Beverage Industry

A Touch of Glass

June 1, 2006

A Touch of Glass

With a bit of Americana, Mountain Valley fills a niche in premium bottled waters
By ELIZABETH FUHRMAN

The consumer trend of trading up for gourmet and specialty beverages isn’t limited to categories such as wines, spirits, beers and coffees. Water has a place in this movement too, and Mountain Valley Spring Water Co., Hot Springs, Ark., with its historic brand and glass packaging, is moving its spring and sparkling waters to on-premise and retail channels to fill the premium water niche.

Sixty-one percent of fine dining full-service operators are seeing more orders for bottled water than two years ago, reports The National Restaurant Association, Washington, D.C. “That’s an enormous opportunity,” says Breck Speed, chairman and chief executive officer for Mountain Valley Spring Water. “Americans are a little behind Europeans in enjoying water with all meals. In a lot of cases, where we’re out there competing, we’re not trying to beat out foreign competition. It may be the very first time that restaurant chain or individual fine dining establishment might put bottled water on their menu at all. It’s kind of like the early days for bottled water, so it’s a great opportunity … like the Oklahoma Land Rush.”
Mountain Valley Spring Water may be new to on-premise, but it isn’t new to the water business. The company finds its home in Hot Springs National Park, an area that is a protected watershed known for its warm thermal springs as well as a number of cool springs. Mountain Valley Spring Water products contain a unique mineral content from “Spring One,” one of the three springs located within the company’s protected 2,000-acre tract.
Originally, Mountain Valley Spring Water was sold as Lockett’s Spring Water until a pharmacist named Peter E. Greene changed the name in 1871 and began distributing it nationally. Even though the company has changed hands several times since then, its current owner, Clear Mountain Spring Water, claims it is the longest running continuously produced brand in the United States. Even its headquarters in Hot Springs’ historic district is listed on the National Register of Historic Places.
Speed entered the home-and-office delivery distribution system by starting Clear Mountain in 1988 with a group of investors in Arkansas where the bottled water market was just beginning to develop. Clear Mountain grew along with increasing bottled water consumption and through acquisitions. Along the way, the company began to pick up Mountain Valley distributorships.
When Mountain Valley came up for sale in 2003, Clear Mountain was a natural to acquire the business since it was already Mountain Valley’s largest distributor and since Speed and other investors also owned Veriplas Inc., a PET plastic container manufacturer that was Mountain Valley’s largest competitor in PET product for water bottles in central Arkansas and the surrounding states.
Clear Mountain and Veriplas Inc. combined to acquire Mountain Valley in April 2004, making Mountain Valley part of a vertically integrated company with on-premise, retail and home-and-office delivery sales channels. The company’s sales now break down into two-thirds from water and one-third from plastic container manufacturing.
Mountain Valley’s point of difference boils down to three elements, says Jim Karrh, chief marketing officer. The first thing that makes Mountain Valley different is quality.
“Everyone wants to talk about being high quality, but you need some objective measures,” Karrh explains. “In our case, it’s taste. We know we have a premium taste that is as good as anything that’s available in the world. With spring water, there are things humans can’t replicate. It’s a process of more than 3,000 years that depends on geological properties. What we end up with is a water coming out of the ground naturally sodium free but with good minerals such as magnesium and calcium.”
Heritage is what next sets Mountain Valley Spring Water apart, with stories about the brand that include 13 U.S. presidents, movie stars and sports stars. This leads to the third element, which Karrh calls Americana. “We’re really a bit of American history,” he says. “We’re the only premium domestic water available coast to coast in glass, and the one brand that can be a preferred alternative to imported waters. That, from a marketing and customer standpoint, is a tremendous place to be.”
On-premise potential
Mountain Valley traditionally has been distributed by a network of about 120 independent distributors in 36 states. Historically, the water was distributed through home-and-office route operations, and those independent distributors used what capabilities they could to address the on-premise and retail trades.  
But now the Mountain Valley brand provides opportunities for the whole company to focus on other distribution methods to move the products into the on-premise and retail channels where Speed thinks the company will have a long-term competitive advantage. A targeted focus on retail and on-premise is the reason Mountain Valley redesigned its glass bottles and logos and introduced new products and sizes.
While Mountain Valley has been known primarily for its premium spring water in glass, it did add plastic bottling in the early 90s. In 2004, when Mountain Valley was acquired, the glass single-serve, half-gallon and 1-liter spring water was bottled in a stock glass bottle with a film label and a plastic cap. The packaging wasn’t communicating the premium nature of Mountain Valley Spring Water, Karrh says.
The realities of storing, cooling and serving water on-premise moved Mountain Valley to a fused logo on the bottle. “Clients want a bottle that will look good when they put it on the table, whether or not they put it in and out of high-humidity conditions or ice,” Karrh says.
Staying true to its heritage, the company updated the bottle’s label by going retro and back to a red oval with fonts and designs true to the original Art Deco-style packaging. The back of the bottle also now includes Mountain Valley Spring Water’s story. Additionally, Mountain Valley replaced the bottle’s plastic cap with an aluminum-closure design taken from original Mountain Valley Spring Water packaging.
“The packaging says that this is premium,” Karrh says. “People who don’t even know Mountain Valley, just from looking at the packaging, [can see] that heritage come through.”
Mountain Valley’s next move for on-premise was to bring back Mountain Valley Sparkling Water. The company had produced a sparkling water until the late 1990s, but since its previous owner wasn’t in the on-premise channel, it dropped the variety. Mountain Valley Sparkling is lightly carbonated with a crisp taste including mineral content.
“Sparkling is not a big part of the category generally, but it’s a big deal in the on-premise world,” Karrh says. “Most finer restaurants, caterers and hotel operators will serve more sparkling than still water.”
Moving on-premise sales further forward, Howard Staley, director of on-premise sales, joined Mountain Valley in January of 2005. “The direction I really have is to take the company and new glass products in other channels with a more appropriate go-to-market plan and distributor network,” he says. “That means putting the products in the hands of distributor networks that are more suited for the on-premise/foodservice trade.”
With glass bottled waters the focus of on-premise sales and the relaunch of its sparkling water line, Mountain Valley still needed to provide the appropriate package sizes that on-premise operators require. Typically, the 1-liter bottle is shared during table service. The half-liter is used more for single-serve, but is also shareable and more acceptable in a more casual dining environment. Beginning in July, Mountain Valley will offer a one-third liter of sparkling and spring waters. “That package specifically will have appeal for lodging perhaps for an in-room mini bar or casino business,” Staley says. “It’s also great for meeting breaks and catering where a smaller size is appropriate for grab and go.
“Being able to standardize the process, price point and delivery system is a real advantage for Mountain Valley, because we’re national in scope,” he continues. “We’ve made it possible to have a great sparkling and spring water from the same place. That’s why it’s helpful to have companion sizes and pricing so there is a similar look on the table, and it makes for a more consistent message for the operator in terms of presenting.”
The company is currently in test markets for Ted’s Montana Grills, owned by Ted Turner and George McKerrow Jr., which Staley feels is a perfect fit for Mountain Valley because of its fine-dining American menu experience. Typically, locations that are excellent at moving wine products are the locations Mountain Valley is targeting, including American, French, Italian and other fine-dining establishments. “The wine consumer is a bottled water consumer,” Staley says. “That’s our end consumer, and that’s the restaurant clientele we’re looking for.”
Mountain Valley Spring Water is moving toward a hybrid system of distribution of food, wine and spirits, and beer distributors. One of the company’s largest distributors is Southern Wine & Spirits in Las Vegas, and that city has typically been one of the company’s strongest on-premise markets. “Las Vegas has turned into quite a culinary hotbed,” Staley says. “It’s fueling a lot of really upscale, white tablecloth restaurant businesses that we’re also going directly at.”
Staley is targeting major metropolitan areas, including New York, Miami, California and the Western states, where the company can focus and have field people in place. On-premise sales also will focus on the company’s current core markets such as Atlanta and Chicago, and smaller markets such as Kansas City, Mo.; Memphis, Tenn.; and New Orleans, where the brand name is very familiar and the company already has equity.
Not discounting the impact home-and-office delivery has on the company, the Mountain Valley brand is making an impact in this market as well. Clear Mountain has seven company-owned Mountain Valley distributorships in Little Rock, Memphis, Kansas City, Charleston, S.C.; Savannah, Ga.; and Greenville, Miss. Now, Mountain Valley is a primary product line and an emphasis for home-and-office delivery, says Philip Tappan, president of Clear Mountain home-and-office delivery.
“It’s kind of refreshing in that we’re going back [in home-and-office delivery] and telling the Mountain Valley story and trying to up-sell our customers on the heritage, quality and glass packaging,” he says.
More diversity in the product mix has produced an increase in sales of about 12 percent in the seven company-owned distributorships. For home-and-office delivery, the company provides 2.5-gallon and 5-gallon glass containers.  The division also is discovering that smaller glass packaging is a good trend as well. “We are finding a number of offices that are willing to place the single-serve glass bottles in their boardrooms, executive areas or offices,” Tappan says. The division also distributes Mountain Valley to health and racquet clubs, spas, and through a “Touch of Glass” holiday promotion to home customers and businesses for holiday parties.
Rewarding retail
Bottled water consumers have become more sophisticated, much like overall food consumers, Speed says. Grocery stores are increasing the selection of higher quality goods, with even the bottled water aisles beginning to differentiate, which is where Mountain Valley plans to fit in. The company is beginning to distribute in higher-end grocery chains, with the goal not to compete against the giant cola companies, but in its own premium niche.
And because Mountain Valley is part of a vertically integrated company, the company is able to introduce innovations in packaging. Along with 8-ounce, 12-ounce, 16.9-ounce, 24-ounce, 1-liter and 1.5-liter in PET bottles, the company launched a one-way 4-gallon recyclable bottle this spring. “It kind of crosses retail and home-and-office delivery,” Speed says. “An enormous number of water coolers were sold at retail last year.”
The single-use bottle is made out of recyclable material, and can either be recycled again or discarded. The ultra light bottle – it only uses 307 grams of PET – can function under the pressures created by bottled water dispensers. The product also eliminates bottle deposits for retailers.
“It’s another way to reach into a niche where we think we have a competitive advantage because we’re vertically integrated, and because we’re the first to market,” Speed says.
The company is in the process of developing a bottle using PLA as well. “There has been tremendous interest in the natural foods industry for this,” Speed says.
But Mountain Valley Spring Water doesn’t have any aspirations to be the next gingko biloba, caffeinated, or whatever nutraceutical water. “It’s all right to just be water,” he adds.  
“We’ve got quality and heritage with this water,” Speed says. “This is an enormous opportunity to seek out and really develop and dominate that premium niche.”    
 Historic foundation
Situated along historic Bathhouse Row in Hot Springs’ downtown district, the Mountain Valley Water building is an example of the Classical Revival style. Constructed in 1910, the two-story building originally was home to DeSoto Mineral Springs, and built over a spring that can still be seen at the rear of the first level. In 1921, a third level was added to accommodate a Japanese-styled ballroom, which houses Mountain Valley’s corporate offices today.
The building became home to Mountain Valley Water Co. when its owner purchased DeSoto. However, the company’s headquarters moved to St. Louis, and has had several headquarter and owner changes since then. It wasn’t until 1987 that the headquarters returned to Hot Springs and the company began restoring the original DeSoto building, with then Governor Bill Clinton speaking at the rededication ceremony in 1988.
In 2004, following the purchase of Mountain Valley by Clear Mountain Spring Water, more renovations returned the Visitors’ Center to a more historically authentic state. The “Famous Mineral Water” sign was re-created and placed above the Water Pavilion. In addition, the collection of Mountain Valley bottles and memorabilia for display more than doubled.
Dining with water
Overall, full-service restaurant operators are seeing more orders for bottled water, according to the National Restaurant Association. In terms of beverages, bottled water is second to wine in the number of increased requests. The percentage of full-service operators by type of operation who said their customers are buying more bottled water compared to 2004 are:
Fine-dining 61%
Casual 55%
Family
52%
Source: National Restaurant Association, Washington, D.C.