A deep well of innovation

by Jeff Gelski
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Like a river current gaining momentum flowing downstream, sales in the bottled water category have increased steadily in recent years. Sales rose 7.5% in 2004, according to the Beverage Marketing Corp. (B.M.C.).

Virtually every successful food product spawns line extensions and variations and it is certainly no surprise that this broadening is taking place with a product as simple as water. Examples include flavored water-based beverages and fortified or enhanced water-based beverages, many containing vitamins.

Also, at least two companies introduced water-based beverages this year that contain appetite suppressants. Another area of future growth might be promoting water-based beverages to specific niche markets, such as Hispanics or women.

The bottled water category maintains a positive future, as statistics show room for growth in many product categories.

Per capita consumption of bottled water has gained by at least a gallon annually in the United States, according to the New York-based B.M.C. It reached 23.8 gallons in 2004, a 7.6% increase from 22.1 gallons in 2003.

Bottled water in 2003 became the second-largest commercial beverage category by volume in the U.S., trailing only carbonated soft drinks.

In 2004, total U.S. category volume climbed over 6.8 billion gallons, an increase of 8.6% from the volume level in 2003. Sales approached $9.2 billion in 2004, a 7.5% increase. Sales are growing at a slower rate than volume because of price promotions, especially on multi-packs of single-serve bottles, according to the B.M.C.

"Bottled water truly is an awesome category," said Michael Belles, chairman of the B.M.C. "It just keeps growing. And with factors such as concern over calories and health and wellness trends, there’s room for even more growth."

B.M.C. also predicted more growth for enhanced water, which it classified as water fortified with minerals, vitamins and other additives. This category saw U.S. wholesale sales jump from $20 million in 2000 to $338.8 million in 2003. B.M.C. predicts sales to hit $650 million in 2008.

In flavored water, B.M.C. forecasts U.S. sales to go over $800 million by 2009.

Statistics from Information Resources, Inc.’s InfoScan Reviews show bottled water sales grew by $295 million, or 15%, in 2004.

"Every player in this segment is a marketing genius in my book," said Valerie Skala Walker, vice-president of analytic product management for I.R.I. "You’ve convinced a lot of Americans that we can’t drink water out of the tap, and that some water is better than other water."

At least one beverage manufacturer sees the need for companies to offer a variety of water-based beverages.

"People are sick of just water," said Larry Twombly, chief executive officer of Hat Trick Beverage, an Encinitas, Calif., maker of bottled water and enhanced waters. "If you (offer) the benefits of water, they want to have something else in it, like healthier benefits and flavor as well."

Beverage manufacturers participating in the various water categories will need to follow government labeling guidelines and know how to "mask" flavor problems associated with certain ingredients, especially vitamins.


Enhancing beverage sales

The Propel brand leads the country in sales of enhanced water beverages, according to the B.M.C. Wholesale sales of the brand, which is owned by Gatorade, jumped from $3 million in 2000 to $161 million in 2003. The B.M.C. predicts Propel sales will reach $345 million in 2008.

Propel Fitness Water is promoted as a source (25% of the daily value) of the b vitamins niacin, B6 and pantothenic acid. It is a good source (10% of the daily value) of the antioxidants vitamin C and vitamin E.

The Glaceau brand from Energy Brands, Inc., Whitestone, N.Y., holds the No. 2 ranking in the category, rising from $11 million in 2000 wholesale sales to $95 million in 2003. Sales could hit $195 million by 2008, according to the B.M.C.

Glaceau’s Vitaminwater line features such water-based beverages as Multi-v with b vitamins, calcium, vitamin C and vitamin E; Focus with vitamin A and ginkgo biloba to help maintain good eyesight and improve concentration; and Revive with b vitamins and potassium for curing hangovers.

Mr. Twombly of Hat Trick tipped his cap to the competitive Glaceau brand.

"I’m a big fan of their product," he said. "It’s a great product, and a great-looking product. It’s one of the fastest-growing beverages in the world."

He decided to invent his own vitamin waters and add another marketing twist. Vitality from Hat Trick Beverage is sugar-free and sweetened with sucralose, a high-intensity sweetener found in Splenda.

Mr. Twombly uses b vitamins, vitamin A, vitamin C and calcium in his product.

"The most you probably can get in a serving is 50% of the daily allowance by the F.D.A.," Mr. Twombly said of vitamins in general. "After that, it starts to react and come out of the solution. It gets pretty difficult."

Vitamins may turn the water cloudy and leave it with a bitter taste, making the use of sweeteners necessary. The b vitamins tend to give the water a light pink color.

The Vitality product has entered markets in California, Arizona, Nevada, Connecticut, Florida and Massachusetts. Other market entries are planned this year for North Carolina, South Carolina and Tennessee.


Flavors to choose from

Nationwide sales growth of flavored water-based beverages convinced PepsiCo, Purchase, N.Y., to introduce Aquafina FlavorSplash this past January. The zero-calorie water is made with natural fruit flavors and sweetened with Splenda. It comes in three flavors: raspberry, citrus blend and wild berry.

"As the water category continues to experience explosive growth, we’re seeing a greater demand for more choices," said Cie Nicholson, vice-president of non-carbonated beverages, Pepsi-Cola North America.

The Aquafina brand, a product of Pepsi-Cola North America, became the first billion-dollar brand of bottled water in the U.S. in 2004, according to the B.M.C. Dasani, a Coca-Cola North America (C.C.N.A.), Atlanta, product, could reach the billion-dollar mark in 2005, but Aquafina should hold onto the No. 1 spot, according to the B.M.C.

C.C.N.A. entered the flavored water beverage segment in January by launching Dasani Lemon and Dasani Raspberry. Both drinks are sweetened with Splenda.


Following the Model Code

Beverage company executives wanting to explore further innovative ideas in water may attend the International Bottled Water Association’s 47th annual convention Sept. 27-30 in Orlando, Fla. The event’s official theme is "Quality Through Innovation."

The I.B.W.A., based in Alexandria, Va., is a source of information about all types of bottled waters. The association works with the F.D.A. and state governments. It requires member bottlers to adhere to the I.B.W.A. Model Code.

Beverage manufacturers must follow several regulations, including Standards of Identity, Standards of Quality, the Nutrition Labeling Education Act and the F.D.A.’s Good Manufacturing Practices (GMPs).

"Bottled water is a very specific regulatory category," said Stephen Kay, vice-president of communications for the I.B.W.A. "It is a specific category with specific standards on what qualifies as a bottled water and how it is labeled."

If a manufacturer adds a slight flavor or an ingredient like Splenda, it may take the beverage out of the bottled water category, Mr. Kay said. It becomes more of a water-based beverage.

If a beverage contains juice, manufacturers must say how much, Mr. Twombly said.


Supplements in the water aisle

New beverages containing the diet supplement Super CitriMax probably will fit into another water-based beverage category besides bottled water.

Super CitriMax is the brand name for hydroxycitric acid, a compound found in Garcinia cambogia, a type of fruit. Laboratory tests have shown hydroxycitric acid may reduce the conversion of carbohydrates into stored fat by inhibiting certain enzyme processes.

Woman On Top, Inc., Los Angeles, introduced Slimmer You H2O with Super CitriMax this year. It’s sugar-free and available in the natural flavors of orange and lemon.

Slimmer You H2O is classified as a herbal supplement because it contains such a high percentage of Super CitriMax, said Dary Rees, founder and c.e.o. of Woman On Top.

Retailers still may sell Slimmer You H2O alongside water-based beverages.

"That’s up to the discretion of the retailer," Mr. Kay said.

The other new product with Super CitriMax, Jana Skinny Water, is being imported by Creative Enterprises International, Inc., Bryn Mawr, Pa.

Jana Skinny Water initially will be available in 7-Eleven convenience stores, said Eric Wahl, creative marketing officer for Jana Natural European Artesian Water and Jana Skinny Water. Creative Enterprises is negotiating with other national chains, he added.

Jana Skinny Water has artesian water from St. Jana, Croatia. Creative Enterprises also offers Jana Natural European Artesian Water. The water comes from 2,500 feet below the surface. It has 63 milligrams of calcium, 32.5 milligrams of magnesium and 4.2 milligrams of silica per liter, Mr. Wahl said.


Aquas Frescas aqui

Not only interested in health-conscious consumers, Hat Trick Beverage has turned its attention to the growing number of U.S. Hispanic consumers.

Its Dos Lagos Aquas Frescas brand grossed $340,000 in the brand’s first nine weeks in two markets. Aquas Frescas in late May had entered markets in Southern California, Arizona, New Mexico and Texas. Hat Trick is also aiming for pockets of Hispanic communities in Chicago, North Carolina and South Carolina, Mr. Twombly said.

Aquas Frescas means cool or fresh waters in English. A juice line that may be classified as a water-based beverage, Dos Lagos Aquas Frescas comes in such flavors as mango, limon, tamarindo, horchata and pineapple. The original flavors come from Mexico, Central America and Latin America.

"Traditionally sold from barrels in Mexico and Latin America, aquas frescas are dispensed from vats here in the states," Mr. Twombly said. "There were no comparable aquas frescas bottled drinks before we entered the market."

He added, "We carefully researched our target market — thirsty Latinos in San Diego. We noticed as they would come into a convenience store and ask for their favorite juice drink, many were looking for the fruit and water beverage, or a substitute, they were used to making in their kitchens back home or getting by the pitcher full in cafes."

Hat Trick Beverage has found success entering its products in convenience stores and independent grocery stores instead of chain stores, Mr. Twombly said.


Woman power takes hold

The U.S. Census Bureau predicts the Hispanic population could make up 24.4% of the entire U.S. population by 2050. Females represent another segment specifically targeted by makers of water products.

Ms. Rees and her company, Woman On Top, focus on that segment of the population.

Less than two years ago the company introduced its first product, an enhanced water-based beverage called Aphrodisia Goddess Rose Nectar. The beverage featured herbs known for their aphrodisiac effects.

"I was basically creating a love potion," Ms. Rees said.

The beverage has a rose petal flavor and a red cabbage extract gives the product a pink color. The company has followed up with other products such as Venus Water for Women (a natural spring or purified drinking water) as well as Slimmer You H2O.

Woman On Top water-based beverages recently gained entry into chain stores owned by Albertsons, Inc., Boise, Idaho. The company also is on a preferred vendor list for 7-Eleven, Inc., Dallas.

Twenty per cent of the profits from Woman On Top are donated to women’s causes. Ms. Rees is looking for corporate partners for a national campaign aimed at the women’s market.

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