, U.S. citizens have access to it at a ridiculously low price. Yet they get ripped off for bottled water and keep on buying it so much that the bottled water industry has a worldwide value of $18 billion. Why is that?

The cost of production does not justify the margin

The cost of a bottle of water is, for the manufacturer, of just $0.05 ($0.02 is the price that The Economist estimated in 2013 for the production of a PET bottle). If the same bottle is sold for the amount of $2, the markup is of 4,000%.

According to the International Bottled Water Association (IBWA), in 2013 the average price for one gallon of water (excluded sparkling and imported waters, but including refillable containers and office water jugs) was of $1.21, versus a tap water price per gallon of $0.002, as it benefits from economies of scale, making bottled water 605 times more expensive in this case.

Since the Beverage Marketing Corporation stated that 65% of the sold bottles of water were meant as single-serve, let’s hypothesize to spend $1 per 16.9 ounce bottle. This means we would spend almost $8 for one gallon, which means we would spend 3.785 times more than for tap water. This would bring us to a yearly expense of $365 versus ten cents for tap water.

Now, let’s compare the price of bottled water with, say, gasoline. According to GlobalPetrolPrices.com, one gallon of gasoline has, in the USA an average price of $2.57. One gallon of bottled water can cost around $10, which makes bottled water more than three times as expensive as gasoline.

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Why Does Bottled Water Cost Significantly More than Tap Water?
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