Bottled Water - Big Business in Indonesia

by |September 12, 2011

Water-businessmen sell piped water at an inflated price to those without access in Jakarta’s slums  Photo: Jakarta Globe

The movement to challenge the bottled water industry has come a pretty long way in countries like the USA, Australia and Canada. Public education campaigns by organizations like the Council of Canadians, Pacific Institute and Corporate Accountability International, have debunked the myth that bottled water is necessarily cleaner or healthier than tap water, and emphasized the absurdity of paying such high prices for a product we can get from the tap. Studies also emphasize the environmental burden of bottled water, starting with the energy and raw materials necessary for producing the bottles, transporting them, and the end-user problem of discarding plastic waste. These issues have been covered before by my fellow Water Matters bloggers.

While bottled water continues to turn significant profits in the USA and Europe, beverage companies are focusing more and more attention on the emerging markets of Asia – where an anti-bottled water campaign seems virtually impossible. In countries like China, India and Indonesia, economic growth is giving Asian urbanites the disposable income to spend big on commercial products, and bottled water consumption is exploding.

I recently spent some time in Indonesia, talking with academics, urban planners and aid workers about the country’s drinking water woes (over 100 million people lack access to safe drinking water). The consensus is that Indonesia is witnessing a major behavioral shift toward dependency on bottled water. Of course this turn to the bottle is primarily occurring in the middle classes – but the Asian Development Bank estimated this class grew to 43 percent in 2009, which in a population of around 245 million is no small figure. In the same year, Indonesia consumed 15.7 billion liters of bottled water, making it one of the largest total consumers in Asia, second only to China.

Before bottled water became a serious market in Indonesia, people boiled their water. For those connected to the piped network, you could boil it a couple of times and be satisfied that it was drinkable. Outside of the network, water would probably be sourced from a local well, and it might need to be boiled then sit overnight for the sediment to settle before it could be consumed.

These days, things are both better and worse. In major cities like Jakarta, the water has become increasingly contaminated – a consequence of urbanization, increased pollution of surface water sources, the leaching of sewage into groundwater, increased salinity from rising sea levels, and over extraction by unregulated neighborhood wells and industry. At the same time, people who can afford it now have the convenience of bottled water being sold on every street corner and in every shopping center – in gallons, liters and small compact bottles – a trend that has emerged only within the past 15 or so years.

The French company Danone dominates the Indonesian market, accounting for around 60% of all bottled water sales with its majority owned Aqua brand; but Nestle, Coca-Cola and PepsiCo are also players – and all signs point to market expansion. A huge host of small local companies has also appeared in the last 10 years, offering more competitive prices. In 2010, membership of Indonesia’s Association of Bottled Water Companies reached 183 local and foreign owned businesses. Some small-scale entrepreneurs set up re-filling stations that provide treated water sourced from either mountain springs, their own well, or sometimes from a source connected to the piped network. So selling water is big business now in Indonesia – whether you are a large company or a small private vendor.

When there is such little public trust in government to provide clean water, no wonder business is booming. Even people who are connected to a piped water supply only use it for showers and washing dishes, they cook with bottled water. So homes that are being supplied with treated water through their pipes, are also regularly purchasing bottled water for their everyday consumption – probably from one of Aqua-Danone’s 11 springs and 15 factories.

Gallons of Aqua’s bottled water ready and waiting for distribution  Photo: Budi Sugiharto

The Aqua brand is growing fast, and with net profits rising by 16% in 2009 the company has plans to expand its bottling factories (and therefore the natural springs it uses). This kind of investment in the outer districts of Indonesia is welcome – it provides jobs, and revenue via company taxes and the tariffs charged for using spring water.

In some places, however, local farmers haven’t been too happy with Aqua’s level of water extraction – which sits at around 6 billion liters a year. At various factories, like those at the springs in Sukabumi, West Java, farmers claim that over the years the water levels have been significantly depleted (just like communities near bottled water plants in the US and India). Since 2006, Aqua-Danone has expanded its Sustainable Development team from 2 to 30 staff, hiring specialists with expertise in agriculture, micro-finance and hydrology. The company knows that using and selling a natural resource like water can be a sensitive business, and that it must demonstrate its environmental credentials to the communities in which it operates. Aqua-Danone even received an MDG award for its recent efforts. Yet protests continue, with anti-water privatization NGOs rallying the farmers, and the company doing what it can to placate the antagonists while also scaling up their water-focused CSR programs.

But this and other conflicts like it are isolated events in Indonesia. NGOs here have a hard time rallying the troops like they can in the US or Australia. Aqua-Danone really provides a service in Indonesia, not just a luxury product, and they perform their service far better than the government. In fact, it’s hard to think of an incentive for local governments to invest in drinking water improvements when the private sector is already filling the gap. Hence the massive shift in the water consuming behavior of tens of millions of Indonesians over the past decade.

Air RahMat demonstration and distribution initiative at a public school Photo: Institute for Public Health and Water Research

The risks of bottled water to health and the environment remain, whether being sold in the Global North or Global South. And the WHO does not consider bottled water an improved or sustainable solution to water access in countries like Indonesia. One hope is that breakthroughs in ‘point of use’ filtration systems will begin to take off. This means people could drink water from the tap, or from a local well, if they use something like Air RahMat. This product, developed by the US Center for Disease Control, was introduced into the Indonesian market in 2006 by USAID. It was intended to be an affordable alternative to boiling water, and to purchasing water from vendors or bottled water companies. The Asian Development Bank claimed it to be the solution – people would no longer have to boil their water, spend extra money on gas, or even more money on bottled water.

But what happened to this revolutionary product? No one I spoke to in Jakarta had even heard of Air RahMat. And these are people working every day on water planning, infrastructure and policy. According to one post-project report by USAID, changing people’s consumption habits has proven difficult – they are used to buying their water already treated, or in the poor areas boiling it themselves. Without changing this behavior and mind-set, the product won’t sell. Hmmmm….perhaps Air RahMat should hire the marketing team from Aqua-Danone!

Columbia Water Center demonstrates research-based solutions to global freshwater scarcity and climate-related water risks.  Follow Columbia Water Center on Facebook and Twitter

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Sarah FechtKirthAlex NugrohoMuhammad Harfian AbdullahLeroy Lafarge Recent comment authors
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Leroy Lafarge
Guest

“This kind of investment in the outer districts of Indonesia is welcome ” everything is unfortunately said here. As this kind of business is seen as profitable by the government (creating local employment, creating local competition, bribes paid) they will not try to improve the water supply system quickly and with efficiency since it has a huge cost.

Muhammad Harfian Abdullah
Guest

it’s happen when you see on big city but low productivity, i think.

Alex Nugroho
Guest
Alex Nugroho

that’s the problem indonesia have from last time, and even for now.
i think government doesn’t have solutions for this.

Kirth
Guest
Kirth

Interesting that the link you provided for this new technology Air RahMat is not there. The page has been removed. Why and by whom I ask.
Special interests?

Sarah Fecht
Editor

Hi Kirth,

Likely the US AID has just updated and reorganized its website in the 8 years since the link was originally added to this story. But thanks for letting us know about the broken link — I’ve updated it with a different link that may be helpful.