Making Water Different

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In an earlier article I talked about the impact of healthy lifestyles on Coca-Cola's (NYSE: KO) sparkling beverages and how the bottled water brand, Dasani, gained market share. I also highlighted concerns about the lack of a competitive barrier surrounding those products:

While it’s great that Coca-Cola’s bottled water gained market share, the competition for water far outnumbers the competition for carbonated sodas. Every grocery store out there carries a brand of bottled water. It’s easier to bottle water than to make soda with the taste of Coca-Cola.”

Coca-Cola and Pepsi Cola are unique, and the recipes are closely guarded secrets, making it difficult for competitors to duplicate. However, water is water, right?

In bevindustry.com’s article “Bottled water makes a splash,” Jennifer Haderspeck summarizes attempts by the industry to make water more appealing and different.

She discusses the fact, based on a report from Mintel, that Nestle, Coca-Cola, and Pepsico (NYSE: PEP) accounted for 57% of the bottled water market but lost 2% from Feb. 2011 - Feb. 2012 to private labels. 

How can Coca-Cola and its competitors differentiate bottled water?

1) Community Involvement – Beverage companies decided to confront heightened health awareness through education and community involvement.

Coca-Cola, through community cooperation, wants to educate people on making the right beverage decisions for themselves and their families, and highlights the many causes of obesity. It also wants to make calorie reporting more transparent. Coca-Cola encourages people to exercise, stay active, and drink plenty of healthy beverages.

Nestle launched the Nestle Pure Life Hydration Movement where, according to bevindustry.com, families pledge to “swap one sugared beverage a day for water for an entire year”. Nestle plans to take this movement to Facebook, where it will offer $1 coupons.

These public relations initiatives will prove helpful in encouraging people to drink Nestle’s bottled water.

2) Adding Taste – Beverage companies sometime add flavors to water; however, doing this adds calories, scaring the more health conscious consumers away. Companies attempt to curb this fear with zero calorie drinks.

For example, Coca-Cola’s Glaceau Vitaminwater and Pepsico’s SoBe Lifewater saw declines in sales during a 52 week period ending July 8. However, the zero calorie version of Vitaminwater saw a double digit increase of 12% during the same time frame, according to bevindustry.com.

3) Adding Ingredients – Some beverage companies add natural ingredients to water drinks. SoBe Lifewaters’s new line contains coconut and mango mandarin. Other types of enhanced water drinks include kiwi, strawberry, and grape.

Companies also offer dispensers containing nutrients and vitamins that get dispersed into bottles upon consumption. Experts say this preserves the nutrients vitality that gets lost in storage and shipping.

4) Adding Sparkle – Carbonated water “adds that bite” that some people want in a drink. Carbonated water lacks the calories and sugar of a soda, appealing to those who want more taste in their “healthy drinks”.

National Beverage’s (NASDAQ: FIZZ) La Croix sparkling water gives consumers wanting to live healthier lifestyles bottled water with taste after exercise. It lacks the sodium, sugar and calories that add pounds.  As people become more health conscious, enhanced waters like La Croix will serve as a bridge between the tasteless bottled water and sodas.

Conclusion

The beverage leader of the future will know how to inform the consumer base as to the benefits of all its drinks, as well as provide a balance of taste and health for the increasingly health conscious consumer and cater to the traditional beverage consumers who still prefer the colas. I think so far Coca-Cola does the best job at this. Right now Coca-Cola sells its sparkling and non sparkling beverages in most regions of the world.


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