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Water risks ripple through rich beverage industry

AT New York's Del Posto, diners can share a US$130 entree of wild branzino fish with roasted fennel and peperonata concentrato and a US$3,600 bottle of Dom Perignon. They cannot share a bottle of Perrier or San Pellegrino water.

The Italian restaurant backed by celebrities Mario Batali and Joseph Bastianich is one of several shunning bottled water, along with the city of San Francisco and New York state.

"The argument for local water is compelling and obvious," said Bastianich, who is phasing out bottled water across his restaurant empire, which stretches to Los Angeles.

"It's about transportation, packaging, the absurdity of moving water all over the world," he said.

As environmental worries cut into sales from traditionally lucrative bottled water, beverage companies such as Coca-Cola, PepsiCo, Nestle and SABMiller are becoming more attuned to the risks of negative consumer environmental perceptions.

Water is becoming scarcer, raising a fear that so-far manageable price increases could spike, leading drink companies to take action to maintain access to water.

"Water is the new oil," said Steve Dixon, who manages the Global Beverage Fund at Arnhold & S. Bleichroeder, repeating what has become a mantra as climate change and population growth tax water supplies.

"As an investor, I'm not concerned about the reality," Dixon said, guessing there will always be enough water overall.

"But I'm aware of the perceptions ... and you can't totally shrug it off because perceptions are important."

About a third of the world's people now live in areas of water stress, said Brooke Barton, manager of corporate accountability for Ceres, a network of environmental groups and investors seeking to address sustainability challenges. By 2025, she said it'll be more like two-thirds.

Water is still cheap, but that is changing.

"(Water) is currently not a very big cost. The issue is where it will go in the future," said Andy Wales, head of sustainable development for brewer SABMiller, which used 94.5 billion liters of water in its latest fiscal year.

That works out to 4.5 liters for every liter of beer it made.

Water and energy combined only made up 5 percent of its costs, overshadowed by brewing ingredients, bottling materials and labor.

Still the brewer said water costs at a Bogota, Colombia plant are rising some 12 percent a year from increased soil being washed into the river as cattle grazing upstream causes deforestation.

With 139 breweries on six continents, the brewer's total water use can range from about 40 liters for a liter of beer in Central Europe to 155 liters in South Africa.

Using the smaller ratio as a proxy, SABMiller's entire "water footprint" was roughly 8.4 trillion liters of water last year, more than double what the small nation of Iceland used in 2004.

"In the long term we do see it as a risk," Wales said.


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