Controversy, Innovation in Bottled Water (Bottled Up & Ready to Go)

The bottled water industry has experienced quite a shake up this year as environmental groups and several U.S. cities have taken initiatives to curb the consumption of bottled water. Los Angeles, San Francisco, Seattle, Salt Lake City, Santa Barbara, Calif., and Ann Arbor, Mich., have made such moves, including bans on the use of plastic bottles at city-sponsored events, removal from restaurant menus and campaigns to use tap water instead of bottled water. The U.S. Conference of Mayors created a resolution last year to emphasize the importance of municipal water; it appears campaigns to drink tap water are also hitting media outlets, as reports questioning the purity of bottled water and environmental concerns about the abundance of water bottles in landfills continue to make their rounds.

But the bottled water category is resilient and is weathering the controversy. According to the International Bottled Water Association (IBWA), in conjunction with Beverage Marketing Corp. (BMC), sales and consumption of bottled water are on the rise in the United States. Wholesale dollar sales for bottled water exceeded $11.⁷ billion in 2007, a 7.8-percent increase from $10.⁸ billion in 2006. IBWA has also made a strong effort to shed light on the “bottled water versus tap water” debate, stating studies have shown that 75 percent of consumers drink both tap and bottled water, and are not replacing municipal drinking with bottled water. Instead, consumers are choosing bottled water as an alternative to other bottled beverages that contain caffeine, sugar, artificial flavors and other ingredients.

And what about this talk of bottled water being unregulated? FDA already regulates bottled water products and has developed regulations covering identity (different types of bottled water) and standards of quality, which determine the maximum levels of chemical, physical, microbial and radiological contaminants allowed in bottled water. Interestingly, FDA has also adopted many standards from the U.S. Environmental Protection Agency’s (EPA) regulation of public drinking water. Both bottled drinking water and tap water share many of the same standards for contaminants. In an attempt to ease consumer concern, Underwriters Laboratories (UL), a not-for profit product safety certification organization, announced in April 2008 its certification program for bottled water. The program enables consumers of bottled water to choose brands that have been validated by UL to meet FDA and IBWA requirements for quality and safety. Bottles bearing the UL Certified Water Quality Mark have been produced at plants audited by UL and are inclusive of IBWA, Hazard Analysis and Critical Control Point (HAACP) and GMP (good manufacturing practice) requirements.

Water at the Oasis

According to the Beverage Marketing’s “2008 Selected Beverage Category Top Line Report,” the enhanced water arena is smoking hot as top players actively pursue and tweak brands to shape this burgeoning category. For example, Coca-Cola acquired Energy Brands in May 2007 with complete ownership of Vitaminwater, Energywater and Smartwater. Cadbury recently made an effort to attract consumers with the introduction of Snapple LYTe Water and Antioxidant Water; and in 2008, Pepsi reworked two of its brands for a more functional water profile: Aquafina Alive and SoBE Life Water.

But niche brands are also holding court in this category as they roll out new flavor profiles and innovative products. “Water is a versatile product that allows manufacturers to, through innovation, expand and accent its appeal and function with the intent of increasing healthy hydration that meets the needs of consumers,” said Brian Allen, co-founder of Bot Beverages, makers of fortified water tailored for children. Allen and his wife started the company out of a need they found in their home and what they understood was a common need among other parents—healthy, natural hydration for kids that tastes good.

Allen added flavor and function proliferation in various forms will continue to expand and keep the market fresh and interesting. Innovative and new introductions abound; for example, Water Joe, which was conceptualized during a late night study session by an Arizona State University student, offers Artisan spring water that includes a shot of caffeine extracted from coffee beans. Ayala’s Herbal water infuses a variety of herbs such as lavender, mint, thyme, jasmine and vanilla bean into bottled water; this enhanced herbal-flavored water was recently certified organic and will soon bear the USDA organic label. Skinny Water recently introduced Açaí Grape Blueberry (Hi-Energy) enhanced water that contains the antioxidant-rich fruit açaí and includes guarana, ginseng, L-carnitine and vitamins B3, B6 and B12; it has been formulated to kick start the metabolism and suppress appetite cravings, according to the company. Another interesting new product is called Aroma Water, which uses aromatic closures called “ScentSational Caps” to deliver a fruit flavored taste experience, without direct additives and sweeteners. According to the company, over time the water becomes infused with aroma from the cap to deliver a taste that is based from the sense of smell.

The market for bottled water tailored for children is also catching on. “The trend of fortified waters for kids is there to help round out their diets that are often heavy on empty calories,” said Allen. He added that when retailers are looking to stock their shelves with these fortified beverages, it is important to offer kids’ products that the primary purchaser—normally the female head of household—would consume, trust and understand. Also, the product should fundamentally fill a need in daily consumption requirements.

“Parents are looking for organic, healthier options for their children,” said Jaime Phan, senior brand manager, Hansen’s Natural, which recently launched Organic Junior Water that is flavored with a splash of juice. “They want to ensure that the flavored water beverage they give their young kids tastes great and contains the best natural ingredients.”

Allen added, “As a parent myself, I know that we value the following qualities respectively when choosing a product: low sugar content, nutritional value, natural ingredients and a low fat content. Parents are pushing for healthier alternatives and manufacturers are listening to their needs by offering more nutritious, great-tasting products. But kids are the ultimate decision makers! If it’s purchased by mom and not liked by the child, no one wins.”

Package Makes Perfect

Environmental concerns are raising red flags over the amount of plastic water bottles that are not being properly recycled. According to the Container Recycling Institute’s (CRI) 2007 “Water Water Everywhere” report, 96 percent of single-serve polyethylene terephthalate (PET) plastic water bottles, because they are frequently consumed “on the go,” do not get recycled. The national recycling rate for all PET bottles, including soda bottles, is just 23.1-percent, and bottled water is even lower. CRI estimates about four billion PET bottles end up in the waste stream.

Companies have attempted to address this concern in several ways. Pepsi is introducing a light 500 mL flavored non-carbonated beverage bottle; the company noted the new bottle has 20 percent less plastic and will eliminate approximately 20 million pounds of waste from the environment. Old Orchard Brand moved away from the on-the-go packaging by offering the first vitamin water available in multi-serve 64-oz. bottles. The large lightweight plastic bottles for its FruitSense product are typically reserved for the fruit juice aisle; but, such a move may prompt more “at-home” consumption vs. the single-serve, on-the-go segment. PrimoWater, launched in April 2008, was one of the early adopters for using bio-based materials for its single-serve bottles. The bottle is made from Ingeo PLA, a corn-based plastic.

“The market is filled with floor-to-ceiling decisions every consumer has at point-of-purchase,” Allen said. “Packaging is the arrow through to the consumer that can trigger the choice. Packaging that’s simple, yet innovative, with a clearly defined value message will break through at that point of decision and the more unique it is, the better for recall and word-of-mouth.”

Cutting-edge packaging will always have a place within the premium water niche. SEI water offers natural spring water in a bottle shaped like a military canteen. 420 Water won two awards, including Best PET Packaging, for its sleek oval-esque design. And Aquadeco takes advantage of art-deco design by creating a gorgeous glass and plastic bottle that unites the founder’s love of vintage art and architecture.

The bottled water category will continue to deliver new innovations and controversy. For retailers, providing a variety of products that address a consumer’s stance on these issues will become increasingly important. Now is the time to work with bottled water manufacturers and local environmental groups to help educate your consumers about the issues and making choices that best meet their lifestyle.