The following inquiry concerning the use of bottled water was submitted at Community and Protective Services Committee to City staff.
Inquiry
Would staff report back to Committee on the possible options available to eliminate the sale of plastic water bottles from City administrative, recreation and cultural facilities? Including a process by which they could work with our partners and lease holders to encourage the elimination of the sale of plastic water bottles in all City facilities.
Response dated January 20, 2022
BACKGROUND
The sale of cold beverages in most City facilities, through both vending machine and concession counter sales, are subject to the terms and conditions of a 5-year pouring rights agreement with Coca Cola. The associated pouring rights budgeted revenue pressure to the City is $276,000 annually.
Though the pouring rights agreement was intended to end in 2016, it was also subject to a minimum volume commitment (MVC) specifying that the agreement would remain in place until 115,000 cases of drinks had been sold. By 2016 this volume had not been achieved and the terms of the agreement remained binding on the City. There is currently an outstanding balance of 22,688 cases of Coke products to be sold in order to meet the MVC requirement and bring the contract to an end.
In the last 5 years, the City has taken steps to provide alternatives to bottled water at its facilities. New water fountains have been installed at many municipal facilities and has existing fountains have been converted or replaces with newer models that can conveniently fill reusable drinking containers. The City has also installed signage and floor decals in many of facilities highlighting the availability and location of water fountains. Many City facilities now have a visible, effective and efficient alternative to disposal water bottles.
As a result of these measures, and broader social and environmental initiatives, water bottle sales at City facilities have steadily declined. In 2019, approximately 19% of total sales in City facilities were bottled water, compared to 25% in 2018. Due to pandemic related facility closures and Provincial restrictions in 2020 and 2021, minimal sales of any beverage products have occurred.
Two options have been considered for the elimination of plastic water bottles from City facilities:
Option 1 – Pouring Rights Agreement Buyout
The terms of the pouring rights agreement with Coca Cola remain in place until the outstanding MVC has been achieved. The option to buy out the remaining MVC and terminate the agreement would cost the City approximately $574,000. This would bring an immediate end to the contract and allow the City to either discontinue the sale of beverages at its facilities or pursue a new pouring rights contract with restrictions on certain products and container types. The termination of the pouring rights agreement would result in a revenue shortfall of approximately $276,000 annually along with a corresponding need to reduce budgeted revenue targets by this amount.
Option 2- Eliminate Bottled Water at City Facilities
Noting the decline in the sale of bottled water at City facilities, the City can elect to eliminate this product from vending machines while under the existing pouring rights agreement. Based on recent sales volumes, it is estimated that the City will achieve the outstanding MVC requirements in approximately 36 to 48 months. Bottled water represents 11% of the total number of cases sold through vending machines, or approximately 1,276 cases annually. By eliminating the sale of this product, it is estimated that the timelines to achieve the MVC would be extended by an additional year once the volume of sales on the remaining products returns to pre-pandemic levels.
Although this option has the potential to delay the fulfilment of the existing MVC requirement under the current pouring rights agreement, it does not require additional funding and does not significantly impact overall sales revenues from the sale of cold beverages.
After assessing the impacts of both options and reviewing the impact of COVID-19 related facility closures, staff have approached Coca Cola to eliminate water bottles from vending machines, which will be replaced with other Coca Cola products. Staff are working with the vendor to work out specific details. All bottles are expected to be removed by the end of Q2 2022.
With respect to reducing or eliminating bottled water from concessions operated by City partners and commercial vendors, RCFS is proposing the initiation of a direct request for the voluntary elimination of this product as existing stocks are depleted. In addition, the City of Ottawa has begun to include a restrictive clause for plastic water bottles in rental and service agreements with third parties.
