Hi I'm Derek Thompson,
this is 'Economics in Plain English,'
where I answer your questions
about business and money.
You asked,
Why is bottled water so expensive?
It's a good question.
But the first question I had in response was,
'Expensive compared to what?'
Compared to the stuff you'd buy
out of a vending machine
bottled water isn't expensive at all.
It's practically the same price as soda,
and cheaper if you buy it in bulk.
But compared to tap water, bottled water
is expensive.
Really expensive.
240 to 10,000 times more expensive.
A single half liter of bottled water
costs as much as a day's worth
of cooking, washing showering,
and toilet flushing
with ordinary water.
If a family went through their day
using bottled water instead of tap water,
their monthly water bill could be as much
as $9,000.
But why is it so much more expensive?
The first difference between water and bottled water
is the bottle.
That sounds obvious and it is obvious,
but what might be less obvious is
how much goes into that bottle.
Making it, marketing it, transporting it.
For every dollar that you spend
on a bottle of water sourced from abroad,
you're spending about 33 cents in transportation costs.
For every liter of bottled water that you drink
the production process consumes twice that much.
So when you buy one liter of water,
you're actually paying for three liters of water.
That brings us to the second ingredient in bottled water
which is:
water.
Bottled water companies have two ways of getting this water.
They can either pay a city or a spring to acquire it,
or they can simply own their own spring.
But both these ways cost money.
After all there isn't really such a thing as free water.
Even the water that feels free to you
is paid for by taxes and utilities.
There's one last ingredient you're paying for
when you buy the most expensive kind of bottled water.
And it's not the bottle,
and it's not the water.
It's the label.
It's branding, it's marketing.
From advertising campaigns
to buying famous spokespeople,
to marketing with big fancy sports teams,
it costs a lot of money to stand out in
a crowded marketplace when you're
selling basically the most common thing on earth.
Americans spend $15 billion every year on bottled water.
Incredibly we drink more of it than we drink beer
or milk.
So the real reason why companies are able
to sell us high-priced bottled water is really quite simple.
You're willing to pay for it.
And so am I.