The PET water market has become very fractured in the past five years, breaking up into flavored water, enhanced and functional water, essence waters, which usually entails adding herbs or a hint of natural flavor to water, and structured waters that tout higher pH or oxygen levels. And this fragmentation makes it more difficult to categorize newer, innovative brands into any one particular segment. For instance, the buzzed-about Hint Water brand offers consumers a hint of flavor, yet it’s considered part of the essence waters sub-category, as flavored waters often contain artificial flavors and non-nutritive sweeteners like sucralose.
And, despite the health halo surrounding PET water products, the value-added water segment has had soft sales and volume performance during the past few years, according to Gary Hemphill, managing director at New York City-based consultancy Beverage Marketing Corp. (BMC).
According to BMC, value-added water constitutes three sub-segments—enhanced water, flavored water and essence waters. While the entire category had strong growth from 2000 to 2007, value-added water nose-dived in 2008, due in large part to the financial crisis that year that impacted the U.S. economy. And, for the past five years, value-added water has had very modest or flat growth.
“I think to some extent it continues to be a lingering impact of the weakness of the economy. By point of comparison, with traditional single-serve water, it’s aggressively priced, so when you compare the prices of the two products, it’s a tougher sell. There is a significant premium to enhanced water and then especially compared to traditional water, so that likely plays into the weakness in those segments,” Hemphill says.
The overall value-added bottled water market actually dropped 1.5 percent in 2012 and is projected to drop even further when final 2013 figures are released, according to BMC. And, BMC reports that the soft performance is really due to the underperformance of the flavored water sub-segment, which was down 6 percent in 2012. By comparison, enhanced water grew slightly and the essence water segment rose 1.5 percent in 2012.
The enhanced water category continues to be dominated by Vitaminwater, which accounts for a 53 percent market share, followed by Pepsi’s Propel and SoBe Lifewater water brands. With the lion’s share taken up by those three brands, the remaining volume is made up of smaller players.
Recently, the most innovation and the strongest growth has come from new water variations. There are the essence waters such as Hint, Ayala’s Herbal Water and Metromint, to name a few, that have rapidly made a push from the natural food channel and the up-and-down-the-street channel into mainstream grocery stores. According to BMC, the essence waters sub-category still makes up only about 2 percent of the overall value-added water segment, but it’s growing strongly from a small base. The health halo surrounding these water brands with natural supplements like mint and herbal flavors is helping to rejuvenate the image of enhanced waters beyond older brands like Vitaminwater.
One newer entrant to the essence water category is Balance Water, which contains wild-harvested Australian herbs and flower essences in four variations to help consumers with specific health needs. Balance Water comes in Relax, Travel, Mind and Refresh.
Martin Chalk, co-founder of Balance Water, describes the product as positioned between a tea and a water.
“We are somewhat of a new category as we are a functional, non-flavored water. We do a flower infusion and that gives the water a gentle function much like an herbal tea. We compete with SmartWater and Voss and Evian and Fiji for share of throat, but we also compete with the enhanced waters and the alkaline waters,” Chalk says.
In the past two years, alkaline water and ionized water brands have generated a lot of buzz as the newest water fad.
Real Water, a brand owned by Affinitylifestyles.com out of Las Vegas, boasts a high pH level due to a purification process called E2 Technology, which stands for Electron Energized. Through this process, electrons are added to the water through electrical restructuring, which makes Real Water alkalized and a powerful antioxidant that hydrates the body very well on a cellular level, according to the company. The negative ionization makes the water healthier, the company claims.
Alkaline waters aren’t necessarily new. Essentia Water has been on the market for 15 years yet has recently enjoyed a surge in sales due to consumers’ growing awareness of alkaline waters. Marketed as a super hydrating water, Essentia has a proprietary electrolyte formula and a higher pH of 9.5. Essentia achieves its alkalinity by using Ionic Separation Technology where acidic ions are separated from the alkaline ions and then removed from the water. According to the company, this allows for charged electrolytes, better permeation, and therefore, faster hydration.
Ken Uptain, president of Essentia Water, Inc., says the brand was ahead of its time when it launched in 1998 yet consumer loyalty to the brand has built steadily over the years because the product delivers on its promise.
“It’s a one-of-a-kind product. It has a great taste and people feel better and hydrated when they drink it,” Uptain says. “Consumers are becoming educated that there is more to their water than just sourced waters and they are looking for more functional products.”
Essentia Water has successfully migrated from the natural channel, where it was a category leader, into the grocery channel. And based on current trends, Uptain sees a bright future for the brand: “Based on our current path, we will meet our goal of being one of the top three rated premium hydration brands in the country in the next five years.”
Hemphill with BMC notes that there is a lot of buzz surrounding alkaline water brands, although there are some challenges for that category.
“I think there a lot of consumers who are unclear on the benefits and going forward, that’s something that probably needs to be addressed by the players in that segment,” Hemphill says.
Cap-activated beverages are another innovative segment of the enhanced water category gaining traction. Los Angeles-based The Rising Beverage Company markets a functional water called Activate Drinks that features a proprietary cap design where vitamins are stored separately from the water. Consumers twist the cap to release the nutrients into the water.
With varieties like Beauty and Defy and with flavors like Lulo Pear and Pomegranate Blue, Activate takes the functionality of enhanced waters to the next level.
“Activate conducted proprietary research and found that vitamins A, B5, B12 and C deteriorate sitting in water. This is why Activate keeps its nutrients stored separately in the brand’s unique cap, to ensure the vitamins stay fresh,” says Jesse Merrill, vice president of marketing for Activate Drinks.
Vitamin and mineral-enhanced waters saw healthy sales growth in 2012, ringing in $1.48 billion in wholesale dollar sales, which was a bump of 2.1 percent from 2011. Considering that the category had $67.5 million in sales back in 2001, it’s clear that enhanced water is a viable segment of the overall health and wellness beverage market and is poised for steady growth.
“I think, in general, water has a great healthy image,” Hemphill says. “There is a lot of innovation around water beverages. Companies are using the water name and building on it with flavors, vitamins and sweeteners, and the water name helps the positioning of the product from a health and wellness perspective.”