linked in facebook twitter rss

  • Interbrand
  • Brandchannel

your chance!
your chance!


  Bottled Water Floods the Market   Bottled Water Floods the Market  John Karolefski  
Bottled Water Floods the Market At one end of the spectrum of competitors are brands with European roots led by Evian, the world’s best-selling water. At the other end are niche and regional brands with limited distribution, such as Minnehaha, a 106-year-old spring water from Hunting Valley, Ohio. Altogether, hundreds of bottled waters will engage in a battle for brand supremacy, or more accurately, brand survival.

Two companies dominate the world market for branded bottled water: Groupe Danone, based in Paris, and Nestle, S.A., based in Vaud, Switzerland. The former markets Evian, Volvic, and others, including Dannon spring water. Nestle markets such majors as Perrier, Vittel, San Pellegrino, Poland Spring and Deer Park.

The US subsidiaries of these global giants are jockeying for shelf space with private label, regional and niche products, and with two formidable soft drink giants: Coca-Cola and PepsiCo, marketing their own brands of water.

Bottled water falls into two broad categories: non-carbonated (distilled, filtered and spring) and carbonated (both naturally occurring and mechanically added). The war will largely be fought among the non-carbonated brands, which account for most of the volume.

What’s driving the market for bottled water in the US?

“There is a public perception that municipal water is not as safe as it could be,” explains Walt Boyes, principal of Spitzer and Boyes, consultants in water treatment and distribution. “In some cases, that’s true. There are many places in the US where the drinking water coming out of the tap is barely drinkable. In other places, that’s not true at all. New York City’s water is every bit as good as bottled Evian.”

That’s hardly been the case in Western Europe where bottled drinking water has been standard for years. Even until the early 1970s, there were large areas in Europe – especially Italy, Spain and Portugal – where it simply was not safe to drink water from the tap, according to Boyes. That situation gave rise to the great European brands of sparking mineral water such as Perrier of France, San Pellegrino of Italy and Gerolsteiner of Germany. All of these can be found on the shelves of supermarkets with average assortments of water.

The US began disinfecting its municipal water in the early 1900s, making tap water safe to drink. But interest in bottled water began growing in the last few decades, experts say, because of several factors – a decline in drinking water quality in some regions, public perception, healthy lifestyles, the need for proper hydration after exercise, and effective marketing campaigns by makers of successful European brands. Perrier is credited with igniting the bottled water market in the US in the late 1970s.

The reason why there are so many brands of non-carbonated water is that getting into the water business is inexpensive, according to Boyes. A bottling machine costs $100,000.

“What keeps stores making their own brands is the profit,” he says. “If a store can make its own water in its distribution center for 10 cents a bottle and sell it for US$ 1.25 a bottle, they’ll make more money than if they’re selling [name brand] water at a three percent margin.”

According to the International Bottled Water Association, there are two types of sources from which bottled water can be drawn. One is natural sources such as spring and wells.

The other is approved potable municipal supplies. Companies that use the latter reprocess the water using methods such as distillation, reverse osmosis, de-ionization and filtration.

US law requires all drinking water to be treated so it doesn’t go bad in the bottle, Boyes explains. Since there isn’t a taste difference, all non-carbonated water is basically the same.

And that’s where branding comes in.

“Branding is extremely important for water,” says Chiranjeev Kohil, professor of marketing at California State University at Fullerton. “In a lot of categories, you can duplicate products and get an edge on quality or attributes, but that edge can be shaved off very quickly by competitors. In the water category, there is no technological superiority. The only thing that differentiates one water from the next is the brand.”

Marketing experts say that a commodity such as water can be branded effectively. The key is differentiation, but that’s also the challenge. After all, water is water.

“The source of the water provides a good foundation for differentiation,” says Rob Frankel, a branding consultant. “Evian is from the Alps, Arrowhead is from the mountains in California, etc. If you’re going to tap into the brand culture, so to speak, you start with the singularity of the source.”

Harvey Briggs of Lindsay Stone and Briggs recommends that marketers “grab the high ground” and focus on key benefits that consumers are looking for. “The people who grab, say, purity and own that with the brand are the ones who are going to succeed in the long term,” says Briggs, executive vice president of the brand innovation firm in Madison, Wisconsin.

If there weren’t any branding in the water category, the business would eventually go 100 percent to price and to private label, says Robert Lynn, executive vice president of sales and marketing for Global Beverage Systems, marketers of Le*Nature’s Beverages. For the time being, he believes that brand is more important than price.

“Price won’t become the major factor until growth stops,” he predicts. “When the growth stops, that’s when the war starts, and you fight the war on price. How do brands as strong as Coke and Pepsi fight their wars? On price. Two-liter soda for 69 cents. And those brands are stronger than any of the water brands.”

The US bottled water market has been reshaped in the last few years by the entry of Coke and Pepsi and their respective brands, Dasani and Aquifina, both filtered tap water.

“Each of these two marketers has introduced a single product that has been heavily promoted and enjoyed the support of the best distribution systems to be had in the beverage industry,” according to a report on the US bottled water market by

Pepsi’s Aquafina, introduced in 1997, is now the number one branded non-carbonated bottled water in the US. Coke’s Dasani, launched a few months later, is second in the category. Both are likely to lead the market in the future.

“When you become a brand leader, it’s not only because you had a good, strong name,” says Kohil of California State. “It’s also because you had a very efficient distribution system in place. That’s the advantage that [Coke and Pepsi] have. They already have the relationships with the distributors and retailers.”

Meanwhile, the regional brands have to rely on local loyalty as they compete “against the big, faceless multinationals,” says Briggs of Lindsey Stone and Briggs. For example, consumers in New England may be inclined to buy local natural spring waters such as Hidden Spring or Twin Mountain from Vermont.

“The regionals will succeed through grass roots efforts,” Briggs says. “It’s the things they are going to do to get closer to their communities that are going to differentiate them.”

Frankel, the consultant, believes that store brands will account for most of the business because they ride the advertising coattails of the major marketers. Consumers will support the category but spend less because they’re buying private label.

The category will see its share of new products in the form of enhanced waters that provide energy, promote fitness or just taste better than plain drinking water. Recent entrants include: Propel, a purified water beverage with vitamins from Quaker Oats, the makers of Gatorade; Fluoride To Go, a fluorinated spring water from Dannon; and Fruit 2 Go, a naturally-flavored spring water beverage from Veryfine Products.

But the war will be in non-carbonated bottled water. Market analysts look for major consolidation among the plethora of brands in the next few years. Essentially, the large national marketers will buy local brands around the country and shut them down. Why? To reduce competition and, in some cases, to acquire other supply sources for spring water.

The battle between Coke and Pepsi and the larger European brands is the “high profile war that will be waged,” predicts Briggs, who adds that branding will remain a deciding factor for discerning consumers. “Quality and trust are going to be critical, so brands will be important.”

Marketers everywhere will certainly drink to that.    



John Karolefski, formerly the editor-in-chief of Brand Marketing magazine, writes and speaks frequently about marketing issues.

 commenting closed Add Social Bookmark bookmark  print
 suggest topic  recommend ( 30 )  email

  brandchannel home archive   2013  |  2012  |  2011  |  2010  |  2009  |  2008  |  2007  |  2006  |  2005  |  2004  |  2003  | 2002  |  2001
Dec 30, 2002 Are Books Bound by Their Brand? -- Edwin Colyer
  Some authors have strong brands, but how many of us choose a book by its publisher?
Dec 16, 2002 Has Gen X Fallen Through the Cracks? -- Vivian Manning-Schaffel
  Generation Y appears preferable to Gen X for brand owners and advertisers pitching their wares. Should we mind the generation gap?
Dec 9, 2002 Can Small Businesses Sprout Big Brands? -- Edwin Colyer
  Small or large, every business has a brand, and the ability to use it to its advantage.
Dec 2, 2002 Anti-Globalists v. Big Brands: Who is Going to Win? -- Randall Frost
  Is there a win-win solution between the anti-globalists and big brands?
Nov 25, 2002 Milking the Organic Market -- Erin Speiser Ihde
  Organic brands are positioning themselves as an alternative for health-conscious, socially responsible consumers. The challenge? Milking a higher price.
Nov 18, 2002 Branding Drugs for a Market of One -- Edwin Colyer
  As pharmacogenomics surface on the horizon, how can pharmaceuticals market efficiently to tiny patient groups?
Nov 11, 2002 Can Japanese Brands Go Global? -- Randall Frost
  Why don't Japan's brands have a stronger presence outside of their local markets?
Nov 4, 2002 The Key to Branding (and Financial) Success -- Vincent Grimaldi de Puget
  How to make your brand rise above the background noise in spite of limited resources, and contribute to improving your company's bottom line.
Oct 28, 2002 Branding the Bush -- Ron Irwin
  Making a killing on eco-tourism.
Oct 21, 2002 Barbie Goes to Court -- Ed Meikle
  Barbie flexes her muscles in the wake of defamation.
Oct 14, 2002 Keep Your Brand Clean -- John Karolefski
  How to prove your innocence during a threat of guilty by association.
Oct 7, 2002 HELP WANTED: Top Talent Apply Within -- Dale Buss
  In lean times, companies depend even more on their most valuable brand champions: Employees.
Sep 30, 2002 Chefs Acquire a Taste for Branding -- Jocelyne Henri
  Creating a brand à la mode with France's pastry brands, Pierre Hermé, Dalloyau and Ladurée.
Sep 23, 2002 Putting Out the Fire: Managing Through Crisis -- David Liss
  Steering your brand through disaster.
Sep 16, 2002 Cutting Costs: Resource Management All in One Tool -- Fiona Harvey
  Is resource management resourceful thinking?
Sep 9, 2002 Fire Drill: Preparing for Crisis -- David Liss
  Are you ready to protect your brand when disaster strikes?
Sep 2, 2002 Can Dead Dot Coms Be Reincarnated? -- Brad Cook
  Is there value left in the dead brands of generically named dot coms such as pets, wine, and eToys.
Aug 26, 2002 Commodities: Branding the Basics -- Eric Mirabel
  How do we go about turning a commodity product or production capability into a new brand? We look at the Middle East, a transitioning market where manufacturers are branding commodities.
Aug 19, 2002 Brands in Toyland -- Ron Irwin
  Is branding in the toy world just child’s play? We look at how traditional brands like LEGO and Brio stand up to the dazzlingly high-tech competition.
Aug 12, 2002 Long Live the King -- John Karolefski
  Young and svelte, bloated and strung out, Elvis had universal appeal throughout his short lifespan. The king may be dead but apparently the brand lives on.
Aug 5, 2002 IBM Navigates the Biotech Maze -- Edwin Colyer
  IBM Global Services is expanding to a variety of areas like its recent acquisition of PwC Consulting. We look at how a brand like this penetrates the life sciences market.
Jul 29, 2002 Do Nonprofits Have Value? -- Robin Rusch
  As we unveil Interbrand's league tables of the world's most valuable brands for for-profit brands in 2002, we ask, Is there value in a nonprofit brand?
Jul 22, 2002 Trials and Tribulations of Global Naming -- Ed Meikle
  We look at recent trademarking issues from PricewaterhouseCoopers’ Monday to Philip Morris’s Altria and discuss the basic guidelines for domain name registration disputes.
Jul 15, 2002 Successful Start-ups Launch with a Brand -- David Liss
  Why do some start-up brands fail where others succeed? When should one begin to think about the brand in the entrepreneurial process?
Jul 8, 2002 Pushing Product: Is In-Store Promotion Effective? -- John Karolefski
  Is in-store marketing effective or just more clutter separating us from our favorite brand of ice cream?
Jul 1, 2002 Shopping Through a Recession: How Will Luxury Brands Survive? -- Dale Buss
  How are luxury brands faring in the aftermath of September 11 and the past year of recession?
Jun 24, 2002 Lawless Branding: Recent Developments in Trademark Law -- Ed Meikle
  This month’s trademark law developments: Sony loses Walkman to the masses in Austria and FIFA takes on ambush marketers in Latin America.
Jun 17, 2002 Prescribing a Global Identity -- Edwin Colyer
  The pharmaceutical industry has been wary of promoting big, international brands, but is it better to stay local or go global?
Jun 10, 2002 Positioning: The Missing Piece in the Tech Sector -- Rob Gelphman
  Brands in the tech sector need to work on their positioning.
Jun 3, 2002 The New CCO: Delivering Customer Care -- Dale Buss
  In a recession, suddenly everyone cares about attracting the customer. Enter the Chief Customer Officer.
May 27, 2002 Ambush Marketing Steals the Show -- Abram Sauer
  Competition is heating up as sponsoring brands of the World Cup and other global sporting events struggle with ambush marketing.
May 20, 2002 Time Release Branding -- Edwin Colyer
  New pharma needs to launch with a bang. But at which stage beyond molecule is it time to start the branding process?
May 13, 2002 The Sport of Naming -- John Karolefski
  Naming rights for sports stadiums may be big business but are they sound business?
May 6, 2002 Private Labels: Does Branding Matter? -- Robin Rusch
  Can private labels be considered brands? What threat do they pose to brand owners?
Apr 29, 2002 Multimedia Makes the Grade -- Kim Barnet
  Can the education industry learn how to harness multimedia to create new tools and improve its overall brand image?
Apr 22, 2002 Franchising in China: A Dead Duck? -- Edward Young
  The rush to franchise in China may be faster than the drive-through at McDonald's, but the results are not always favorable to the brand.
Apr 8, 2002 Can Branding Save the World? -- Ron Irwin
  Ben & Jerry’s, Avon and Patagonia all engage in cause-related or values-led marketing. Is it a justifiable endeavor or just a feel-good makeover?
Apr 1, 2002 Can Gap Mend Its Brand? -- Vivian Manning-Schaffel
  At one time, Gap had the retail clothing market sewn up. Now it struggles against sister brands Banana Republic and Old Navy.
Mar 25, 2002 Is China's Film Industry Overexposed? -- Edward Young
  As Kodak loses its agreement to manufacture film in China, are local brand Lucky and global giants Fuji, Konica, and Agfa-Gevaert ready to leap in?
Mar 18, 2002 Offensive But Effective? -- Edwin Colyer
  Campaigns for brands like Benetton and FCUK certainly get our attention, but what are they doing for the brand?
Mar 11, 2002 Mortal Brands: Continuing the Legacy -- John Karolefski
  What happens to a brand when its spokesperson literally dies? As Wendy’s re-evaluates its strategy, we look to other branded icons for some hints.
Mar 4, 2002 Apple Shines: Brandchannel's 2001 Readers' Choice Award Results -- Robin Rusch
  What do Apple, Nokia, Volkswagen,, Absolut and Starbucks have in common? Brandchannel's 2001 Readers' Choice survey results are here.
Feb 25, 2002 Has Your Brand Become Generic? -- Stephen Gardner
  What happens when your brand name is part of the public domain? We look at names that have gone generic.
Feb 18, 2002 Zero Percent Brand Management? -- Dale Buss
  Are American automakers trailing behind their overseas counterparts when it comes to managing their brands?
Feb 11, 2002 Conquering New Grounds -- John Karolefski
  Starbucks serves up a fresh brew around the world, but are non-Americans ready to wake up to this powerful brand?
Feb 4, 2002 MTV: 360 Degrees 24/7 -- Vivian Manning-Schaffel
  With a reputation like MTV, the pressure to score high in new media is huge. Is MTV able to give its audience what it wants… online?
Jan 28, 2002 Penetrating the Birth Control Market -- Katherine Daniel
  From legislation to disease, contraception manufacturers focus the brand on mundane subjects and leave out the best part: the sex!
Jan 21, 2002 Brand Mobility: Telecom Operators Turn to Handsets -- Edwin Colyer
  Will cellular service brands eclipse the big cellphone brands? Don't hang up on Nokia, Ericsson and Samsung just yet.
Jan 14, 2002 Is Your Brand Everlasting? -- John Karolefski
  We check in on 2001's fallen icons and ask why some stay strong and prosper, while others wither and die.
Jan 7, 2002 Will Online Rx Get Easier to Swallow? -- Edwin Colyer
  As pharmaceuticals struggle to get doctors to take their medicine, they ignore the valuable branding resources available on the web.