Soda is out, and sparkling water is in
If you’re a millennial like me, odds are your refrigerator and recycling bin are currently jammed full of colorful cans and bottles of sparkling water. In recent years, sparkling water sales have exploded as Americans search for a healthy alternative to artificially sweetened drinks.
Bottled water surpassed carbonated soft drinks for the first time to become the most popular U.S. beverage by volume in 2016, according to an annual report from consulting firm Beverage Marketing Corporation. Americans spent over $15 billion quenching their thirst for bottled water last year alone.
Sparkling, seltzer and mineral water only represent around two billion of the $15 billion sales total, but the segment is expanding at double-digit rates. Top sparkling brands include international giants Perrier and San Pellegrino, and American brands like Sparkling Ice, LaCroix and Polar.
But an ongoing trade dispute about beef — which is older than most millennials themselves — could threaten the ability of European brands to import water to the U.S. market, directly affecting the choice of sparkling water available on your grocery store shelves.
A sparkling market
Sparkling water is essentially water with bubbles. The popular drink- which goes by other aliases including carbonated water and fizzy water- is made by dissolving carbon dioxide in water, either naturally or by treatment.
The current sparkling water craze is due less to the introduction of a new product, but rather a resurgence of an old standby. Perrier entered the U.S. market with its natural sparkling mineral water from France in the late 1970s, sparking a new craze in the 1980s. It’s no surprise that many of the companies who created today’s popular U.S. brands — including Sparkling Ice and LaCroix — actually got their start in the 1980s.
Today’s sparkling water market is bubbling over, thanks in part to a recent surge in young drinkers. Brands like Fort Lauderdale-based LaCroix have developed dedicated followings on social media, with loyal consumers even dressing up as their favorite flavored pastel colored can for Halloween. LaCroix is cashing in on millennials’ sparkling water enthusiasm, recording a 65 percent jump in sales from 2016 to 2017, according to a report by Beverage Industry.
In addition to many popular American brands, the U.S. imported nearly $600 million worth of water in 2016. The top sources of imports were Italy, France and Fiji. International brands San Pellegrino and Perrier — both owned by Switzerland-based food giant Nestle — top the list for imported sparkling waters and are also experiencing double digit growth in the U.S. market. In 2016, French Perrier grew nearly 20 percent and Italian San Pellegrino 10 percent.
The trade beef threatening your sparkling water
Despite the continued popularity of European sparkling water on U.S. shelves, a trade dispute that started nearly 30 years ago over beef and growth hormones could threaten its availability today.
The trade dispute originally started in 1989, when the European Union (EU) banned imports of meat treated with growth hormones, essentially blocking American beef from entering the EU market. The dispute was brought to the World Trade Organization (WTO), where the WTO decided the EU’s beef ban contravened the WTO rules.
When the EU refused to remove the ban, the United States received permission from the WTO to impose tariffs on 34 products imported from the EU, including some cheese, chocolates and even mustard. This list stayed in force for 10 years, until the United States and EU brokered a new deal in 2009. The EU agreed to allow a certain quota of beef products not containing growth hormones to enter its market, in exchange for the United States suspending tariffs on some EU products.
In December 2016, the U.S. Trade Representative (USTR) under the Obama administration opened the latest chapter in the ongoing trade drama. The USTR, on behalf of the beef industry, said the United States hasn’t been able to fully reap the benefits of the 2009 agreement because non-U.S. meat suppliers were filling the agreed upon quota. The USTR announced it was considering imposing tariffs on 90-plus EU products in retaliation, this time including aerated and mineral water.
In February 2017, the USTR asked for public comments and held a hearing on the subject to get feedback on the proposed trade action. Unsurprisingly, Nestle opposed ramping up trade barriers against its products. In a letter to the USTR, Nestle said it would be “severely affected by the proposed tariffs on its S. Pellegrino and Perrier brands”. The company called its water and chocolate products “unrelated” to the beef trade dispute.
Bursting the sparkling water bubble?
The Trump administration has yet to announce whether it will implement the proposed tariffs against European goods. It’s just one of many trade items that could be announced by the administration this year- including trade actions on steel, aluminum, and more. In its first big trade action of 2018, the U.S. decided to impose tariffs on imported solar panels and washing machines.
The ongoing beef battle serves as an example of how long and arduous the trade dispute process can be, and how things can be easily bundled into trade disputes and agreements that you may not expect. For international brands like San Pellegrino and Perrier, it’s an unfortunate reminder that trade disputes can threaten to burst your growing sales bubble. For consumers, it’s a realization that a trade dispute -that may even be older than you are- can directly affect the availability of some of your favorite imported products.