Around the World for $0.10 per Pound

[xoxoxoBruce]

Our buddy Kirk pointed to an article about the economics of bottled water, by Ethan Zuckerman.

I assumed that “Fiji” was the clever choice of a marketing department intent on associating bottled water with a tropical island. It’s not. According to the label, the water is a product of Fiji, specifically, of the Yagara Valley of Viti Levu, one of the islands that makes up Fiji. The water bottling operation appears to be the brainchild of a Canadian entrepreneur, David Gilmour, who bought the Fijian island of Wakaya in 1972, later building an “exclusive ecologically sensitive luxury resort” on the island.

Gilmour was struck by the absurdity of importing bottled water from Europe or the US to Fiji, and started bottling water on the island. The bottling plant is now a 110,000 sqft facility, run by an Australian, and supported by marketing operations in the US. The plant has been exporting bottled water to the US since 1997.

So here’s the thing: Fiji is really, really far away. It’s 1,500 miles from Australia, about 5,000 miles from Los Angeles, which, in turn, is 2,606 air miles from Cambridge. And while you wouldn’t want to drink the water from the Charles River, there’s really no shortage of excellent artesian well water in Massachusetts.

Water is heavy, at about 8.3 lbs per gallon, and must be expensive to ship. The convenience stores and specialty shops get a fortune for it, which would reinforce that assumption. But NOOOOooooooo.

Turns out that overseas shipping costs are so unbelievably cheap, they strain credulity. The Agricultural Marketing Service of the US Department of Agriculture maintains very useful data on domestic and international transport costs. The quarterly Ocean Rate Bulletin provides costs for shipping a 40′ container of animal feed, poultry, onions, hay or 13 other agricultural commodities from California ports to a number of major Asian ports. While there’s no available rate for shipping bottled water, the rates for 40′ containers of wine (mmm, 40-foot container of wine…) to various ports range from $920 to $3,770, averaging around $1800.

How much water or wine is in a 40 foot container? According to the fine folks at Export911, 40 foot containers generally carry 24,000kg or less. Since water conveniently weighs a kilo per liter, that’s 24,000 bottles for $1,800, or $0.075 per bottle. Assume that Suva gets less container traffic than Hong Kong and that I’m not considering packaging weight, and the price might rise to the princely sum of a dime a bottle.

Damn, that's cheap. I guess those sneakers aren't $125 because of shipping costs.
I read recently, they loose about 10,000 containers a year to the briny deep. Keeping the shipping costs down, means they can't run too tight a ship, I guess.
Of course it would be unethical for the insurance companies to pay off those containers and make up the loss by jacking your homeowners and car insurance.

Well now, the water got from Fiji to CA for a dime....but that's not Harvard Yard...

Our friends at USDA have some info on domestic shipping costs as well, via the Refrigerated Transport Quarterly. In 2003, it cost between $2423 and $4900 to ship a containerload of mixed vegetables from Southern California to New York. Here, we’d expect rates to be a bit lower, as our bottled water doesn’t require refrigeration. But even at the low end of this range, domestic transport costs exceed international ones.

OK, now the Fiji water is at Harvard Yard at what he figures is roughly $0.21 per bottle.
Zuckerman is very anti-bottled water as a waste of money and resources.

This blows my mind. I’m used to the miracles of digital globalization, the ability to send bits from one end of the world to the other in microseconds for fractions of a penny. But the ability to send atoms halfway across the planet for $0.10 to $0.25 a kilo is the miracle that actually makes globalization possible… the good and bad sides of it. If it weren’t so cheap to ship Asian televisions to the US, it’s possible that the US would still produce consumer electronics domestically. But they’d likely cost more, and wages would need to rise for consumers to maintain their standards of living. In other words, high transport costs are a form of trade barrier - lower the barrier and new types of trade become profitable.

I've read two other articles he wrote explaining why he feels bottled water is a huge waste, and he makes a very intelligent and reasonable argument.

I was buying bottled water because my domestic water would eat stainless steel. Then I spent more than some small country's GNP, to fix that and you know what...I still buy it. Convenience...there is no other reason. Sloth, causes a waste of money and petroleum.

Take(sucker punch)that, Mother Earth.
Take (hands cash) that, Big Oil.
Take (first born) that, Middle Eastern Sheik.

Oh, like you're not?