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.
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