In recent weeks, on a quiet stretch of Detroit’s west side dotted with vacant homes, a 262,000-square-foot Coca-Cola manufacturing facility has buzzed with activity, even as many businesses in Michigan were ordered by the state to temporarily close to combat the ongoing coronavirus pandemic.

Coca-Cola churns out a number of beverages here, including Dasani bottled water, which generated more than $1 billion in U.S. sales in the past year, according to market research firm IRI. It’s a good time to be in the water business: As the coronavirus pandemic spread in the U.S. throughout March, bottled water sales increased 57 percent over the same time period last year. 

But among the products, such as toilet paper and hand sanitizer, that Americans are panic-buying, bottled water is unusual: There is no shortage of safe drinking water, and health officials have tried to assure people that public water supplies are not contaminated by the coronavirus. Hoarding bottled water simply isn’t necessary for most people.

Source: Nielsen.

What’s more, most bottled water sold in the U.S. comes from the same municipal sources that supply tap water—a fact that might be unknown to most consumers. Coca-Cola makes Dasani at the company’s Detroit plant by purchasing, treating, and bottling municipal water before selling it at a significant upcharge to consumers. Pepsi bottles its Aquafina water brand in Detroit the same way. 

More on Bottled Water

The business model is hugely profitable. The cost to buy that municipal water is exceedingly low—and once bottled, the markup can be around 133 times greater, a Consumer Reports analysis of company water billing and usage records found.

But what’s good for businesses isn’t necessarily good for consumers, according to CR’s review, which included the examination of hundreds of pages of billing and other records obtained through public records requests, and interviews with environmental law experts, industry consultants, residents of Detroit, and consumer advocates. 

For starters, bottlers and consumers aren’t always treated as equals by water utilities, CR found. In Detroit, whose policy prior to the coronavirus crisis called for shutting off water to residents if they fell $150 behind in their water bills, 2,800 homes were estimated to be without running water at the start of the pandemic. (Read more about cities that have not restored water to residents during the coronavirus crisis.)

But bottlers in Detroit have also racked up tens of thousands of dollars of past-due water bills that went unpaid for months, CR found. Not once has their access to water been shut off over the time period we examined. When asked why, the city cited the companies’ strong payment history and an ability to pay their bills. The city said in a later statement that it had made errors collecting past-due balances.

From a regulatory point of view, companies that want to put vast quantities of public water into bottles for profit face few hurdles and minimal ancillary costs, leading some experts to call for taxes on the bottlers. And because the water supply, including the processing and infrastructure, that bottlers rely on is paid for by local taxpayers, the companies’ business is subsidized by the public, consumer advocates say.

“These bottlers are essentially double-dipping—receiving low-cost water subsidized by taxpayers and then turning around and selling it back to the public at a significant markup,” says Brian Ronholm, CR’s director of food policy.

Dasani Water: From Tap to Bottle
Sources: Beverage Marketing Corp. and water billing records from Coca-Cola in Detroit and Pepsi in Harrisburg, Pa.

Shutoffs Pose Health Risk

Detroit has been questioned about the potential health risk of water shutoffs before. In August 2014, residents who had their taps turned off argued in court to suspend shutoffs because a lack of water could create unsanitary conditions and lead to the transmission of hepatitis A, influenza, and other diseases.

Detroit’s lawyers argued that those residents could rely on alternative sources—like bottled water. “Just because a person is out of water doesn’t mean they can’t get water,” a city lawyer said at a court hearing. 

The judge in the case ultimately sided with the city, and the shutoff campaign carried on. 

Now, six years later, Detroit and other cities have taken some steps to address residential water shutoffs during the coronavirus crisis—people need running water not just to cook and bathe but also to practice basic virus-fighting hygiene. 

But the reprieve is only temporary. And it hasn’t necessarily reached everyone.

A Detroit spokesperson says all customers who called to enroll in a program that would turn their water back on during the pandemic have either been restored or are in the process of a restoration. But the spokesperson concedes that some occupants might not have called, and advocates dispute the city’s reported progress. 

“We believe the city of Detroit is vastly exaggerating their progress and underreporting the number of people without water,” Shea Howell—a member of the People’s Water Board, an advocacy group based in Detroit—said during a recent teleconference with reporters.

The coronavirus pandemic has underscored just how problematic water shutoffs can be, as utilities servicing nearly 40 percent of the U.S. population still have not committed to suspending water shutoffs, according to Food & Water Watch. This has consumer advocates worried.

“It’s just unconscionable to make people fear losing their water service at this time,” says Mary Grant, director of the Public Water for All campaign at Food & Water Watch. “We need every governor to step up to address this crisis immediately.” 

‘Paying Twice When They Buy Bottled Water’

It’s a striking situation. People whose water gets shut off because they can’t afford their bill may have no choice but to buy bottled water that comes from the same source that feeds their tap. They may be obtaining bottled water from companies that have been behind on their water bills but didn’t face a shutoff, and whose business depends on access to publicly funded water systems.

And it’s not just in Detroit: Coca-Cola and Pepsi get water from other major cities, including Phoenix and Denver, with a history of shutting off water to residents before the coronavirus crisis.

Coca-Cola didn’t respond to questions from CR about water shutoffs or its late payments, but the company says that it obtains water from a variety of sources, including municipal supplies, and uses a treatment process that “creates a consistent pure, clean, and crisp taste.” The company remains in operation, the company says, because the federal government identified the food and beverage industry as “critical” to keeping grocery stores stocked. 

Pepsi did not respond to repeated requests for comment from CR.

Beulah Walker, chief coordinator for the nonprofit group Hydrate Detroit, which assists residents without running water, pointed out the irony of the situation for residents who have lost their water service at home and may turn to bottled water—possibly Aquafina or Dasani made with city tap water—as an alternative. 

“Detroit residents are paying twice when they buy bottled water,” Walker says. 

Why Companies Bottle Tap Water

Two decades ago, most bottled water in the U.S. came from natural springs, sold by brands such as Evian and Nestlé’s Poland Spring. But bottlers soon came to see the benefit of tap water as a source, says Erik Olson, senior strategic director of health and food at the Natural Resources Defense Council (NRDC): It’s cheaper. “And the more water you use, often, the less you pay per gallon,” he says.

After Coca-Cola and Pepsi introduced their bottled water brands in the 1990s, the industry began to shift from spring water to “purified,” which generally means municipal water that is treated further, sometimes through a process called reverse osmosis. In 2000, spring water made up 67 percent of the bottled water market and the rest was purified water. By 2018, those numbers had essentially flipped, industry data show, with purified water now dominating the market.

The International Bottled Water Association, an industry group, asserts that bottled water provides consumers with a value-added product. “Purified bottled water is not just tap water in a bottle,” says Jill Culora, an IBWA spokesperson. (Coca-Cola and Pepsi aren’t members of the IBWA.) 

“The chemical and physical quality of this bottled water product is not the same as the water that comes out of the tap,” she says. 

The Rise of Bottled Water
See how much the average American consumes of the nation's most popular non-alcoholic bottled beverages each year.
Carbonated soft drinks
Bottled water
Fruit drinks
Milk
Source: Beverage Marketing Corp. DrinkTell Database.
Graphic: Andy Bergmann

But bottlers have caught some flack for failing to correct consumers’ misimpression that all bottled water came from natural spring sources. In 2007, for example, following criticism, Pepsi agreed to state on Aquafina labels that the water was sourced from a municipal supply. “If this helps clarify the fact that the water originates from public sources, then it’s a reasonable thing to do,” the company said at the time. 

Aquafina and Dasani continue to rack up dramatic sales for Pepsi and Coca-Cola, respectively. Last year, industry data show, each company cleared $1 billion in U.S. sales of their bottled tap water brands.

Few Regulatory Hurdles

Companies turning tap water into bottled water can thank the Food and Drug Administration and state regulators, which together oversee the nation’s bottled water, for making the regulatory approval process a relative snap.

For instance, in Michigan Coca-Cola and Pepsi had to provide documentation showing that the Detroit Water & Sewerage Department (DWSD) certified that its tap supply source is safe for consumption. They also had to confirm that their facilities were connected to the Detroit system before paying $25 for a permit to sell a product in the state.

By contrast, when a company wants to launch a spring water brand, they have to undergo a far more complicated and costly process. That includes finding a groundwater source and building the machinery to pump the water up and the infrastructure to transport it to a processing facility—as well as surmounting regulatory hurdles to get the water tested for safety and approved. (Culora says the IBWA couldn’t comment on production cost differences between spring and municipal water.)

Coca-Cola's bottling facility on Warren Avenue in Detroit. Photo: Dustin Blitchok.

And while it’s true that the vast majority of bottlers—if not all—using a public water supply will clean it further, they don’t necessarily have to. If a company bottles tap water but does not treat it, it’s required to explicitly note on the label that its product comes from a municipal or community source and the product cannot be labeled “purified.” (Water that is treated further is not required to be labeled as being from a municipal source, but some products, including Aquafina, come with those labels in bottlers’ efforts to be transparent.)

It’s unclear how many brands produce water this way; the IBWA says it’s not aware of any bottled water products that use a municipal source and aren’t purified, asserting that the possibility any such brand exists is “extremely unlikely.” 

But the IBWA doesn’t represent all bottlers, and in fact, some cities even toyed with the idea of bottling their tap water in the 1990s.

‘Picking on the Little Guy’

In 2014, Detroit’s shutoff policy drew national attention when the city, which emerged that year from bankruptcy, launched a campaign to disconnect service to residents in arrears—forcing some people to turn to other sources, such as capturing rainwater or buying bottled water. Shutoffs have continued since then, but officials concluded in early March that a reprieve was needed to try to help residents during the coronavirus outbreak.

Ricky Reynolds holds up his nearly $20,000 water bill, sent to his home in 2019. Photo: Ryan Felton.

Ricky Reynolds is one of the beneficiaries. The 65-year-old Detroit resident moved into his home down the road from Coca-Cola’s bottling plant last summer after obtaining the deed from an acquaintance for $500. It should have been a happy occasion. Reynolds had been homeless, bouncing between family and friends, so it was a relief to get his own place—until he tried to get the water bill put in his name. 

Reynolds, who is retired, learned from the city that his new home had a nearly $20,000 unpaid water bill.

“It’s hard to catch up with $20,000 when you have a fixed income,” he says. And the city refused to turn on his water unless he paid 10 percent of the bill, he says, a monumental demand for someone living on Social Security income. Reynolds was never able to pay the bill. 

In the months before the city finally restored his water service during the pandemic, Reynolds says, he had to fill up containers with water from family members, then haul them home. And he bought bottled water whenever he could—including, he says, Dasani, which may have been made around the corner at the Coca-Cola plant. (The city didn’t directly respond to questions about Reynolds’ case.)

Detroit’s temporarily suspended shutoff policy states that residents or businesses are delinquent and potentially risk having their water shut off if they are 60 days past due with a minimum balance of $150, a spokesperson says. (The city considers a company’s accounting practices, as well, before determining whether to proceed with a service interruption.)

Records show that since 2017, both Coca-Cola and Pepsi met that threshold at points.

Between April and July 2017, billing records show, Coca-Cola had a $77,600 balance that went unpaid for three months. From August to November of that year, it carried a balance of as much as $287,250 before paying it off. From December 2017 to March 2018, the company had a balance that fluctuated between $1,860 to $108,170 before paying it off in full. Meanwhile, from December 2018 to February 2019, Pepsi had a balance between $1,410 and $29,710 until paying it off.

The city never shut off the companies’ water, and bottling continued.

Disparity in Detroit’s Water Shutoffs
Source: Detroit Water & Sewerage records obtained via Freedom of Information Act requests.

“Since both Pepsi and Coca-Cola have a strong payment history and an unmatched ability to pay their bills, DWSD does not pursue service interruptions,” says Bryan Peckinpaugh, a DWSD spokesperson. “These companies never go longer than three months past due, at which time the balances due, including late fees, are paid. These companies are not a priority target for service interruption due to their payment history and ability to pay.” 

(After CR published this article, the DWSD said that, contrary to Peckinpaugh’s previous statement, the past-due balances cited on the billing data were due to errors on the city's part, including address mailing issues. Regardless, while the city registered Pepsi and Coca-Cola as delinquent, and continued sending bills and assessing late fees, it never shut off the companies’ water.)

Coca-Cola and Pepsi didn’t respond to CR’s questions about why they went months without paying their bills. 

Grant, at Food & Water Watch, takes exception to the city’s position.

“You should have a policy and should apply it equitably,” she says. “I think this is discrimination against low-income households in Detroit, that you’re having a shutoff policy and you’re not applying it, the same shutoff policy, to these big corporations because you expect them to pay down the road.”

Reynolds was also stunned to hear that Detroit let Coca-Cola and Pepsi’s bills slide.

“That’s not fair,” he says. “They’re picking on the little guy.” 

Swimming in Profits

For bottlers, a single municipal source can generate significant revenue, according to records CR obtained.

Pepsi’s average output of Aquafina at a Pennsylvania manufacturing plant is approximately 9.36 million cases per year, according to a January 2018 inspection report. At an industry wholesale average of $1.33 per gallon, that means Pepsi could gross $19.73 million to $23.36 million annually from Aquafina produced at just that one plant, according to an analysis by CR. 

By contrast, billing records obtained by CR show that Pepsi paid $467,941 for water in 2017 to Harrisburg’s water utility operator for 51.21 million gallons—or about one penny per gallon. Pepsi has at least 12 bottling facilities that make Aquafina in the U.S. Coca-Cola has more than 30 that make Dasani.

In Detroit, Pepsi’s plant can push out on average between “500,000 and 600,000 cases of product each day” at its plant just outside of Detroit’s Eastern Market district, according to a 2017 inspection report. (That number counts not just Aquafina but also all Pepsi beverages made at the plant, including soda and bottled tea.)

Coca-Cola has a seemingly good deal in Detroit, too. The company paid the city about $1 million for water and associated fees in 2018, records show, which is less than 0.3 percent of all revenue the DWSD generated in fiscal 2018. That same year, Coca-Cola received 106.13 million gallons of water. 

Subsidized Bottled Water

A spokesperson for Coca-Cola told CR that it financially supports Detroit and other cities in which it operates by paying commercial rates for the water it uses. But, at least in Detroit, the rate the city charges bottlers and city residents is the same.

“PepsiCo and Coca-Cola are charged the same water, sewerage, and drainage rates as any customer in Detroit,” says Peckinpaugh at the DWSD. 

Environmentalists and consumer advocates say that, as a result, bottled water companies are effectively being subsidized by taxpayers.

“The public paid for the water treatment plant to be built, the public paid for the intake structure, the public paid for decades of laying pipes down, the distribution system, the maintenance of that—all those costs are sunk costs,” says the NRDC’s Olson. He adds that the companies also don’t have to contribute to ongoing maintenance costs, essentially giving them a “free ride.”

The IBWA disputes that characterization. Culora, the spokesperson, says that bottled water companies pay utilities for the water they use and that, in doing so, they help “the city generate additional revenue without needing to increase the rates that consumers pay for their tap water.”

But Jim Olson, an environmental and water rights lawyer who works with For Love of Water, a nonprofit based in Michigan, agrees with Erik Olson (who’s unrelated) that the system as it is gives bottlers a financial break. His group drafted a model law that would, among other things, charge bottling companies a royalty or fee on the sale of water, with the proceeds going to a state fund.

“What we have is an ongoing, very lucrative subsidy for the bottled water industry by ratepayers,” Jim Olson says.

Bottled Water Tax?

Others are offering different ways to raise funds from bottlers that can be put toward the cost of maintaining water system infrastructure or providing financial aid to residents behind on their water bill. One idea is for bottlers to pay a tax on their product, or for municipalities to assess one at the point of sale. 

Nick Schroeck, an environmental law expert and associate dean of experiential education at the University of Detroit Mercy, writing in 2018 for The Conversation, an academic news site, focused on a long-running environmental controversy in northern Michigan involving Nestlé, which pays a $200 annual permitting fee to suck up millions of gallons of spring water in the state. Public outrage had been “simmering” over how little Nestlé pays for access to a public resource vs. how much it profits, he said. Schroeck suggested that Michigan could collect taxes on companies that harvest groundwater or spring water, or “significantly” raise the fees bottlers must pay to operate in the state.

At the time, Michigan lawmakers were considering a tax of 5 cents per gallon on water harvested from groundwater by bottlers, who would pay the tax, with the intention of generating revenue for a dedicated fund for water infrastructure costs. But the bill died in the legislature.

Schroeck tells CR he believes there’s still potential in this idea. He suggests a tax for bottlers could be used to help low-income residents struggling to pay their water bills. “As long as there’s a legitimate public health safety purpose for it, I don’t think there’s a problem,” he says. 

Pepsi plant sign outside the company's bottling facility in Detroit. Photo: Dustin Blitchok.

The IBWA’s Culora says her group opposes any effort to tax bottled water. She points to a recent report by the California State Water Resources Control Board that examined the possibility of using a bottled water tax at the point of sale to fund a financial aid program for low-income residents. The tax could raise $153.6 million for such a fund, according to a draft of the report, though, it says, the tax “could have a regressive impact on low-income households that purchase bottled water due to actual or perceived contamination of tap water.” 

But the board adds in the report that most bottled water expenditures are discretionary, and there’s a “possible basis” for taxing it to fund such a program because it contributes to “public trash and other environmental impacts.” (A final version of the report is not complete. Coca-Cola didn’t respond directly to questions by CR about a tax.) 

Since 2016, nearly 16,000 households in Detroit have enrolled in a local financial aid program, according to the city’s water department. But Nick Leonard, executive director of the Great Lakes Environmental Law Center, a nonprofit based in Detroit, says that additional measures are needed to help residents unable to pay. They would ultimately benefit utilities, he adds, by generating more revenue for the utility because more residents would be able to keep up with their bills. 

Consumer Reports agrees there’s viability in taxing bottled water to fund a financial aid program. “A tax on bottlers could be viewed by states and municipalities as a way to help offset that arrangement and allow them to apply needed funds toward assisting low-income residents with their water bills and/or improving their water system infrastructure,” says Ronholm, CR’s director of food policy.

Concerned About Your Tap Water?

If you’re concerned about the quality of your tap water and are on a public system, you should be able to get a report from your local water authority about the level of contaminants that may be present, if you’re serviced by a community water system. The Environmental Protection Agency and World Health Organization say that the novel coronavirus has not been detected in municipal supplies, and risk of it happening is low.

“Most water in the U.S. is safe, and if you’re hoarding bottled water, you’re taking it away from people who might not have safe water at home, people who’ve been shut off,” says Grant at Food & Water Watch. 

Water filters are an option for those who want to exercise added caution, as well. In the past, CR has reviewed filters for their ability to remove certain potentially dangerous contaminants. 

Consumer advocates and activists say that while the move to suspend shutoffs is encouraging, a long-term solution is necessary. That was a theme echoed by public health experts and advocates at a teleconference earlier this month on the move to ban shutoffs in Detroit during the pandemic, including Monica Lewis-Patrick, president of We the People of Detroit, a human rights and water advocacy group.

“Even after the coronavirus pandemic has passed, we must work together to develop an affordable water structure that will allow those who’ve been restored to maintain their water and access to proper sanitation,” Lewis-Patrick says.

Editor’s Note: This article was updated to include a statement sent by the Detroit Water & Sewerage Department after publication.