Home » Category Focus: Spending declines drag down bottled water
Category Focus: Spending declines drag down bottled water
Although it has been a beverage leader for years, bottled water is now facing a number of challenges to keep sales growing. Many companies have opted to branch out with enhanced or functional waters, while others have moved to larger sizes and multi-packs for the more economical take-home market. Aside from new product introductions and packaging changes, the two words on the minds of consumers and manufacturers of bottled water today are economy and environment.
For the first time in nearly five years, Chicago-based market research firm Information Resources Inc. reported a decline in bottled water sales during the past year. The decline may be due to consumers becoming concerned about the effects of PET bottles on the environment, as well as their concern about spending money on bottled water when money is harder to come by these days.
“It all came down to cost,” says Brian Morgan, senior drinks analyst at Euromonitor International, Chicago. “Tap water is basically free and bottled water is very expensive. I think that was the deciding factor.”
Although Aquafina and Dasani took the No. 3 and No. 4 spots, respectively, on IRI’s list of top bottled waters, both showed declines in dollar sales. Aquafina earned $763.4 million through supermarkets, drug stores, convenience stores and mass merchandise accounts, down more than 12 percent for the 52 weeks ending Aug. 9, 2009. Dasani sales decreased 15 percent to $702.9 million.
According to the December 2008 “Bottled Water in the U.S.” report from Mintel International, the number of tap water users will likely rise through 2013. The biggest reasons for not drinking bottled water are the availability of tap water and price, the report states.
Helping to confirm that theory, Brita Water Filters have seen an increase in sales, which seems to back up the idea that consumers are opting for tap water instead of bottled water, Morgan says.
Although many of the top bottled water brands declined in sales during the past year, IRI reports some brands actually saw sales increase. Nestle Pure Life took the No. 9 spot, earning $211.1 million in supermarkets, drug stores, convenience stores and mass merchandise channels, an increase of 17.1 percent. Nestle Pure Life is considered a value brand, and its lower price point likely contributed to its success.
Private label also is known for being a less expensive alternative, and earned the No. 1 spot in bottled water sales. Private label bottled waters grew 5.3 percent during the year ending Aug. 9, 2009, bringing in sales of more than $850.3 million.
“Private label has done well, but that’s not just water, that’s every category where consumers are looking for cheap alternatives,” Morgan says.
Enhanced and functional
In the past, the lure of bottled waters’ on-the-go convenience was enough to keep consumers coming back for more. With consumers double-checking their spending, bottled water companies have had to add ingredients to keep their attention.
Enhanced waters have fared increasingly well because many consumers are drinking them as alternatives to sports drinks, says Garima Goel-lal, senior beverage analyst at Mintel International.
“A lot of people drinking sports drinks probably converted to enhanced water because they viewed them as a low-calorie option for their athletic activity,” she says.
Among the new enhanced waters this year, Glaceau introduced Vitaminwater10, a low-calorie water. The product contains 10 calories per serving and is sweetened with stevia-based Reb-A. It is available in XXX (acai-blueberry-pomegranate), Essential (orange-orange), Energy (tropical citrus) and Multi-V (lemonade) varieties. Vitaminwater10 is packaged in 20-ounce single-serve bottles and 20-packs. XXX and Essential varieties also are available in 16-ounce four-packs.
In its first few months on the market, Vitaminwater10 had $65.8 million in sales, based on IRI’s data, while original Vitaminwater earned $848.9 million. Glaceau’s Smartwater also fared well with $193.5 million, an increase of nearly 60 percent.
“Vitaminwater has created a template of many different flavors and functionalities,” Morgan says. “Some are for brain function and mental acuity, and some are for sports, energy and so forth. I think it’s true that, in general, people are looking for healthier drinks.”
PepsiCo’s Aquafina and Propel introduced waters with a fruit twist. Aquafina FlavorSplash is available in Grape, Wild Berry, Raspberry, Lemon, Peach Mango and Strawberry Kiwi flavors. The 16.9-ounce bottles also use 20 percent less plastic for less environmental impact, the company says. Aquafina also introduced Aquafina Sparkling, a carbonated water with natural fruit flavor. It is available in Berry Burst and Citrus Twist.
Propel added Blueberry Pomegranate to its line of low-calorie, nutrient-enhanced waters. The flavor joins Grape, Kiwi-Strawberry, Berry and Lemon varieties. The company also modernized its packaging, and now uses 33 percent less plastic and 30 percent less label material than the previous 500-ml. bottle.
As for Propel’s functional aspect, PepsiCo launched Propel Body and Propel Mind in Peach Mango and Black Cherry flavors, respectively. Propel Body contains 10 percent the daily value of fiber, and Propel Mind has vitamin E plus choline, the company says.
To complement the healthy trend, PepsiCo-owned Sobe Lifewater released two zero-calorie flavors, Acai Fruit Punch and Mango Melon. The flavors are sweetened with PureVia, a zero-calorie sweetener made from stevia, and infused with vitamins C, E and B.
Taking a less functional, but still flavorful path, Hint Inc. added four flavors to its sugar-free line of flavored water. Hibiscus Vanilla, Watermelon, Honeydew Hibiscus and Blackberry joined Mango-Grapefruit, Pomegranate-Tangerine, Lime, Raspberry-Lime, Peppermint, Pear, Tropical Punch, Cucumber and Strawberry Kiwi varieties.
“Consumers are tired of complicated functional claims and they don’t want to worry about preservative and other artificial ingredients,” said Kara Goldin, chief executive officer at Hint Inc., in a statement. “They want a simple drink that tastes good.”
Skinny Nutritional Corp. expanded its enhanced waters with its addition of Skinny Water Wake Up, a new “breakfast” flavor to its Skinny Water line. Skinny Water Wake Up is a blend of orange, cranberry and tangerine flavors. The product also contains EGCG, a green tea extract.
Speaking of tea, Arizona Beverage Co. partnered with Nestle Waters North America and launched Arizona Tea Waters, a spin on enhanced waters. Arizona Tea Waters are certified organic by the U.S. Department of Agriculture, and combine the antioxidant benefits of green tea with the hydration of spring water, the companies say. The product is available in Yumberry Green Tea, Mandarin Orange Green Tea and Pomegranate Green Tea.
Bottled water with a beauty function is another trend in the category. 9th Street Beverage, a non-alcohol subsidiary of Anheuser-Busch, St. Louis, began distributing Borba Skin Balance Aqua-less Crystallines and Borba Skin Balance Water, in packets and bottles, respectively. The packets are added to a 16-ounce bottle of water for two servings, the company says. The packets and bottled beverages offer antioxidants, vitamins and botanicals for skin-care benefits, such as clear complexion, smoother skin and help for dry, dehydrated skin.
“I think there will always be this desire for the next new thing, or some kind of drink that can do all kinds of wonders,” Morgan says. “I think the growth will go to functional waters and things that have an inherent value that people can understand.”
In addition, companies have introduced powdered packets to be added to bottled waters, which may help keep bottled water sales on track.
With all the challenges in the bottled water category, the question remains: what will happen to the category in the future?
“We have to keep in mind that this category is almost reaching maturity in terms of consumer penetration,” Mintel’s Goel-lal says. “This year, the category will most likely continue to decline. Even if we see growth later on, it will be small growth. [The possibility of] new consumers being added to the category seems to be an issue, at least in this economy.”
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