Nestle Waters Bets on Sparkling

Beverage maker invests in new flavors, production, packaging

VEVEY, Switzerland -- With bottled water expected to outsell carbonated soft drinks in the United States by 2017, Nestle Waters is making a push now to grab share away from CSDs not by shunning carbonation but by embracing it.

Nestle Waters

The company is "doubling down on the U.S.," according to a Wall Street Journal report, where it is launching more flavored versions of its sparkling waters and will build seven production lines this year.

"They want bubbles,” Marco Settembri, chief executive of Nestlé Waters told the newspaper about people who have given up soda. “But they want healthy bubbles.”

Vevey, Switzerland-based Nestlé is launching a green-apple flavor of its Perrier Sparkling Natural Mineral Water and a cherry-lemon flavor for Poland Spring Sparkling Natural Spring Water, among other line extensions, to capitalize on growing consumer wariness toward both sugary and diet sodas. Many of its new products will be sold in redesigned slim cans aimed at freshening the brand, according to the report.

Nestlé’s sparkling water business, which includes San Pellegrino, stands on the precipice of the bottled-water opportunity. In 2014, Nestlé’s sparkling waters grew 14% in the U.S., faster than the 8% growth for its still waters, Tim Brown, chief executive of Nestlé Waters North America, told the newspaper.

But Nestlé’s brands face mounting challenges from supermarket and private-label brands, which are usually cheaper than branded products and account for about 25% of the $13-billion U.S. bottled-water wholesale market.

Of course, Nestle Waters, which has a 35% share of the U.S. market, faces competition from major beverage-makers Coca-Cola Co. and PepsiCo Inc., which command 20% of the market between them.

A Coke spokesman told WSJ the company sees great potential for profitable growth in bottled water, “which is why we continue to focus on building our successful Dasani and Smartwater brands.”

PepsiCo said that its Aquafina water business delivered a strong performance in the U.S. in 2014 and the company is looking forward to “sustainable, long-term growth.”

Perrier is the best-selling sparkling water in convenience stores, according to IRI. Meanwhile, smaller brands, led by Sparkling ICE and including Fruit2o, SkinnyGirl and Cascade Ice, have made their own dents in the sparkling-water market.

Click here to read the complete Wall Street Journal story.

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