At the end of The Big Short, a movie detailing hedge fund manager Michael Burry’s bet against the housing market prior to the 2008 market crash, a single line states: “Michael Burry is focusing all of his trading on one commodity: Water.” Now, years later, his prophetic line is coming true: bottled water is set to become the largest soft drink category in 2019, and clean water tech/water sustainability is garnering unprecedented investment. The water and wastewater treatment market is anticipated to be worth $681B by 2025, while bottled water consumption has increased over 90% since 2008.
There are two sides to the water market: one, is the consumer side, driven by health and wellness trends, which has resulted in rising demand for drinking freshwater; the other is increased need for water supply for industry and agriculture. NewtonX examined both sides of the water market as part of a recent Clean Water Market project, that consisted of surveys and interviews with beverage industry CXOs and investors, as well as with CXOs at leading clean water tech companies and investors in these companies. The data and insights in this article are informed by the results of the NewtonX Clean Water Market project.
The La Croix Craze is Just The Tip of The Iceberg: Why the Water Market is Exploding
In 2018, then-CEO of PepsiCo, Indra Nooyi famously said “Water in all its forms, still, sparkling flavored; still, flavored sparkling; electrolytic waters; sports hydration, they’re all growing categories.” That same year, PepsiCo acquired sparkling water machine maker SodaStream for $3.2B, in a move that many speculated was an effort to compete with the sparkling water craze surrounding La Croix. However, La Croix branding alone does not account for the rise in packaged water: the sparkling water behemoth is actually over 20 years old (founded in 1996), but only took off after 2010, when Americans began to curb soda intake for health reasons.
Over the past four years, the sparkling water category has more than doubled, and was worth over $1.7B in mid 2017. As consumers become more and more health conscious, their demand for water has risen. But this is just the tip of the iceberg: the rise in consumer demand has been mirrored in rising demand for clean water across industries, including the food and beverage industry. Indeed food and beverage companies are one of the largest culprits of wastewater: a soda or soft drink uses 50 gallons of water to produce, the average cup of coffee requires 35 gallons of water, while a pound of beef takes 1,800 gallons of water to produce — and the vast majority of this water is discharged into a waterway.
Additionally, demand for clean water for agriculture and industry is on the rise: 69% of global freshwater is committed to agriculture, while the industrial sector accounts for 19% of water consumption. With a rapidly rising global population, this demand will only increase, as will the 12% of water consumption used in households.
The oil and gas industry is also heavily dependent on water, even though many of the world’s largest oil reserves are in the extremely water-starved regions. The industry relies on water during drilling to lubricate and cool the drill, as well as in hydraulic fracturing operations, where water is mixed with chemicals to create fractures in the rock and hold these fractures open so oil or gas can flow into the well. The industry also produces water — at an average rate of 10 barrels of water per one barrel of oil — most of which ends up being wasted.
By some estimates, by 2030 demand for water is expected to exceed supply by 40%, meaning that water dependent industries, including agriculture and the oil and gas industry, will need to find ways of recycling contaminated water for reuse.
Enter: Clean Water Tech
The wastewater treatment market is expected to surpass $680B by 2025, with Asia Pacific accounting for almost half of revenue share. Much of the market is focused on consumer water purification systems to get clean drinking water to humans. However, water recycling for industrial and agricultural use is also a growing sector of the market, with GE Water & Process Technologies and Siemens as the leading providers, but other players including 3M Purification, Aqua Tech International, and early-stage startups such as Forward Water Technologies acting as competition.
As our global society becomes more and more environmentally conscious, water regulation will likely increase, for oil and gas companies in particular. This will increase the surge of investment in water reuse tech. Similarly, as consumer demand for bottled water rises, the food and beverage industry will need to not only have sustainable water sources, but also begin recycling excess water used in production to curb costs and decrease their water footprint.
Just as Michael Burry predicted, the water market shows no signs of slowing down any time soon.