Saturday, October 26, 2013

Soda vs Bottled Water!!!


Should nature care whether it is one or the other?

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Bottled Water Sales Rising as Soda Ebbs

Few things are more American than Coca-Cola.

But bottled water is washing away the palate trained to drain a bubbly soda. By the end of this decade, if not sooner, sales of bottled water are expected to surpass those of carbonated soft drinks, according to Michael C. Bellas, chief executive of the Beverage Marketing Corporation.

“I’ve never seen anything like it,” said Mr. Bellas, who has watched water’s rise in the industry since the 1980s.

Sales of water in standard lightweight plastic bottles grew at a rate of more than 20 percent every quarter from 1993 to 2005, he said. The growth has continued since, but now it has settled into percentages within the high single digits.

If the estimated drinking of water from the household tap is included, water consumption began exceeding that of soda in the mid-2000s.

That significant shift has posed a tough challenge for the Coca-Cola Company and rival PepsiCo in recent years. While both companies sell bottled water lines, Dasani for Coke and Aquafina for Pepsi, they have had trouble establishing dominance in the more profitable business of so-called enhanced waters — including flavored and carbonated waters and those with added vitamins and minerals — where a horde of new beverage companies like TalkingRain, Hint water and Fruit2O are giving them a run for the money.

“Given where pricing has gone, I would assume that on the average 24 pack of bottled water, Coke and Pepsi are selling at break-even at best,” said John Faucher, who tracks the beverage and household products businesses at JPMorgan Chase. “The one thing keeping them in plain, old bottled water is that both have a very large and highly profitable single-serve business in it.”
Plain bottled waters are little more than purified tap water with a sprinkle of minerals tossed in, which makes the business one of producing bottles and filling them.

Factors as varied as innovations in bottling technology that have helped drive down the price of water as well as continuing concern about obesity and related diseases are also driving the trend. A recent study by North Dakota State University, for instance, used dietary intake data collected by the federal government to draw correlations between decreased consumption of soda from 1999 through 2010 and improvements in the biomarkers that indicated cholesterol and other chronic diseases.

A study by Coca-Cola asserted that the government’s data, the National Health and Nutrition Examination Survey, was flawed, but that had not stopped public health officials from encouraging greater consumption of beverages with less sugar.

Last month, Michelle Obama heavily endorsed water, teaming up with Coke, Pepsi and Nestlé Waters, among others, to persuade Americans to drink more of it. Health advocates complained that Mrs. Obama had capitulated to corporate partners by not explaining the benefits of water over the sodas they sell and that her initiative promoted even greater use of plastic bottles when she could have just recommended turning on the tap.

Bottled water has also grown cheaper, adding to its attraction. Cases of 24 half-liter bottles of store-brand water can be had for $2, or about 8 cents a bottle, and some grocery store chains even are using waters as loss leaders to attract customers, teeing up shopping carts with a case already on board.

Companies like Niagara Water, a privately held company that is the largest private-label water bottler in the country, have a fully integrated, highly automated production system that starts with plastic pellets that are made into bottles and goes all the way through to filling the bottles, making caps and screwing them on.

This poses a problem for the big beverage companies selling branded waters. “Coke and Pepsi can compete in convenience stores where water is being sold one bottle at a time, but they can’t make money on selling cases at $1.99 apiece,” said John Sicher, publisher of Beverage Digest.
In a conference call with analysts last week, PepsiCo’s chief financial officer, Hugh F. Johnston, said that the company had no plans to invest in increasing its bottled water offerings. “We don’t think it creates value over time,” Mr. Johnston said.

Some of the things that have made Pepsi and Coke formidable competitors in the soda business work against them in water. The companies, for instance, stock grocery store shelves directly off their trucks. That gives them more extensive and timely information about how their products are doing and greater control over marketing, but it also is much more expensive than the distribution system used by companies like Niagara and Nestlé Waters, which has a private label business in addition to marketing brands like Poland Spring and Ozarka.

Those companies let retailers handle stocking, shipping pallets of their waters to warehouses.
Coke sold 5.8 billion liters of waters abroad and 253 million liters in the United States and Canada from 2007 to 2012. Pepsi’s water sales in North America actually declined by 636 million liters over that period, but it still sold 4.7 billion liters overseas, according to Euromonitor.
Both companies’ soda sales fell in North America over that time but grew internationally. Volume sales of soda, however, may be deceptive. “The volume growth is there, but when we’re talking about international markets like China, India and Latin America — prices are lower,” said Jonas Feliciano, an industry analyst at Euromonitor.

The TalkingRain Beverage Company, a bottled water business that started in the Pacific Northwest, is getting out of the plain water business altogether because the economics are so bad. “The water business has become very commoditized,” said Kevin Klock, its chief executive. “Folks in that business have to produce high quantities at fast speed in very light bottles, and it requires a huge investment to be in that game.”

TalkingRain makes Sparkling ICE, a bubbly water that comes in flavors like kiwi strawberry and blackberry with no calories and “vitamins and antioxidants.” The brand had developed strong consumer loyalty in the company’s back yard, consistently generating about $10 million in sales a year when Mr. Klock decided to bet big on it after taking the helm in 2010.

Last year, TalkingRain sold $200 million worth of Sparkling ICE, and sales this year are on track to exceed $400 million, Mr. Klock said. “There’s a large market out there that wants something sparkling, something flavored, something without a controversial sweetener, and we hit that market,” he said.
Now Pepsi and Coke are scrambling to dip their toes into it, too. They are fighting back with investments in flavored and enhanced waters and, in Coke’s case, packaging. Dasani, Coke’s primary water business, comes in the company’s PlantBottle, at least 30 percent of which is made from plant materials.

“First, consumers who purchase Dasani are looking for a high quality product that delivers a high quality taste time and time again,” said Geoff Henry, brand director of Dasani. “Beyond what the brand stands for, we are looking to lead in packaging and sustainability because those things also matter to our consumers.”

On Thursday, Coke introduced its first sparkling Dasani drinks in four flavors, and Pepsi is expected to take the wraps off a premium bottled water product called OM this year, according to Beverage Digest.
Coca-Cola has also been successful with Smartwater, which was part of its $4.1 billion purchase of Glaceau, the maker of Vitaminwater. Smartwater is little more than distilled water with added electrolytes, but volume sales were up by 16.2 percent in the first half of this year, according to Beverage Digest.

Dasani also has introduced Dasani Drops, with flavors like cherry pomegranate and pink lemonade, which consumers add to the drink to fit their taste, a quality especially prized by millennials.
A bumper crop of flavor drops has been coming onto the market ever since Kraft introduced Mio in 2011. SweetLeaf and Stur, for instance, are Stevia-based sweeteners for water that impart flavor. Pepsi recently began selling Aquafina FlavorSplash drops.

Sales of most branded enhanced water, however, were down in the first half of 2013, and whether giving consumers the option to flavor plain water will change that equation remains to be seen. Vitaminwater’s volume sales slid 17.3 percent, for instance, while SoBe Lifewater, a line of flavored waters owned by PepsiCo, dropped 30.3 percent, according to Beverage Digest.
On the other hand, Nestlé and bottlers like Niagara, which carry lower prices, saw sharp increases in volume sales of their enhanced waters.

“Is it a great idea? Not necessarily,” Mr. Faucher said of the big companies’ push into enhanced waters. “Do they have much of a choice? Not necessarily. People want variety and so Coke and Pepsi are going where the opportunity is. There aren’t a lot of other options.”

 

18 comments:

Leah DeEgidio said...

I personally would have never guessed that this was an issue. I think that Coke and Pepsi should stick to what they are good at and if Dasani and Aquafina aren't making enough profit, the amount supplied across the country should decrease. If independent bottled water companies can produce bottles cheaper and more effectively, then it is not surprising they are doing better in this market. I also find it ironic that the man quoted from Danasi spoke about sustainability. I am almost positive that Dasani is one of the only brands that has not altered their bottles to include less plastic.

Anonymous said...

Again, we avoid the route of the problem.

First off, we need to eliminate water bottles ENTIRELY. They are the scourge of the natural environment. If they were gone, half of these issues would be too. 'Water' isn't the only factor when talking about bottled water..building factories to create these bottles, buying the plastic and distributing them are all wrapped up into the mix as well. If Dasani and Aquafina are truly worried about their profits they should just start selling water in mass quantities or link up with some sort of pipeline.

As for Pepsi and Coke, they both contain so much sugar and they're HORRIBLE for your health (not to mention they too are distributed in all plastic materials). America has one of the highest obesity rates in the world so I can hardly even pretend to care about their profits. If it were up to me, both Pepsi and Coke would be shut down and we'd all be drinking either water or juice!
-Megan Spaulding

Annamaria Watson said...

I had two thoughts while reading this article. The first was that I was pleased that the average American finally seems to care more about their health and what they put into their bodies. The fact that water has become so popular makes me very happy in that regard.
My second though, however, was that this is only a temporary health illusion. Not only are water bottles one of the top contributors to environmental degradation, but they are also overpriced and advertised falsely.

On the one hand, I am happy that CocaCola, etc is realizing that they need to make their products healthier and more environmentally friendly because their consumers look for those qualities. On the other hand, I am sad that this 'health revolution' is ultimately only causing more health issues in poorer countries, the ocean, and, soon, all over the world.

Bradley Malave said...

It doesn’t surprise me at all that sales for bottled water is increasing at such a drastic rate. In the article it states that the increase was 20% every quarter from 1993-2005. I would guess that the increase of sales is in direct relation to the increase of population. Water is necessary for life as is food which my guess would be that food demand increased as well. I could understand why Coca-Cola Company and PepsiCo have been having strong competitors in the water industry, because they are not strictly water so purely water companies such as TalkingRain that are focused on just that. I think that it’s a good thing that Mrs. Obama teamed up with some companies to promote drinking water. It makes it seem like these companies paid her a lot of money to promote their bottled water because if not, then she could have just suggested people to drink tap water which is very good quality. Seeing the great numbers in bottled water sold internationally rather than domestically tells me that those countries don’t have many options when it comes to buying bottled water and since pepsico and coca-cola water bottle products are cheap and good quality, it makes sense that their profits are mostly gained there.

Chris Olsen said...

I think it's great that there is such a drastic shift from soda to water. This is great for the health of the country, however, it doesn't do much for the environment. They still use plastic bottles, it doesn't matter if there is soda or water in it. We need to replace the plastic bottle for something better for the environment. Although, realistically this won't happen over night I think we can at least reduce the amount of plastic used in the bottles. This can be done because it has already, however, I think we can further reduce the amount of plastic until we can hit our goal of replacing plastic bottles.

Also Pepsi and Coke need to realize that the other companies are doing better than them in the water market. They need to either cut their losses and stop producing water or change something to make their product stand out more amongst the other competitors. Coke and Pepsi need to do something or they will continue to have a loss.

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Mary OSullivan said...

It's nice to see that there has been a large shift from soda to water in the past few years. Truthfully I have never been much of a soda drinker myself, so I find the change to be a needed occurrence. However, I don't understand why Coke and Pepsi find it necessary to force their way into this new market of specialized waters. They own many different brands, including some food companies(Pepsi). They should focus on all the brands that they are carrying now and try to improve upon them, not add more to their company. if there is a product not doing well, they should just simply decrease the amount supplied. They are spreading themselves too thin, and one day this will be their downfall.Coke and Pepsi should just stick to what their good at and stop trying to dominate every market that comes into play.

Remy Gallo said...

Reading the sentence "I've never seen anything like it, said Mr. Bellas, who has watched water's rise in the industry since the 1980s," makes me sadder then anything else in the article. Water is a human right, it should not be in any industry! But fighting that will get me no where so I will move on. It excites me that people are choosing water over soda because of the increase in health related diseases, especially in the United States, but it annoys me that companies see this as a bad thing because they aren't making money. This is capitalism at its finest. I do, however, see something good coming out of this. If sales in water are rising then people are getting the idea that soda is bad for them. Maybe in the next coming years they can be convinced that buying any bottled beverage is bad, and then we might be able to see real progress on the environment.

Michael Bronn said...

I did not know how tough the competition between companies that sell bottle water really is. I also think that the popularity of bottled water is rising because people think that it tastes better than tap, as well as being safer to drink than tap water. I personally prefer bottled water over tap water. I think that maybe on company can change the game up and keep from using plastic bottle by having trucks go around neighborhoods and fill tanks of water for households or something along the lines of that. Water is also becoming more popular because everyone knows what is in them and how bad soda really is for your body. Flavored and carbonated water is definitely something the majority of people prefer over plain bottled water.

Taylor Vogt said...

I think it's great bottled water is winning. I grew up drinking tons of pepsi and coke products. Right now I'm paying the consequence because my teeth are all rotting out. It's not pleasant, because unlike being chipped away they seemingly melting. The fact that we have been drinking more water, in my eyes, is amazing. I drink Fruit2O and another product called ICE. They're delicious and are even infused with vitamins in some instances. I've been trying to find Dasani Drops but I can't seem to find them anywhere. Hopefully, as this article suggests, they'll be more widely sold in the coming months/years.

Christie Homberg said...

Personally, I don't purchase disposable water bottles. Last semester I learned of the environmental and social issues associated with bottled water, and it just blows my mind that something that impacts so many things so negatively is seen as being this super healthy product. Bottled water acts as an excellent example of an environmental problem with social roots.
As for the article, I actually learned last year that bottled water is Pepsi's highest selling product. I think that American's, in general, are becoming more concerned with what they consume so bottled water seems like a perfect substitute for soda. However, the chemicals that leech into the water have such negative health effects, both in the short and long term, that it doesn't really makes way more sense to use tap water.

Dana Colavito said...

It surprised me greatly to see how bottled water has surpassed soda companies like Coke and Pepsi on the market. I am happy to hear that people are more concerned with their health and are drinking more water but I don't like the idea of how much plastic is being used. I think all of these companies should be more environmentally friendly. The fact that Coke and Pepsi are trying to do this and better their product by being healthier for consumers is a huge leap forward.

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