Functional and flavored hydration

by Allison Sebolt
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In today’s beverage market, water is no longer just water. Despite the fact the overall market for traditional bottled water was down 6% for the year ended June 14, according to Information Resources, Inc., a Chicago-based market research firm, the number of new functional and flavored water product introductions has grown. Through these new functional and flavored waters, companies are looking for ways to offer consumers additional benefits.

According to the Global New Products Database from Mintel International, there were a total of 249 new bottled water products introduced in 2008, up from 180 in 2007. So far in 2009, through July 7, there have been 100 new bottled water products introduced. Additionally, there were 66 water and fruit-flavored still drinks with a functional claim introduced in 2008, up from 24 in 2007. In 2009 through the first week of July there have been 13 water products introduced with a functional claim.

"The primary driver of the category has been consumer demand for healthier refreshment beverages, that’s probably first and foremost," said Gary Hemphill, senior vice-president of information services for Beverage Marketing Corp., New York.

According to the B.M.C., the traditional bottled water segment has shown an unprecedented decline in volume in 2008. In terms of sales, the market has been flat over the past year and a half, Mr. Hemphill said.

"The market has been soft, but essentially the overall market for refreshment beverages in the U.S. has been soft during the last year and a half because of the economy," Mr. Hemphill said. "So bottled water’s performance is consistent with what is happening in the overall marketplace. Most of that is due to the weak economy."

Overall, the U.S. refreshment beverage market fell 2% in 2008, the B.M.C. said.

The growth in the bottled water category in the recent past has been driven by a number of factors.

"Growth in consumer demand for healthier refreshment, the aggressive pricing in the category and the packaging has made it a very popular product for on-the-go consumers," Mr. Hemphill said.

But in today’s economy consumers are looking for ways to reduce spending, so some consumers are refilling water bottles from the tap instead of buying new bottles. The B.M.C. said flavored and enhanced waters gained 8% volume share between 2007 and 2008.

Some of the recently introduced functional water products include Fruit2O Essentials, a brand owned by Sunny Delight Beverages Co., Cincinnati, which is marketed as having two servings of fruit and zero calories.

"The creation of the Fruit2O Essentials line was really in response to a lack of better, more nutritious fortified water options out there for consumers," said Dave Zellen, brand manager. "Many fortified waters and juices claim to provide important health benefits, such as immunity-enhancing nutrients and enriched vitamins. The problem is that many of them don’t provide significant levels of vitamins and minerals, and, worse yet, are loaded with extra sugar and calories."

Arizona Beverages, Lake Success, N.Y., recently introduced Tea Waters, which combine the antioxidant benefits of green tea with Poland Spring water from Nestle. Arizona also has Vapor Water, a distilled water the company said is further improved upon by infusing a blend of electrolytes.

Dasani, part of The Coca-Cola Co., Atlanta, recently introduced a line with a touch of fruit flavor in three varieties: lime essence, strawberry kiwi essence and black cherry essence.

Despite new products on the market, not all consumers are buying into the idea of water with added benefits.

"Consumers are becoming savvier in recognizing the fact that the benefits claimed by many functional beverages can actually be found in less pricey regular beverages," Mintel said. "Functional teas are going to show a downward trend due to increasing competition from regular teas, which offer considerable price savings over functional teas but also have the magic ingredient — antioxidants."

Mintel said enhanced waters saw significant growth from 2003-08, but the market now is likely to receive consumer criticism for its marketing messages of low- or no-calorie products when in reality many brands carry as much sugar as soda and fruit juice/juice drinks.

During the past decade, plain bottled water has gained the most share in the beverage market and carbonated beverages have lost the most share.

"People will continue to want healthier products, so you’ll continue to see more innovation," Mr. Hemphill said.

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