2013 Beverage Report, Part 2: Bottled Water

On the rebound and being enhanced

Steve Holtz, Editor in Chief, CSP Daily News

OAK BROOK, Ill. -- Bottled water has been in the news since Florida Senator Marco Rubio (R) took a much-lampooned sip from a bottle of water as he delivered the Republican response to President Barack Obama's 2013 State of the Union address last week.

Rubio--considered by many to be a viable 2016 presidential candidate--has largely managed to subdue negative buzz and weather the late-might comedy onslaught by acknowledging the awkwardness of the moment.

Further, he is using it to solicit donations for Reclaim America, his political action committee (PAC)--raising more than $100,000 so far by selling more than 3,450 water bottles since Wednesday, according to an ABC News report. The white water bottles, which bear the name "RUBIO" in red letters, come with a minimum donation of $25.

"Send the liberal detractors a message that not only does Marco Rubio inspire you … he hydrates you too," the PAC said on social media.

Meanwhile, Poland Springs, the brand of bottled water quaffed by Rubio, said on social media: "Reflecting on our cameo. What a night!"

Retail Channels

"Price continues to be an ongoing story for bottled water," Gary Hemphill, senior vice president of information services at Beverage Marketing Group in New York, told CSP Daily News about water in all retail channels. "There remains significant pricing pressure in the category with the emergence of private label as a force in the category."

In convenience stores, however, SymphonyIRI Group scan data shows private-label bottled water volume sales dipped a significant 22% in 2012. Coca-Cola's Dasani and Pepsico's Aquafina saw some growth as a result, but Nestle Waters North America's regional brands and premium waters were the real winners (up double digits in several instances). And that growth is expected to continue after a couple of slow years in the late 2000s.

"We project bottled water will see 5% to 6% growth in 2013 and 2014 and even into 2015 due to health and wellness trends," Jim Donker, director of national accounts at Nestle Waters North America, Stamford, Conn., told CSP Daily News.

Hemphill also credits the move toward health and wellness as the driving force that allowed bottled water to "rebound since the depths of the recession." "The category is aided by its positioning as the ultimate health beverage," he said.

"Bottled water is the No. 1 selling beverage around the world, but here in the U.S. it still trails carbonated soft drinks," Donker said to underscore the potential of the category. "We're looking closer at when bottled water will pass CSDs as [the most popular] packaged beverage [in all channels], and what we're seeing now is probably as soon as 2018." Of course, in c-stores, water surpassing CSDs is a distant reality--5.4 billion units for CSDs vs. 1.9 billion for water--but the movement in all channels illustrates the opportunity.

Mel Landis, chief customer officer at Coca-Cola Refreshments, Atlanta, agrees there is tremendous opportunity in the noncarbonated beverage business, and says Coca-Cola hopes to lead the way in innovation. "This whole space for consumers in an active, healthy lifestyle, the hydration space, really resonates well with us," he said. "VitaminWater Zero and PowerAde Zero have opened up that category, particularly to women that … wanted the hydration benefits but never wanted the calories."

One Drop at a Time

Meanwhile, enhanced waters have reached a new level of prominence as several beverage company start-ups--Karma, Activate, etc.--have entered the category to challenge VitaminWater, which dropped almost 5% in volume in 2012.

Adding to the new bevy of brightly colored bottles are enhancers that consumers can add themselves. Products such as Crystal Light to Go and MiO, both from Kraft Foods, Dasani Drops from Coca-Cola and private-label brands have pioneered a new beverage/general merchandise subcategory.

"We continue to see consumer trends toward customization, flavor variety and convenience," said Jessica Sheth, senior associate brand manager for Kraft, Northfield, Ill., about the rollout of MiO Liquid Enhancer in 2010. MiO and Dasani Drops come in less-than-2-ounce bottles and are intended to be mixed with bottled water, allowing the consumer to add as much or as little to their preferred taste. "Specifically, MiO targets Millennials, and while price is an important consideration for this group, uniqueness and trend-inspired attributes are also essential," Sheth said.

Extensions of MiO have already included an "energy" line that adds caffeine and a "fit" line, rolled out in January, that provides electrolytes for a sports-drink-like beverage. MiO Energy sold more than 7 million units in c-stores in its first year on the market, according to SymphonyIRI Group data.

Retailers and consumers can likely expect extensions of Dasani Drops if the first four flavors, introduced this past fall, catch on.

"Dasani Drops, that's an enhanced water, just in a different form," said Landis. "How do we add value to core water, whether it's nutrients or flavor or whatever it is? … The whole ingredient-enhanced thing is really interesting. If you can do drops in flavors, why can't you do nutrients in concentrate? Why can't I do energy, vitamins, etc.?"

CSP's complete 2013 Beverage Report.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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