Over the last 15 years, the rise of bottled water as a product category has been nothing more than stunning. Currently at 33 percent (and rising) of all bottled beverages sold, bottled water has cemented itself as not only a staple of every retailer’s bottled beverage strategy, but as its king. In fact, our data shows that in 2014 bottled water overtook soda as the most popular bottled beverage purchased at our hospital campuses.
Because of the $185 billion bottled water industry’s meteoric rise, all major beverage companies are now spending millions to differentiate their water from the competition.
Water is no longer simply water, and a smattering of “premium water” brands (selling at premium prices) are filling store and restaurant shelves across the globe. The Guardian asks, “How did a substance that falls from the air, springs from the earth and comes out of your tap become a hyperactive multibillion-dollar business?” It’s a fair question.
But perhaps a more pertinent question for a smart operator is: How can this new water war be used to benefit your organization?
That’s where LIFEWTR comes in.
What is LIFEWTR?
LIFEWTR is PepsiCo’s new attempt to capture a meaningful segment of the premium water category. LIFEWTR is positioned as a higher-end complement to its billion dollar Aquafina brand. According to PepsiCo, it is “purified water, pH balanced with electrolytes added for taste.” It contains magnesium, sulfate, and potassium bicarbonate and, like Aquafina, is purified by reverse osmosis. LIFEWTR has debuted with two different package sizes (1L and 700ml).
In order to differentiate this premium water from its competition, LIFEWTR will feature rotating rising artists’ work on its labels to engage consumers. LIFEWTR marks Pepsi’s second attempt at a premium water offering, as its 2014 product Qua never took off.
Source: Wall Street Journal
3 Reasons LIFEWTR Will Benefit Savvy Operators:
1. Premium Water Sales Replace Declining Soda Sales
It’s no secret that traditional soda consumption continues to decline. Over the last five years, Americans have gone from consuming 53.7 gallons of carbonated soda a year all the way down to 38.9 gallons (a decline of nearly 28%). In contrast, over the same period bottled water consumption more than doubled. In recent years, consumers have decided to decrease their sugar intake and these new beverages have made it easier for them to do so.
For foodservice operators that offer grab-and-go coolers and beverage racks, offering multiple tiers of bottled water is not only a smart thing to do, but it’s increasingly becoming a necessity. At Pepsi’s suggested retail price of $2.70 for a 1L bottle and $2.06 for a 700mL, LIFEWTR is a great, high margin replacement for traditional carbonated soft drinks. In addition, our data shows that consumers have responded particularly favorably to ambient racks of premium water near the point of sale, suggesting that there’s an opportunity to add LIFEWTR to pick up incremental sales without replacing any current SKU’s. In other words, LIFEWTR may not only help stem the tide of declining soda sales, but add incremental volume and profit as well.
2. LIFEWTR Fills a Key Gap in Pepsi’s Product Portfolio
We are fond of saying that a modern exclusive beverage deal still provides an organization with a remarkable amount of choice, especially when you consider both Coke and Pepsi’s vast product portfolios (including teas, juices, smoothies, etc). With the release of LIFEWTR, this statement becomes even more true.
Until now, Pepsi had no viable competition to Coke’s successful Smartwater brand, which, according to Beverage Marketing Corp., earned 45% of the premium bottled water market by volume in 2015. Pepsi has now closed the last meaningful gap in its bottled product offerings when compared to Coke, and can now offer a legitimate answer to the booming Smartwater brand. With this leveling of the playing field, one of Coke’s key advantages has begun to dissipate. Almost overnight, premium water has become the newest front in the decades-long soda wars.
3. Pepsi is Putting Big Dollars Behind LIFEWTR’s Roll-Out
Given the high-profile debut of LIFEWTR and the large market share enjoyed by Coke’s Smartwater, Pepsi has a lot riding on LIFEWTR’s success. It’s become clear that PepsiCo is making a huge investment in the brand. Case in point: Pepsi dolled out an estimated $5M to Fox to land a 30-second spot during this year’s Super Bowl to introduce its new product to consumers. If it seems unusual for a beverage company to spend coveted Super Bowl time promoting bottled water over its flagship cola brands, that’s because it is. Traditional soda brands typically receive the spotlight during this vital marketing event.
Pepsi is eager to get its LIFEWTR in front of the eyeballs and wallets of key demographics. The company is reportedly placing 90,000 incremental displays across a variety of retail outlets throughout the U.S. for the rollout. Hospitals and airports are key geographical assets for this brand, and PepsiCo would love nothing more than to own the exclusive rights to distribute this product at these properties. Smart operators and executives will know how to turn opportunity into value and mutual benefit by seriously exploring exclusive pouring rights agreements with Pepsi at this time.
We’re Here to Help
Pepsi’s LIFEWTR launch illustrates how important the water category has become and presents significant opportunities for smart operators and executives to create value for their organization and customers. The timing to negotiate your first exclusive beverage deal (or enhance your current one) has never been better. We can guide you through every step of the process.
Contact us today to explore what a beverage deal can mean for you.