After Bottled Water? Purified Ice Cubes
By GWENDOLYN BOUNDS
Staff Reporter of The Wall Street Journal.
From The Wall Street Journal Online

You pay $2 a bottle for pure spring water, and $80 for 18-year-old scotch and cool it down with ... an ordinary cube of ice?

A handful of upstart businesses are hoping to persuade consumers, restaurants, airlines, hotels, hospitals and the military that they could be risking their health (and compromising good taste) by not buying prepackaged, upscale ice.

The concept differs from the plastic bags of premade ice that can be purchased at most supermarkets and convenience stores. These new products are trays filled with spring or filtered water marketed as better-tasting than tap water and safer than ice handled by humans.

[AquaICE]
A package of AquaICE ice-cube trays, which are sealed with purified municipal tap water.

Icerocks marketed as "secured spring water ice cubes," are set to hit the U.S. market in October. Four trays with slots for 12 cubes each will cost about $3.99. AquaICE sealed ice-cube trays -- containing purified municipal tap water in plain, lemon and lime flavors -- are already sold in a handful of Ohio stores. The product, made by aquaICE LLC of Dublin, Ohio, costs about $5 for 50 cubes.

It remains to be seen whether enough consumers will find it palatable to fork over 10 cents for an ice cube when it costs nothing to freeze a similarly functioning product from tap water.

"There's got to be a point in time where, with the overall cost of living ... that the average consumer thinks it's ridiculous and will say, 'I can't just go out and buy ice,' " says Bob Richardson, national category manager of beverages for Wild Oats Markets Inc., which operates 100-plus organic-minded stores under the names Wild Oats, Henry's and Sun Harvest. His stores don't carry the newfangled cubes.

While Mr. Richardson thinks the concept has potential -- he saw the Icerocks trays at a recent trade show and says he would consider stocking them -- he says manufacturers will have to convince consumers that they aren't "getting gouged for ice cubes."

Manufacturers are taking a different tack: They say their ice cubes taste better because the water is shielded from odors that linger in freezers.

And just because tap water is frozen doesn't mean there's no bacteria lurking in the cubes -- E. coli and hepatitis A and C, in fact, are potential health threats, says Jane McEwen, spokeswoman for the International Packaged Ice Association, a trade group based in Tampa.

About 16.4 million cases annually of acute gastrointestinal illness are attributed to public drinking water systems in the U.S., say health regulators. But it's unknown how many of those are due to tainted ice.

Yet some experts say consumers shouldn't worry excessively over a fear of water contamination. "Some of these products are pretty silly and harping on paranoia," says Jennifer Berg, director of New York University's graduate program in food studies and food management. "If it's used in commercial food service or down in the Caribbean or parts of Europe and Greece, that's where it would make sense. But at home, where you practice basic hygiene, you aren't at risk."

Retailers say health-conscious consumers have picked up on the safe ice trend, and manufacturers are responding in turn. For instance, Mike Schall, chief executive officer of aquaICE, says his company is working on a line of vitamin-enhanced ice.

"Some people laugh because they think it's a gimmick," says Sunny Patel, owner of Two Brothers Wine & Spirits in Columbus who recommends these ice cubes for scotch or for travel in regions with questionable water purity. "But once they know more about it, they buy it."

For now, smaller businesses, with the backing of beverage and packaged-goods industry executives, are trying to get the trend in full swing. Icerocks, for one, is the product of a Miami-based company called Water Bank of America Inc. founded by three Canadian brothers. The brothers, Michel, Jean-Jean and Robert Pelletier, started their company as a means to acquire springs and other water sources, which they intend to resell to third parties. The company acquired Icerocks, which was sold to consumers on a small-scale in France, from an entrepreneur in 2005. Water Bank has since hired the former president of bottled water purveyor Naya Inc., Stu Levitan, as its chief operating officer.

However, many of the largest bottled water makers aren't involved yet. Most are invested in production and distribution operations for bottled products and would need new equipment to make ice. "We're sticking to our knitting and not getting too diverted," says Jane Lazgin, spokeswoman for Nestle Waters North America Inc., a subsidiary of Nestlé SA and the country's largest bottled-water company with brands like Poland Spring. A spokesman for Coca-Cola Co.'s Dasani says he's "never heard of such a thing" as secured ice.

U.S. consumers are now drinking more bottled water annually -- some 26.1 gallons a person -- than any other beverage except for soft drinks, according to research firm Beverage Marketing Corp. And the industry is exploding with new spinoffs, including flavored and vitamin-enhanced waters.

All that could be replicated in ice format. "Initial drinkers of the protected ice product will be the same type of people who went for bottled water in this country -- people who are well-heeled, germaphobes and like the novelty," says Mr. Levitan. "Over time, if we do this right, I believe this will be a commodity." Ross Colbert, a managing director of Beverage Marketing and a board member of Water Bank, says he sees the premium ice customer as someone who needs ice on a private boat or plane and wants an alternative to dragging ice in plastic bags to the sink to break it open.

Indeed, the ice industry, valued at about $2 billion to $2.5 billion at retail in North America, has been slow to ride the wave of bottled water's marketing success, says Ms. McEwen of the industry's trade group. Plastic ice cube bags that resemble bubble wrap and that can be filled and frozen for camping have been sold for years, as have various machines and trays that shape cubes in different styles. But most packaged ice still comes either in solid blocks or one of two shapes of cubes -- a limitation dictated by machines that produce ice in bulk.

Recently, though, a few makers have been testing the waters: Reddy Ice Holdings Inc. of Dallas repackaged its Crystal Cubes line a couple of years ago to attract a more-affluent crowd in the Arizona market. The cubes, which sell for about 20% to 30% more than a standard seven-pound $1.50 bag, are cut into dense one-inch squares, a design that purportedly makes them melt more slowly. Lang Ice Co. in Chicago markets its square Chicago Classic Cubes on its Web site as "gourmet ice cubes that are designed to last longer." Still, Lang Ice owner Paul Lang says he's not looking only for upscale customers: "Our business focus is more everyday consumption of the product."

To carve out more than a niche, however, will take resources. Water Bank, with the help of lead underwriter Kingsdale Capital Markets (USA) Inc., is going public with a private placement reverse merger transaction that will close on July 31 and aims to raise $4.5 million in capital.

Since mid-June, the company has distributed 5,000 packs of Icerocks in new refrigerators sold by manufacturer Groupe Candy Hoover in France, and to date has spent some $100,000 on packaging, marketing and Web design. Its trays were included in gift bags given to celebrities at the Academy Awards in Los Angeles in March.