By Mike Esterl
Mary Clare Carley leaves home each morning with a gallon water
jug and carries it wherever she goes to stay hydrated.
The 34-year-old teacher doesn't remember when she last drank
water from a tap. Instead she buys Crystal Springs or Great Value
distilled water at supermarkets for $1 or less. "If I don't have my
gallon of water, I just feel incomplete," said Ms. Carley, seated
at an Atlanta food court with her giant water bottle.
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.
But water is so hot that most consumers buy it despite the
environmental drawbacks.
Meanwhile, dozens of smaller, high-end specialty-water brands
with names like Real Water, People Water and HappyWater have begun
flooding the market. They are backed by investors of all types who
are trying to create higher margins with new bottle designs, exotic
minerals and elaborate tales of provenance. Eternal's label faces
inward so shoppers view it through water, filtered by limestone,
quartzite and sandstone from the Allegheny Mountains. Karma
Wellness Water's cap injects seven vitamins when you're ready to
drink. Other startups pitch birch water, maple water and cactus
water.
Aquahydrate, headed by former Coke executive Hal Kravitz, is
getting a publicity boost from its celebrity shareholders Mark
Wahlberg and Sean "Diddy" Combs, who have recently featured the
high pH, electrolyte-infused water in "Entourage," a film Mr.
Wahlberg helped produce, and in a TV ad for Mr. Combs' Ciroc
vodka.
Private-equity firms Castanea Partners, which sold Fuze Beverage
to Coke in 2007, and First Beverage Ventures, a unit of Los
Angeles-based First Beverage Group, took stakes last fall in
Essentia, an alkaline water. Verlinvest, an investment fund of
Anheuser-Busch InBev SA's main Belgian shareholders, has invested
in Hint, a flavored water so popular on Google's Mountain View,
Calif., campus that Hint stocks its own refrigerators there.
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.
Debra Ann Stokes recently stopped at Whole Foods in Atlanta to
stock up on bottles of alkaline water, which has a high pH level
that proponents say can neutralize acids and help the body absorb
nutrients. "This goes down much different, smoother," said Ms.
Stokes, a 64-year-old belly-dance instructor, grabbing six
one-liter bottles of Alkalife Ten.
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.
The Government Accountability Office also noted in a 2009 report
that the Food and Drug Administration can't make bottlers use
certified laboratories for water-quality tests or share their
results. The Mayo Clinic, meanwhile, says the science on specialty
waters like alkaline water is thin and that "for most people, plain
water is best."
Write to Mike Esterl at mike.esterl@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 26, 2015 05:44 ET (09:44 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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