Essay Sample on Bottled Water Manufacturing Industry: Goods, Market Structure and Trends

Introduction

In the North American Industry Classification System, bottled water manufacturing falls under the manufacturing industry, and is code 312112 (Executive Office of the President, 2017). The industry in the U.S comprises the purification and bottling of drinking water, including those that are naturally carbonated. For this brief, I will begin by identifying the goods and services this industry produces. Next will be to identify the industry's market structure, followed by a description of any notable microeconomic relationships or market trends. Lastly will be to highlight the government's impact on the industry output, market price, and structure.

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Goods and Services Produced In This Industry

As the name suggests, the industry deals with all the processes surrounding bottled water. One of the services offered in this industry in the purification of water. The other service is the carbonation of water. However, there is naturally carbonated water, and in such cases, the companies in this industry only do the purification. Lastly is the bottling of the already purified and carbonated water ready for sale.

The Industry Market Structure and Characteristics

It is estimated that the global bottled water market grows at a significant compound annual growth rate. Bottled water is drinking water and includes distilled water, well water, spring water or mineral water that is packed in glass or plastic water bottle. They may be carbonated or not, and their sizes range from small direct consumer serving bottles to the large ones used in coolers. The types of bottled water market segmentation include carbonated bottled water, flavored bottled water, still bottled water, functional bottled water, and others. The market segment by applications includes retail stores, supermarkets, and e-retailers.

Despite the existence of different manufacturers in the bottled water industry, it remains to be a monopolistic market. However, it is a monopolistic competitive market since many sellers try to make their brands extremely different from the rest of the sellers. The large portion of the market is controlled only by a few firms like Coca-Cola through Dasani and Pepsi cola despite the existence of other manufactures like Suntory, Unicer, Icelandic Glacial, CG Roxane, Vichy Catalan, and Mountain Valley Spring among others. A monopolistic competitive market, by definition, is characterized by an industry in which similar products and or services are offered, but the products are not perfect substitutes for each other. That is precisely the case in bottled water manufacturing where many players produce similar goods, but the water provided by the various firms are not perfect substitutes of the other. Besides, the rate of entry and exit from the market is very low, and the decisions made by any individual firm in the industry do not affect the other players or competitors directly. That is precisely the characteristics of bottled water manufacturing that qualifies it to be a monopolistic competitive market.

Microeconomic Relationships in the Industry

Every year, the consumption of bottled water increases by ten percent globally, with the fastest growth rates experienced in developing countries of South America and Asia. The largest consumer market of bottled water in the world is the United States. However, from an economic perspective, it is scary to look at bottled water. According to the Environmental Working Group's report in 2011, it was established that bottled water is 1,900 times more expensive than tap water and that 90% of this cost goes to packaging, bottling, marketing, and other expenses (Jacobs, 2011). From this, it is clear the hidden costs of health and the environment.

Despite its high costs, however, bottled water has continually been used in place of tap water for its better taste, convenience, and perceived purity. In the United States, for example, eighty-five million bottles of water are consumed every day, which is a year amounts to more than thirty billion bottles (Hu, Morton, & Mahler, 2011). The high demand for bottled water is due to the perceived safety over tap water and the risks associated with drinking water. Water quality is a primary concern of most consumers who believe that bottled water is of higher quality than tap water. The type of water supply in the area where a person lives is also another major factor influencing their decision to select bottled water over tap water. The graph below shows the relationship between the price of water and the quantity demanded.

Figure 1: Demand relationship for water

Impact of the Government in the Industry's Market Price and Output

The government can impact the market price of bottled water as well as the output of the industry in many ways. The government can implement policies that directly or indirectly affect the market prices of the products through the imposition of tax on bottled water. If this is done, the costs would automatically rise hence leading to reduced demand. Besides, the government regulates the production of bottled water by introducing strict regulations in the industry that would see no new investors and even the existing ones closing down.

References

Executive Office of the President (2017). North American Industry Classification System. United States: Office of Management and Budget. Retrieved from https://www.census.gov/eos/www/naics/2017NAICS/2017_NAICS_Manual.pdf

Hu, Z., Morton, L. W., & Mahler, R. L. (2011). Bottled water: United States consumers and their perceptions of water quality. International Journal of Environmental Research and Public Health, 8(2), 565-578. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3084479/

Jacobs A. (2011). Drinking from a Bottle Instead of the Tap Just Doesn't Hold Water. Scientific American. Retrieved from https://www.scientificamerican.com/article/bottled-water-ridiculous-waste/