27 July 2017

Water Everywhere in Bottles

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Despite obvious drawbacks—the plastic and the extra cost for something essentially free out of the tap—thirst for bottled water just keeps growing. U.S. bottled water volume rose 7% last year. That puts it on track to outsell soda by 2017, according to forecasts by industry tracker Beverage Marketing Corp. Nestlé SA, whose water brands include Pure Life and Poland Spring, sold more water than Dr Pepper Snapple Group Inc. sold soda last year, making Nestlé—not Dr Pepper—the No. 3 company in the U.S. for nonalcoholic beverages, according to Beverage Digest.

That is bad news for Coca-Cola Co. and chief rival PepsiCo Inc. which together control roughly two thirds of the higher-margin U.S. soda market. Between 2000 and 2014, per capita bottled-water consumption more than doubled to 34.02 gallons from 16.74 gallons while soda fell to 39.92 gallons from 53.17 gallons, according to Beverage Marketing. There are now hundreds of brands vying in a market that was non-existent not that long ago, leaving those hallway and playground drinking fountains in the dust.

Coke and Pepsi together do have about a fifth of the bottled-water market. Coke’s main brand is Dasani; Pepsi’s is Aquafina. But they would rather be selling soda. Over the past decade, according to Beverage Marketing, the wholesale price for a gallon of water has dropped to $1.23 from $1.63 while soda has risen to $4.05 from $3.05. With water, “The philosophy is stack it high and sell it low,’’ said Bill Sipper, a beverage consultant at Cascadia Managing Brands. Retail sales of bottled water totaled $18.82 billion last year, estimates market researcher Euromonitor, compared with $36.87 billion for soda.

Environmental concerns dog the product in some quarters. At least 18 national parks, including Grand Canyon and Mount Rushmore, have prohibited the sale of bottled water. Bottled water is frowned upon on many college campuses, and in May, protesters demanded that Nestlé stop tapping California’s water supplies during the state’s drought. Starbucks Corp. stopped using California water for its Ethos brand, but Nestlé hasn’t changed.

Water wars are heating up. Bottled water brands spent $84.5 million on advertising last year, much less than the $650.6 million spent advertising soda, estimates Kantar Media. But Fiji Water, owned by closely held Roll Global, alone plans to spend $30 million this year for its first U.S. television campaign, contrasting the pristine volcanic island that produces its water with grimy cityscapes.

Coke has a new ad campaign featuring actress Jennifer Aniston touting its vapor-distilled, electrolyte-enhanced Smartwater and PepsiCo this summer ran its first ad campaign for Aquafina since 2008. Detox Water, whose investors include Aloecorp and NBA player Mason Plumlee, has handed out thousands of free samples of its brand new aloe water in Manhattan this summer.

Some of this interest may have been stirred up by a 2013 industry-funded study attributing scores of illnesses to tap water. But a lot of it is being generated by a new consumer obsession: Hydration. In a December poll by Mintel, 29% of bottled water drinkers said they would “feel strange’’ not always having water with them. That helped Hidrate Inc., a start-up by University of Minnesota students, raise more than $600,000 on the crowdfunding site Kickstarter this year to finance a bottle that tracks how much water you’re drinking and sends alerts to your smart phone.

Some scientific studies indicate Americans may be going overboard. The Institute of Medicine estimates women and men need about 2.7 and 3.7 liters of water a day, respectively, but that includes water from other sources like soda or coffee and 20% from food. It says fluid intake prompted by thirst and drinking at meals is usually sufficient.

Click here to access the full article on The Wall Street Journal.

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