THE DRINKS INDUSTRY IN SCOTLAND
10. The bottled water industry
106. In contrast to soft drinks, bottled water is
a much faster growing industry. UK consumption of bottled water
has grown from 350 million litres in 1989 to over 1,190 million
litres in 1999.
This has been driven largely by an increased awareness of health
issues among consumers, and, significantly, has been achieved
without major advertising expenditures by the companies themselves.
Scottish producers appear to have some important competitive advantages.
UK bottled water consumers view Scotland as having a pure and
clean (and one might say wet) environment, and thus a good place
from which to source bottled water.
Scottish companies currently supply around 25 per cent of the
total UK market, and there are good reasons to expect growth in
Scottish bottled water production to continue, although Highland
Spring Ltd took a more guarded view. Referring to the plethora
of indirect taxes which now apply the Company said:
"The Scottish natural
mineral water industry will not be able to sustain its economic
viability or its growth... It is under...pressure from the efficient
grocery supply market in Europe...It is hard for [the Scottish
natural mineral industry] to absorb both the increased costs of
these new taxes and the real 'hidden' cost of tackling the complex
administrative workload necessary for their compliance".
107. It was also argued that transport costs are
critical to the ability of bottled water producers to compete,
because of the distance between Scotland and the main UK market
in the South East of England.
108. The bottled water industry is not immune to
the workings of the competitive process we have discussed elsewhere
in this report. The existing involvement of the two major soft
drinks producers in the bottled water industry was noted. It was
claimed that both Coca-Cola and Pepsi-Cola are already able to
use their strength in soft drinks to make "groupage"
deals, which "effectively force retailers and catering accounts
to distribution of their bottled water portfolios".
In addition, attention was drawn to plans by Coca-Cola to make
it the dominant player in the world bottled water market.
109. Broadly there are three types of bottled water:
natural mineral water, spring water and table water. In other
countries in the EU there is tighter control over what might be
designated as "spring water". This matter and the possible
competitive threat of "engineered" water to the purer,
but more expensive, natural mineral water in which Scotland excels,
especially when coupled with the financial muscle of the multinationals
who produce the engineered variety, raised some concern. Highland
Spring felt that a strengthening of the legislation, in particular
the full transposition into UK law of the 1996 European Directive
96/70, concerned with the exploitation and marketing of mineral
waters, including harmonising the definition of the term "spring
water", might allow the more natural Scottish product to
compete more effectively with the engineered water.
110. The exploitation and marketing of bottled waters
is currently controlled by The Natural Mineral Water, Spring
Water and Bottled Drinking Water Regulations 1999. In March
2001 a consultation exercise was undertaken on The Draft Natural
Mineral Water, Spring Water and Bottled Drinking Water (Amendment)
(Scotland) Regulations 2001. The effects of the amended Regulations
would be to set new limits for certain substances in bottled waters;
enable industry to inform consumers when waters are suitable for
infant feeding; and prohibit the bottling of spring water that
does not comply with the Regulations and make it an offence to
sell bottled drinking water that does not meet the labelling provisions.
The Scottish Executive is now reviewing the results of the March
consultation exercise. It intends to publish the outcome and proceed
to further consultation.
111. In its response to the first consultation, Highland
Spring further stressed its view on the status of "spring
water" in the UK.
"The UK is also not
equitable with the rest of Europe on treatment of Spring Water.
Permitted treatments should be clarified and declared on the label.
As it stands at present the consumer is not informed on this matter".
It strikes us that this is an entirely reasonable
expectation. Its implementation would overcome any confusion concerning
the type of product which consumers were buying. Accordingly,
we would ask the Scottish Executive to consider transposing into
law the full terms of Directive 96/70/EC.
144 HC 973-i, Session 1999-2000, p.16, para 2, Table
p.18, para 6, Table 4. Back
149 Ibid. Back
the Food Standards Agency Scotland website, www.foodstandards.gov.uk/consultations/scotland. Back
324-i, Session 2001-2002, Q.687. Back
153 Ibid. Back