Bottled water: No longer cool?

NEW YORK (Fortune) -- Recently, I stopped by my neighborhood Exxon station to conduct a price test. A 20-ounce bottle of Aquafina water cost $1.57, including tax. A 20-ounce bottle of Pepsi also cost $1.57. Regular gas sold for $3.05 a gallon.

Yep - water costs the same as soda and three times as much as the gas.

Some brands like PepsiCo's Aquafina are made from filtered tap water.

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So critics are asking: Why drink bottled water?

After all, it's pricey. Packaging and shipping water consumes energy and contributes to global warming. Empty bottles add to litter and solid waste. And, as a rule, bottled water is no safer or healthier than the H2O that flows from municipal water systems.

What's more, blind taste tests, while wholly unscientific, often show that few people can distinguish between bottled and tap water.

No wonder environmentalists, shareholder activists and church groups are targeting Coca-Cola (Charts, Fortune 500), PepsiCo (Charts, Fortune 500) and Nestle (Charts), the leading sellers of bottled water. Some examples:

• Shareholders working with an activist group called Corporate Accountability International filed a resolution with Coca-Cola asking the company to report on the sources and safety of its bottled water. (It got 7 percent of the vote at Coke's annual meeting last week.) The group also met with Nestle officials last week.
• The Natural Resources Defense Council, Sierra Club and World Wildlife Federation have all urged their supporters to consume less bottled water. A 1999 NRDC study found that bottled water was no purer or safer than most tap water.
• The Religion News Service, in a story published on the Web site beliefnet.com and in The Christian Century magazine, reports that a "fledgling campaign against the bottling of water has sprung up among people of faith."
• Salt Lake City's outspoken mayor, Rocky Anderson asked city officials to stop handing out bottled water at meetings. "The environmental impacts surrounding the production, shipment and disposal of bottled water do not fit within the city's goal to conduct itself in an environmentally sustainable way," Anderson wrote.
• A handful of high-end restaurants - including Chez Panisse in Berkeley, the home of celebrity chef Alice Waters - have stopped serving bottled water.

"This is going to build momentum, year after year," says Deborah Lapidus, an organizer with Corporate Accountability's "Think Outside the Bottle" campaign. "If you Google 'bottled water' now, you'll see a lot more concern than we've ever seen before."

Maybe so, but bottled water remains a bright spot for the beverage business. U.S. sales of bottled water rose by nearly 10 percent in 2006, according to estimates from Beverage Marketing Corporation provided to the International Bottled Water Association. Americans consumed about 8.3 billion gallons of bottled water last year - about 26 gallons per person.

Pepsi's Aquafina, the best-selling brand, and Coke's Dasani, which is second, are made from purified tap water. Nestle, the global leader, gets most of its water from spring sources; they are sold in North America under such regional brands as Ice Mountain, Deer Park, Poland Spring, Arrowhead, Ozarka, Zephyrhills and Calistoga.

Nestle has had to fight lawsuits in Michigan and California from opponents who charge that the company is depleting local supplies. But Jane Lazgin, a spokesperson for Nestle Waters North America, says: "There's no evidence of environmental harm." She says the company's goal is to minimize its water use and preserve local sources, noting: "We don't build these $100-million plants on wheels."

Although some critics argue that the commercialization of water undermines the idea that people are entitled to safe, clean drinking water, the companies say that their water use makes up only a tiny fraction of the global supply and that they, too, support public water systems.

Coca-Cola supports nearly 70 public water projects in 40 countries, in partnership with such groups as CARE and the World Wildlife Fund. Starbucks' (Charts, Fortune 500) Ethos Water, which is distributed by PepsiCo, donates a portion of its profits to water projects in the developing world.

The companies also say they try to minimize the environmental impact of bottled water by, for example, using recycled resin to make plastic bottles and reducing the bottle's weight. Coke executives who spoke to Fortune say they don't see bottled water in competition with tap water, but as an alternative to packaged drinks.

"Consumers are making a choice of bottled water versus another beverage," says Greg Koch, director of global water stewardship for Coca-Cola. "Do I want a Coca-Cola? Do I want a coffee? Or juice? Or is it happy hour? There's a time and place for bottled water, as there is for milk and juice and beer."

He's got a point. What's more, it makes perfect sense for Coke and Pepsi to sell water as a wholesome alternative to sugary sodas - for which they've taken a lot of flack from nutrition groups.

"Our message is about convenience and great taste and choice," says Elaine Palmer, a spokesperson at PepsiCo, which has charitable projects to support public water in China and India.

Still, for consumers who want to minimize their impact on the environment and their waistlines, there's a good alternative to bottled water - namely, tap water and a reusable water bottle. Corporate Accountability sells a 22-ounce blue aluminum bottle emblazoned with the slogan "Think Outside the Bottle."

Gina Solomon, a physician and senior scientist with the Natural Resources Defense Council, who oversaw the group's 1999 study, uses a low-cost filter at home and a reusable bottle of tap water.

"People complain about the cost of gasoline," Solomon says. "No one seems to realize that they are paying for a picture of pretty mountains on the label and a product they could get for free from their own tap."