While unit expansion remains an elusive undertaking, bottled-water dollar sales continue to exhibit strong resilience in the convenience-retailing channel within the three core buckets of value, mainstream and premium water brands.
To retailer Alex Weatherall, establishing the gold standard of bottled water merchandising means understanding the differences of what sets bottled-water consumers apart.
Some religiously reach for value brands with a no-frills buying mindset, said Weatherall, while others eternally grab the varieties packed with functional attributes or brand cache. But at the end of the day, the owner of Sherborn Market, Sherborn, Massachusetts, sees the lion’s share of water-buying customers making an immediate beeline to Poland Spring, his top non-flavored seller, which he sells 16.9-ounce bottles for $1.25.
“Poland Spring is located chest-height, a prominent cooler position, with five facings,” said Weatherall, a former regional manager for grocery chain Wegmans Food Markets.
While Poland Spring ranks seventh among all non-flavored water brands in the c-store market with $201 million in sales, according to data from Circana, Weatherall said, “We have tradesmen who see Poland Spring as a be-all.”
Elsewhere, though, Gen Z and millennial consumers are gravitating toward emerging cache-fueled brands, such as Fiji, Core Hydration+, smartwater and Prime Hydration, the latter which Weatherall added to the mix in 2023. It found an audience for those seeking water infused with electrolytes to support pre- and post-workout regimens.
“People were clamoring for it, so I sent one of my associates to Vitamin Shoppe to buy a ton of it,” said Weatherall, whose bottled-water sales grow at a faster clip than c-stores’ average growth rate of 6.3%, according to Circana data.
“With Poland Spring, it’s basically, ‘I’m thirsty; it costs $1.25 a bottle, so I’ll grab one.’ There’s no signaling with value brands—simply, you’re thirsty,” said Weatherall. “With Prime Hydration, it’s that Gen Z customer who’s maybe an athlete, has a smart phone and wants Prime because it’s popular on social media or his buddies buy it. That’s a different type of signaling.”
In convenience, bottled water is split into three core segments: value, mainstream and premium. “To many, water is water,” said Scott Love, senior vice president, retail client solutions for Chicago-based Circana. “But over time, we’ve seen category permutations, where one water brand touts alkaline, another functionality and a third where the water is sourced.”
Waiakea, for example, grew c-store sales 63.3% on a small sample size, finding a place among the top 20 c-store bottled-water SKUs, according to 52-week Circana data ending Sept. 10, 2023.
The allure? Waiakea is naturally occurring alkaline volcanic water from Hilo, Hawaii. It’s mineral- and electrolyte-rich and sustainably sourced. These attributes allowed the fledgling brand to not only register stellar dollar sales but grow c-store units 44.9% during the period.
Also part of the premium bottled-water segment: value-added drinks. “Consumers have shown an interest in value-added waters that offer good-for-you, functional benefits, and many are thriving,” said Gary Hemphill, managing director of research for New York-based Beverage Marketing Corp.
“Refreshment definitely rates high with consumers, as does the value of hydration. Some other factors that impact buying include price, package and brand,” said Hemphill. “Most of the new product activity in 2023 is coming from value-added and enhanced waters, such as Gatorade Water [set to debut in 2024]. That’s certainly a new product with high expectations based on the strength of the Gatorade brand.”
Retailer Jon Sanders is blunt when describing consumers of the various water segments.
“What I found is that people are water snobs and need to have their brand of choice or it’s a deal-breaker,” said Sanders, owner of Reef Convenience Store in Spring Lake, Michigan. “They carry it like a badge or personal statement. We only carry four or five brands, including Dasani, Ice Mountain and higher-end Fiji.”
Reef also sees a great deal of success with private-label water, which it procures from distributor United Wholesale or even Sam’s Club—Sanders’ core buying sources.
“With a brand like Fiji, the price point is a nonissue. But other folks are looking for deals, especially in inflationary times,” he said. “We sell a 16.9-ounce private-label water for 69 cents; my cost per unit is only 18 cents.”
Weatherall, however, say stocking private label would only work in his store if it were embossed with a Sherborn Market label, something he said is not economically feasible for him.
Improving category results can be driven by several strategies, including establishing loyalty, and finding ways to stimulate sales through price, promotion and display.
Beyond cold-vault positioning, Love of Circana said c-stores should identify secondary placement opportunities for water, such as warm floor displays, if selling-floor space permits.
From a promotional standpoint, Love said less than one-quarter of c-store bottled water sales is influenced by any extensive retailer promotion or display activations, as the bulk of volume is driven by base price.
That could mean opportunity for a motivated retailer. For example, Jennifer Childers, category insights analyst for McLane Co., Temple, Texas, calls out retailer opportunity in “paring the water sale with another popular item—something like adding a free water to a sandwich purchase,” she said. “Retailers only have seconds to capture a shoppers’ attention, so displaying water near or close to an open-air cooler can also drive sales.”
Love doesn’t anticipate any radical shifts in dollar or unit performance in 2024, with dollars rising below double-digits driven by consumers moving to premium brands.
The new product innovation pipeline will be stimulated by the brands that step forth with niche attributes that resonate with consumers, he adds, from simple users to ‘water snobs.’
“This is a stable, well-developed category,” said Love. “I expect to see enhanced-water brands pulling dollars from some other non-adult beverage categories, such as sports drinks, and also expect to see dollars increase for the new SKUs that offer perceived innovation. It will be interesting to see what next year’s BodyArmor and Waiakea will be.”
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