Select Committee on Scottish Affairs First Report


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.[144] 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.[145] 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".[146]

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.[147]

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".[148] In addition, attention was drawn to plans by Coca-Cola to make it the dominant player in the world bottled water market.[149]

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.[150]

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.[151] The Scottish Executive is now reviewing the results of the March consultation exercise. It intends to publish the outcome and proceed to further consultation.[152]

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".[153]

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 1. Back

145  Ibid, p.18, para 6, Table 4. Back

146  Ibid, p.22-23. Back

147  Ibid, p.21. Back

148  Ibid, p.23. Back

149  IbidBack

150  Ibid, p.20. Back

151  See the Food Standards Agency Scotland website, Back

152  HC 324-i, Session 2001-2002, Q.687. Back

153  Ibid. Back

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