Around the world for $0.10 per kilo

The last two days in Cambridge have been unusually warm – one of the “Indian Summers” we tend to get here in New England before the snow comes – and I’ve been drinking lots of bottled water. Yesterday, in the law class Berkman friends and I are team teaching, I noticed that the water brand of choice appears to be Fiji artesian well water. (A walk through a couple of Cambridge convenience stores last night reveals that this isn’t just a Harvard phenomenon – it’s stocked in two other stores on Mass. Avenue.)

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. One of my neighbors, Cricket Creek Farm in Williamstown, is planning on starting a bottled water business in the next year or so. Doesn’t it seem logical that bottled water from New England would be cheaper than that bottled water from halfway around the world?

It’s certainly what I thought. But hey, as so often happens, I’m completely wrong.

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.

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.

Assume it takes $2000 to get our water from Suva to Long Beach and other $3000 from Long Beach to Cambridge. That 8,000 mile journey costs about $0.21 per bottle, about a fifth of the water’s retail price. In other words, while it’s probably the major component of product cost, outpacing the cost of packaging and labor, it’s quite possible to make a profit shipping water from Fiji to Boston.

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.

A double bottom line analysis – considering environmental as well as financial implications – raises some disturbing questions. With shrinking oil supplies and oil at $50+ a barrel, how long can we sustain a world where it’s economically feasible to ship drinking water 8,000 miles? The triple bottom line – economic, environmental and social – opens up yet more issues. What happens when Fijian water has an easy time making it into the US but Fijian businessmen – or immigrants – don’t? Why do we have Fijian water on our store shelves, but no Fijian films, music, food or beer?

It’s just another surreal day in 21st century America. And hey, the water’s delicious.