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Water vending machine companies compete aggressively to sell water outside of supermarkets and pharmacies at an incredible markup. The industry is only lightly regulated – last year the California Department of Public Health inspected just two machines in San Diego County.
People flock to a Chula Vista parking lot to fill up jugs with water from a colorful kiosk owned by Colorado-based Watermill Express.
The company is one of several competing for customers suspicious of city tap water and fed up with buying bottled water.
Watermill, which runs a few dozen water vending machines across San Diego County, typically pays about $4,000 for the water that comes into its machines – city tap water that must meet state and federal water quality standards to begin with.
Then the company treats the water to improve its taste and quality and resells it for $70,000 a year per kiosk, according to company financial disclosures.
Lani Dolifka, Watermill’s co-founder and CEO, said the markup includes treatment technology but also equipment and labor costs.
Yet the whole industry is lightly regulated, so it’s tough for people to know what they are buying, even though they are often paying a premium.
People pay in the neighborhood of 25 or 35 cents for a gallon of self-serve vended water. That’s less expensive than a bottle from the store but more expensive than a gallon of tap water from home, which costs just pennies.
The industry is lucrative enough to kick off a scramble for spots in front of supermarkets, pharmacies and liquor stores across Southern California. Watermill is small compared with industry giant Primo Water, which acquired North County-based Glacier Water several years ago.
Primo operates over 900 of the 1,100 water vending machines in San Diego, many still Glacier-branded.
Stores that allow water vendors to use their space typically get a cut of the sales and may get a signing bonus. The fight to get space in front of stores has resulted in litigation over companies’ tactics.
“It’s really a nasty business, it’s not a gentleman’s business,” said Ed Rose, an attorney who has represented another smaller industry player, Mountain’s Peak.
Several years ago, Mountain’s Peak accused Glacier of having “deceived, threatened and pressured” smaller store owners in Southern California into signing contracts with Glacier instead of Mountain’s Peak. When Mountain’s Peak won contracts at stores Glacier once held, it said Glacier “frequently refused to remove its machines,” leaving Mountain’s Peak unable to sell water on the site.
Glacier, likewise, accused people of sabotaging its machines and stealing store locations for Mountain’s Peak.
Eventually, the two companies settled, in part by agreeing that they would not disparage each other or tamper with each other’s machines.
The California Department of Public Health oversees the industry.
In 2015, the department inspected 154 machines in San Diego County to look at their maintenance record, sanitary condition and labeling.
Last year, it inspected just two.
In July, a department spokesman said officials had yet to inspect a single one of the machines in San Diego.
Companies that own the machines are required to use approved treatment technologies and the machines must be able to shut themselves down if a disinfection process fails, among other requirements.
On a recent day, Tony Torres, the district manager for Watermill Express of Southern California, showed off the guts of one of the company’s kiosks. Inside were several carbon filters, a reverse osmosis system and an ultraviolet light to disinfect water.
“There’s so much overlap, we make sure the water is absolutely safe,” he said.
Customers say they can taste the difference compared with tap water, but data about water quality is hard to come by. This has frustrated municipal drinking water officials who argue the water they provide cheaply to everyone is already safe.
State regulations say vending companies must test their water every six months using a certified laboratory.
Watermill voluntarily provided nearly 1,200 lab results that showed the company consistently provides water free of bacteria – a basic level of drinking water safety – but in a few cases the tests showed bacteria was present.
Primo did not provide similar records in response to a request from Voice of San Diego.
While companies do maintenance on their machines every month and post the date when they last showed up, if there are problems, it’s not clear how the public would ever learn of them. By contrast, public drinking water systems have to notify customers immediately if they find certain problems and, at very least, send everyone an annual report card. Likewise, restaurants must post health scores.
Tap water in most of urban San Diego consistently meets safety standards, so there’s very little bacteria or carcinogens to begin with, though water agency officials across the state struggle to meet ambitious but unenforceable “public health goals” for how clean people’s drinking water should be in an ideal world.
Dolifka and her husband started Watermill three decades ago because they lived near a place where the government had made, kept and disposed of chemical weapons, which left the water unsafe. They couldn’t afford a water delivery service, so they started working on their own way to treat water.
Their company is now one of many tapping into consumer concern.
“Today’s modern society has created vast amounts of unregulated contaminants, such as pharmaceuticals from prescription drugs, microplastics from washing your fleece jacket, industrial pollution from fire-fighting foam, fracking, Teflon coatings, etc.,” she said in an email.
It’s easy to see how intense the competition is.
The Watermill location in the middle of the Chula Vista parking lot was competing against two nearby Primo-owned machines, one still bearing the Glacier brand in front of a Grocery Outlet, the other with Primo branding in front of a CVS.
Martin Mendoza Barreto, a dental surgeon, came to the Watermill kiosk dissatisfied and distrustful of his tap water, despite generations of federal and state regulations aimed at assuring Americans what they’re getting is safe.
He has a water filtration system in his North Park home, buys bottled water and comes to water vending machines – all in an effort to drink clean water. He heard about this Watermill location from a friend. He said even his home filters foul up, but he also isn’t sure what’s in the water he buys in a bottle or from a vending machine.
“It’s the government’s responsibility to ask those companies to provide as much information as possible,” he said.
There are labeling requirements for the machines, though only a few of those requirements touch on safety. Companies must say what treatment process they use, if any, and when the machine was last inspected.
Dolifka said in 2007 she got together a group of industry officials to push for weekly checks-ins, but Glacier refused to service its machines that often, and the state ended up opting for a monthly check-in.
Dolifka said Watermill checks on its machines at least weekly, if not daily.
“Unfortunately, many of our competitors have not exhibited the same commitment to public health,” she said.
Primo declined to comment on things that happened at Glacier before it acquired the company in 2016, including the litigation with Mountain’s Peak or the meeting Dolifka recounted.
“We meet or exceed state, federal and industry regulations and standards. We continue to invest in our quality control team, systems and technologies to improve our already stellar record,” Primo said in a statement.
In a financial disclosure, Primo said its business is “dependent on generating greater consumer awareness of challenges with today’s tap water quality.”
So, the less people trust their tap water, the better the company may do.