Economics of Water in Kennebunk, Maine

I couldn't help noticing one of the letters to the editor in the Maine Sunday Telegram. It was written to respond to the story on Poland Spring's planned contract to buy water from the city of Kennebunk, which I cited in my earlier post on selling the last drop of water. Here's what letter writer Jack Reynolds of Portland had to say:

Poland Springs makes the math easy.

It'll pay $250,000 a year for the privilege of mining 250,000 gallons of water a day from the aquifer that supplies Kennebunk, Kennebunkport and Wells.

Unfortunately, a little multiplication discloses that a great deal for Poland Spring falls a little short for the people of the tri-town area. Those 250,000 gallons of water a day work out to 91,250,000 gallons for each of the 30 years that Poland Spring's lease would run.

The 91,250,000 gallons deliver 963,500,000 16.9-0unce bottles of Poland Spring bottled water, selling for about $1.25 a bottle.

If the deal goes through, Poland Spring's parent, Nestle Waters North America, grosses $866,875,000 for each yearly lease payment of $250,000. That's about $.0003 for each gallon of the 250,000 gallons extracted daily from the local water supply.

Thanks for the math, Jack!

Of course, Nestle has other costs to cover when selling that $1.25 bottle of water:

• the plastic bottle (which almost everyone -- except the Society of the Plastics Industry -- would agree we'd be better off without)
• the cost of transporting the weight of all that water from place to place, despite the fact that folks could be drinking water from their local water system, and of course
• the money they spend on labeling and marketing all that water so it's more appealing than what we can get from a public drinking fountain.

All that must cost them close to a dime a bottle. And of course a hefty chunk of that $1.25 is the retail mark-up, which probably accounts for half the price.

I guess it's a good thing they're getting the water essentially for free from Kennebunk, or they wouldn't make any money at all.