2014 Beverage Report--Trend: The Stairway to Health. Countertrend: The Road to Flavor

Consumers alternately demand wellness and big tastes, and they’re willing to pay for both

Steve Holtz, Editor in Chief, CSP Daily News

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Bottled Water: Sparkling Bubbles Up

At the NACS Show in October, retailers found no fewer than a dozen brands of carbonated, or sparkling, waters on the expo floor.

Coca-Cola Co. highlighted its Fruitwater flavors. PepsiCo redesigned the packaging of its Aquafina Flavorsplash Sparkling. DrPepper Snapple Group (DPSG) got into the business big with Canada Dry and Schweppes. Nestle Waters featured both Perrier and its regional sparkling waters. Then there were the smaller guys: Sparkling ICE, Cascade Ice, National Beverage Corp.’s La Croix and others.

With such a focus on the subcategory, it’s surprising to find the sale of sparkling waters dipped 2.7% in convenience stores during the 52 weeks ending Nov. 30, 2013, and a whopping 22.6% for the prior four weeks, according to Nielsen.

DPSG, however, sees sparkling water as a growth category for the future and is investing in both sweetened and unsweetened bubbly waters.

“On the unsweetened side, we are taking our Canada Dry and Schweppes sparkling seltzer waters, which have traditionally been available on a regional basis, and rolling them out nationally in single-serve formats for sale in the c-store channel,” says Ivan Alvarado, director of category management for the convenience channel at DPSG. “We also recently signed an agreement with Sunny D through which we are now distributing their [sweetened] Fruit 2o offerings.”

Often, according to consultant Mary Pellettieri, the products are the most obvious alternative when consumers move away from carbonated soft drinks for a perceived healthier beverage profile. And she expects more in the future as consumers seek to keep the fizz but lose the sugar or aspartame.

“I think we’ll go back to carbonation; we just haven’t figured out what that product is yet,” she says. “I think we’ll see carbonated teas. There’s more innovation to come. It’s just going to have to get through this period of people going elsewhere.”

Still Water Stages a Coup

For years, carbonated soft drinks have made up the largest beverage category in the country and certainly in c-stores.

But that won’t be the case for long. Sales trends suggest bottled water will overtake CSDs as the largest-selling beverage category by 2017. It’s already taken the lead in 15 major markets in the United States, and with overall U.S. sales growth of 3.4% and c-store growth of 4.2% for the 52 weeks ending Nov. 30, 2013, according to Nielsen, the takeover will continue.

“The trends are very, very good and continue to point to a consumer who is looking for healthy hydration,” says Jim Donker, director of national accounts for Nestle Waters North America, Stamford, Conn.

Gary Hemphill of Beverage Marketing Corp. agrees. “In bottled water, we will see growth once again—especially in private-label, single-serve waters,” he says among his predictions for 2014. “Due to aggressive pricing, this is where the greatest growth is and is likely to be in the future.”

Nestle Waters sees three key trends driving water sales: health, people on the go more often, and cultural and demographic shifts.

“Consumers are more readily telling us what they need, that they need different beverages and different packaging for different need states,” says Chelsea Allen, senior manager, category and shopper solutions for Nestlé Waters. “It’s clear that a 20-ounce bottle isn’t going to meet every need, so we need to have larger sizes for when they have a longer day, if they’re on the go more or they have a sport cap for when they’re at the gym.”

Just the Stats: Bottled Water

2013 unit growth in c-stores through Nov. 30: 3.4%

Bright spots: Desire for healthy beverages growing; new need states to be met.

Pain points: Lack of flavor misses a major trend.

If bottled water were a musical entertainer, it would be: old-school Muzak. It’s ubiquitous. It’s endorsed in doctors’ offices everywhere. There’s not a lot of taste. The older you get, the better it sounds.

Bottled-Water Sales Growth

C-store sales, 52 weeks ending Nov. 30, 2013

Single-serve is the dominant packaging for bottled water in convenience stores, carrying the category to 3.4% growth despite dips in multiserve and sparkling water sales, according to Nielsen data.

Subcategory Volume PCYA
Single serve 5.5%
Take home 3.8%
Multiserve -2.8%
Sparkling -2.6%
TOTAL bottled water 3.4%

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