Water experiences bottle neck in sales
Bottled water sales continued to dip amid environmental concerns and the changing preference for tap water. To win back some consumers, companies have repositioned bottled water as a healthier refreshment option, industry analysts say.
Chicago-based SymphonyIRI Group’s sales data show that bottled still water sales slid 1.4 percent in the 52 weeks ending Aug. 8, 2010, in U.S. supermarkets, drug stores, gas and convenience stores, and mass merchandise outlets, excluding Wal-Mart. Sales recovered a bit from last year’s larger slide of 6.6 percent, according to 2009 SymphonyIRI data. Mintel International, Chicago, forecasts that the category will shrink by an average of 5.2 percent a year in current prices during the next five years, according to the company’s “2009 Bottled Water” report.
Similarly, the enhanced water segment that had grown at a double-digit clip from 2004 to 2008 experienced its first decline in 2009 as sales fell 6.4 percent, according to Mintel. The research firm forecasts recovery for enhanced waters, but it does not expect it to return to double-digit growth patterns, according to its May 2010 “Functional Beverages Segment Performance” report.
“Most of the categories have done about the same as what they were trending in the past, with the notable difference being functional waters,” says Richard Haffner, industry manager at Euromonitor International, Chicago. “… It’s a little bit more negative than we had thought, but functional waters are a relatively small part of the entire category. The majority of the category is still [water] and that trended a little bit more negatively than we thought.”
Private label bottled still water continued its positive sales trends and could reach $1 billion in sales next year if current trends hold. For the 52 weeks ending Aug. 8, private label bottled still water sales increased 10.3 percent to $967 million in the measured channels, increasing its dollar share of the category to 15.1 percent, according to SymphonyIRI data. Private label’s unit sales increased even more quickly as it grew by 13.3 percent to more than 444 million unit sales during the time period.
As private label has enjoyed growth in the bottled still water category, major brands have continued to experience falling sales. PepsiCo’s Aquafina, which has the second largest dollar share of the market, saw sales drop 6.8 percent to $714 million in measured channels for the 52 weeks ending Aug. 8, according to SymphonyIRI data. The Coca-Cola Co.’s Vitaminwater sales dropped 18.2 percent to $709 million, and the company’s Dasani brand saw sales slip by 12.5 percent to $626 million in measured channels during the time period, SymphonyIRI data show.
Nestlé Pure Life, however, was a bright spot among the top sellers of bottled still waters. The brand is lower priced than many other national brands, and saw sales increase by 32 percent to more than $276 million, for the year ending Aug. 8. Nestlé also has repositioned its Pure Life brand as a direct competitor to drinks containing sugar with a campaign on its website, nestle-purelife.us, asking participants to sign a pledge to swap at least one sugared drink per day for water. Pledge participants who registered online received a $1 coupon off a purchase of Nestlé Pure Life. The company also is giving away a year’s supply of water in a contest.
“I think one of the things [bottled water companies are] trying to do is, to a certain extent, reframe their positioning so they’re a healthy alternative to carbonates, which suffer from a lot of disadvantages,” Haffner says. “I think they’re trying to frame themselves against the carbonates and other categories as opposed to being healthy in and of themselves.”
To combat environmental concerns about purchasing bottled water, many companies have repackaged their products in lighter weight bottles. A study commissioned by the International Bottled Water Association (IBWA) revealed that the gram weight of 16.9-ounce single-serve bottled water containers has dropped by 32.6 percent in the past eight years. In 2008, the average amount of PET resin in each bottle had declined to 12.7 grams from 18.9 grams in 2000, according to the IBWA.
Despite a push from the IBWA for recycling of PET water bottles, approximately 14 percent of water bottles are recycled by consumers, according to a May report on naturally healthy beverages by Euromonitor. This is why many bottled water manufacturers have taken it upon themselves to introduce bottles with less packaging, the research firm stated.
Both Dasani and Aquafina have made marketing pushes to promote their more eco-friendly bottles. The Dasani plant bottle is made from up to 30 percent plant-based materials, including sugar cane and molasses, but the bottle is still recyclable, according to the company. PepsiCo’s Aquafina brand repackaged its bottled water in a new Eco-Fina bottle, which the company says uses 50 percent less plastic than its 2002 design.
“Advances made in light-weighting bottled water containers reduce waste, preserve resources and deliver a more sustainable product to consumers,” said Joseph K. Doss, IBWA’s president and chief executive officer, in a statement.
Losing its luster
The fast decline in sales of enhanced waters can be attributed to category maturation and the recession, Euromonitor’s Haffner says.
“We’re seeing some saturation when you look at the pattern of the declining growth rates, but I suspect the economy had a bigger impact after seeing how much they’ve fallen off from last year to this year,” he says.
Sales trends for enhanced waters have mirrored macroeconomic conditions, Mintel reports, as the category recorded strong gains from 2005 to 2007 before slowing to single-digit growth in 2008 and declining in 2009.
“As the economy stabilizes in 2010 and begins to enter a sustained period of growth in 2011 and beyond, sales are likely to improve,” according to Mintel’s report on functional beverages.
Looking to capitalize on that rebound will be several enhanced waters that have been released in the last year. Arizona Beverage Co. launched Rescue Water, which includes a proprietary blend of Twinlab vitamins and antioxidants, in four varieties with corresponding benefits. The Berry Blend Rescue Water contains L-theanine for mental focus benefits and lemon balm extract to help the body relax, the company says.
Better Health Beverage released UnderWay, a line of appetite-suppressing waters fortified with a blend of fiber developed by bariatric physician Dr. Sasson Moulavi. The beverage includes an ingredient called HeroFiber that contains soluble dietary fiber to help maintain cholesterol, glucose and insulin levels within normal range, the company says.
In addition to the recession, consumer concerns about calorie and sugar content of enhanced waters likely spurred the decline, Mintel reports. “Many consumers avoid functional products that they believe are very high in sugar and too sweet tasting,” Mintel reports. “…Clearly, low-sugar, low-calorie formulations are performing better than others.”
Euromonitor’s Haffner echoes those sentiments about enhanced waters, saying that the health and wellness trend among consumers has forced enhanced water manufacturers to balance added functionality with reduced calories and sugar.
Haffner says that the trend has pushed enhanced water companies to move from low-calorie to no-calorie brands, which have enjoyed more success during the last year.
Earlier this year, The Coca-Cola Co. replaced its Vitaminwater 10 line when it launched Vitaminwater Zero, a zero calorie enhanced water that is sweetened with Truvia, crystalline fructose and erythritol. The line is available in seven flavors, including Go-Go (Mixed Berry), Recoup (Peach-Mandarin) and Revitalize (Green Tea). Each variety provides at least 100 percent of the daily value for vitamin C in addition to B vitamins and electrolytes. In addition, the varieties offer different benefits, such as vitamin E and ribose in the Go-Go variety and manganese and vitamin A in XXX (Acai-Blueberry-Pomegranate) flavor. For the 52 weeks ending Aug. 8, Vitaminwater Zero had sales totaling $75.6 million.
In 2008, PepsiCo launched a zero-calorie Sobe Lifewater sweetened with stevia. This year, Lifewater had sales of $257.9 million, an increase of more than 60 percent, in the 52 weeks ending Aug. 8 in measured channels. The brand expanded its zero calorie lineup with Sobe Lifewater B-Energy, a line of all-natural enhanced waters with vitamins B3, B5, B6 and B12 in addition to guarana and ginseng. B-Energy is sweetened with erythritol and available in Black Cherry Dragonfruit and Strawberry Apricot varieties.
“It looks like taking the sugar out and going to zero calories is where the functional waters are going,” Haffner says. “That’s having a positive impact.” B