Water Pressure | Maine's independent water bottlers need more than perfect H2O to compete with giants like Poland Spring

Whatever challenges Maine may grapple with, one thing is certain: We are well hydrated. Maine is home to North America's largest spring water bottling facility — Poland Spring's Hollis operation — and a dozen active independent spring water companies owned by Mainers. Though the latest news around the water cooler is that plastic bottles and fuel exhaust mean the spring water industry helps pollute the environment, for the time being the bottled water industry remains a steadily bloating behemoth, second only in the American beverage world to king soda. There's gold in them there springs.

In 2005 and 2006, PepsiCo's Aquafina and Coca-Cola's Dasani were among the 10 most popular beverages in the country. Americans are expected to spend more than $16 billion this year on bottled water, making water the second most popular type of U.S. beverage after carbonated soft drinks. By 2010, Americans are expected to plunk down $20 billion a year for bottled water.

But if tomorrow morning you uncover a pristine surface spring in your backyard, strategy, not saturation, should be your modus operandi.

Dana Drillen says heady competition from the corporates is, for better or worse, the nature of the business. When Drillen, 57, took over his family's century-old Oak Grove Spring Water company in 1978, he was its only employee. Under Drillen, Oak Grove's home and office water cooler client base increased from the 300 his father served to roughly 2,000. In 2006, Oak Grove generated more than $300,000 in revenue selling to clients within an 80-mile radius of the company's Brewer headquarters. Drillen says Oak Grove has been profitable since around 1980 and he is considering acquiring a small spring water company near Brewer whose name he would not divulge.

Independent spring water companies like Drillen's took off in the late 1990s and early 2000s, according to Scott Whitney, compliance officer for the Maine Drinking Water Program, a division of the Department of Health and Human Services that monitors bottled water facilities in Maine. When Whitney began working for the DWP in 1998, he says there were only a dozen or so facilities registered with the state. Today, there are 33 bottled- and bulk-water facilities licensed by the DWP to sell water in Maine, including six sites registered to Nestlé Waters North America, which owns Poland Spring. Of the 23 facilities owned by Mainers, 13 sold water last year (including Pure Mountain Spring in Fryeburg, which is owned locally but sells water exclusively to Nestlé Waters). Whitney says between two and four new Maine bottlers launch every year.

But no Maine bottler rivals Poland Spring's dominant share of the northeast water market. Nestlé Waters, headquartered in Greenwich, Conn., is the biggest single distributor of bottled water in the country. Sales of Nestlé's 12 domestic and international brands, including Poland Spring, generated more than $3.5 billion in 2006 in the United States alone (Nestlé also markets to Canada). According to Nestlé, when a person shopping in the Northeast purchases bottled water, they choose Poland Spring a little more than half of the time.

"I view it, in five years, in the end, there'll be two [water] distributors in the state of Maine," Drillen says. "[There] will be Nestlé and probably Pepsi."

Oak Grove's Drillen describes Poland Spring as an aggressive competitor that "could come in and put me out of business if it chooses. They haven't greatly affected my business but it is yet to come," Drillen says. "They simply have such a huge market share and it's so profitable that they can literally price us out of business."

Oak Grove last year bottled 250,000 gallons compared to Poland Spring's more than 636 million gallons. Oak Grove's five gallon bottles still beat Poland Spring on price — they cost about $1.50 less than their Poland Spring counterparts — but Drillen knows that could change. Water biz challenges are sometimes enough to make him wish he'd never quit his job as an engineer back in 1978.

"If I had known then what I know now, I'd still be working for Sylvania, he says."

Hard water
Selling water the earth gives up for free ain't as easy as it sounds. Little water companies have to deal with enormous corporate brands like Dasani, Aquafina and Poland Spring. These companies offer volume discounts and donations of cash and equipment to ensure their bottled water products are the only kind sold at a certain university or institution. Their deep pockets allow for immediate, wide distribution in small and large stores, and they can afford to pay what are called slot fees for space on large supermarket chain shelves, which according to University of Southern Maine marketing professor Robert Heiser can cost upwards of $200,000 annually.

Even if small bottlers can get a toehold on shelf space, they still have to factor in the cost of purchasing plastic bottles (around $50,000 a year for an average Maine bottler) while larger bottlers often make their own. And the cost of gas (around $25,000 annually for a Maine indie) to deliver this heavy commodity, which affects bottlers large and small, can break a small bottler. But getting the spring water on your property into the hands of the thirsty is critical — industry experts agree if your water is too costly or isn't readily available, chances are consumers will just buy the next guy's.

Most consumers choose a bottled water brand based on price and availability, according to Gary Hemphill, managing director of the Beverage Marketing Corporation, a global beverage consultant and research organization based in New York City. "If you don't have good distribution, that's a problem because probably in most cases people aren't going to walk out of a store if they don't carry your product, they'll just buy what's there."

To stay alive in the modern water business, indies need to get creative.

Bar Harbor's Mount Desert Spring Water relies on private label clients — like the Cat ferry or local high schools — to boost revenue and may develop a line of flavored water. Carrabassett Spring Water in Peru depends on its national private label clients after selling its home and office bulk service to Poland Spring in 2003 for, says co-owner Jim Milligan, between $1 million and $2 million. Pure Mountain Spring's local owners created the Fryeburg company in 1997 to sell water exclusively to Poland Spring, which bottles it under the Poland Spring label. Northern Maine Bottling Co. in Presque Isle, whose flagship product is Achapani water, is talking with Carrabassett Spring Water about sharing distribution routes. Watson's Springs of Maine in Milo is up for sale, after years of operating in the red amid crushing competition from companies with more money for distribution and marketing, says owner Gordon Watson.

"I think the history will prove that now that the biggies are in it the small ones will come and go unless they find a niche," says Rick Evangelista, owner of Mount Desert Spring Water.

Despite the competition, Bryan Pullen's Summit Spring should have a good shot. The Harrison spring is actually located in the woods, near the top of the highest peak in Cumberland County. The company is one of four Maine bottlers to hold Maine's premium-grade water certification. And Summit Spring also is a rarity because its spring water comes directly from a surface spring. Most spring water companies use a bore-hole well driven down into an aquifer to extract water faster than the natural spring would produce it.

First bottled for commercial use in 1875, Summit Spring has always been a small, locally revered operation. Cool water gushing up from the silt earth on Summit Hill was barreled and carted off during the late 19th century to clients as far away as New York City, where it was sold as a disease-curing elixir. For those who didn't want to pay delivery charges, the spring's owners in 1888 built a four-story hotel and spa in the spring's backyard. The hotel has since burned, but the one-room stone spring house built on the hillside in 1936 to protect the spring remains eerily preserved, its original granite stones frozen in time by the moist air the spring inside creates year-round.

In August 2004, Pullen, a commercial pilot for U.S. Airways, bought Summit Spring from previous owner Kennen Cole, who bottled water by hand for a few dozen clients in the home she still resides in next to the spring. Pullen says he arranged to pay Cole about $2.5 million for the property, including $400,000 up front, and continues to pay in annual installments. Cole accepted Pullen's offer, despite interest from Nestlé, because she wanted to keep the Summit Spring operation small. Pullen, a buzz-cut former military man, vows he'll never force more water out of the aquifer than the 38 gallons per minute that naturally bubble to the surface.

And he probably won't be tempted to break this promise anytime soon, since every week Pullen watches gallons of some of the cleanest water in the state run down Summit Hill because he can't sell it all. Of the 35 million gallons the spring produced last year, Pullen bottled only about 202,000. His two full-time employees work in a $1 million facility Pullen built next to the springhouse, bottling Summit Spring water only a few hours a day, and often not every day. The rest of the time, gravity pulls water out of the spring through underground piping into the main room of the bottling facility, through a steel pipe snaking down the wall and out a spout connected to a grate-covered channel bisecting the floor. On a recent non-bottling day, the whoosh of the water zipping away underfoot was the only sound in the room. Pullen stood inside the doorway of the facility, its concrete floor stained damp with profit leaving his fledgling business, and admitted life could be sweeter at Summit.

"We need help," he said.

Playing up purity
Pullen knows he can't compete on price with the giants — labor, fuel and bottle costs mean his store liters sell for about twice as much as Poland Spring, which operates speedy, high-tech bottling facilities and makes its own bottles. So Pullen's turning to his historic brand and his premium Maine water ranking. He figures if he can convince consumers that his surface spring water is an actual rarity — a bubbling source that for most bottled water companies exists only as a marketing gimmick — he can thrive despite the competition.

But using distinction to appeal to consumers driven by convenience is an uphill battle.

Three years ago, one of the first things Pullen did after buying Summit Spring was to hire the Westbrook consulting firm P.Doc Creative Partners. Pullen has since retained the firm, at a cost of $50,000 and counting, to redesign his logo, expand his website and develop advertising and graphics. According to Sheldon Perkins, partner and creative strategist at P.Doc, he and Pullen talk almost daily about expanding the brand and navigating new challenges in the market, like the growing controversy about the waste plastic water bottles produce.

Pullen believes marketing is his ticket to cracking distribution zones outside of central and southern Maine and New Hampshire (he's applied for vendor licenses in New York, New Jersey and Massachusetts). P.Doc convinced Pullen to sell his water almost exclusively in organic and natural food markets like Wild Oats and Whole Foods, where consumers are more willing to pay a premium for a brand. To attract that discriminating dollar, P.Doc redesigned Summit's logo to recall the 19th century version, and also revamped Summit's website to feature Summit Spring's premium grade certification, its Maine Organic Farmers and Gardeners Association membership and its history as a surface spring.

"What's tough about water," says Perkins, whose companies included other niche food companies, "is the perspective it's all the same. The segment we're developing are the people who care about the quality of the water and the impact of the water on the environment."

On that breezy non-bottling day on Summit Hill, Bryan Pullen sat in the passenger side of his cluttered Ford truck on the dirt road leading away from the spring house, talking about water. Water as a declining resource. Water as a healing solution. Processed tap water, he declared emphatically, is dead. Spring water, though, filtered up from the ground, as constant as the air we breathe, that stuff is alive. Maine is to water what Saudi Arabia is to oil, Pullen said.

A few hundred feet away, Pullen's fountain gently gurgled under a custom-made stainless steel encasing.

"I want to resurrect this brand; there's such a story to tell," Pullen says, starting the truck. "That's what drives me and excites me — these things that are lost."