Functional benefits growing in bottled water category

by Allison Sebolt
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KANSAS CITY — While recent research indicates the public believes bottled water is more pure than tap water, this could change as the industry becomes more open about using public water sources, potentially requiring a refocused marketing claim for the category.

PepsiCo, Inc., Purchase, N.Y., recently made the decision to label Aquafina water as coming from public water sources. Currently, Aquafina bottled water labels its source "P.W.S.," but soon the label will spell out "public water source." The decision was made as a group called Corporate Accountability International pressured bottled water makers to change marketing practices.

Michelle Naughton, a PepsiCo spokeswoman, said that while Aquafina starts from public water sources, it goes through a seven-step purification process that removes chlorides and salts to levels below that of tap water.

In response to PepsiCo’s decision, the International Bottled Water Association said it supports the Food and Drug Administration’s previous decision stating that source labeling for bottled water is not necessary or required if a brand is in compliance with F.D.A. regulations. Additionally, the association said if bottled water is sourced from a municipal water system and hasn’t been further treated, the F.D.A. requires the label to state it is from a community water system.

Aquafina and Dasani are among the fastest-growing bottled water brands, according to Beverage Marketing Corp. In 2006, bottled water was the second-largest beverage category by volume, growing by nearly 10% in 2006. In 2006, bottled water had a share of volume of 27.8% in the beverage market, representing a total of 8.3 billion gallons or 27.6 gallons per capita, according to B.M.C.

As the overall category of bottled water grows, more companies are entering the market. Anheuser-Busch, Inc., St. Louis, recently became the major distributor for Icelandic Water Holdings ehf’s Icelandic Glacial super-premium natural spring water in the United States.

"We’re looking to diversify our portfolio of products to offer more variety to consumers," said Dave Peacock, vice-president of business operations, Anheuser-Busch. "While beer remains our focus, we’re considering the entire beverage landscape for other areas where our competitive advantages can drive sustainable growth."

Yet the greatest potential for growth in bottled water could be in the functional market.

"Beverages offering functional benefits are growing two to three times faster than conventional

refreshment beverages," said Michael C. Bellas, chairman and chief executive officer of B.M.C. "As consumers increase their per capita consumption of beverages in these newer segments, they are putting pressure on carbonated soft drinks and juice as well as tap water."

In an effort to offer functional benefits, Atlanta-based Coca-Cola Co. recently launched Dasani Plus vitamin-enhanced flavored water in June, coming in three flavors: Refresh + Revive, a kiwi strawberry flavor containing Vitamins B3, B6 and B12; Cleanse + Restore, a pomegranate blackberry flavor containing Vitamins E, B3, B6, B12 and fiber; and Defend + Protect, orange tangerine flavor containing Vitamin E and Zinc.

According to Euromonitor International, functional water had the highest growth levels in 2006, with growth in Propel and Glaceau — the two largest functional water brands that hold a combined 89% share of functional bottled waters. Propel introduced Propel Calcium in 2006, and Glaceau has added new varieties this year. However, the functional market is still small in comparison with the rest of the bottled water segment at 10% of sector value.

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