Sep 20, 2002

Enhanced Bottled Waters

Editor's Emphasis

The health and fitness craze among consumers has certainly
been a power that is pushing the bottled water market. Single-serve
polyethylene terraphthallate (PET) sales alone account for approximately
one-third of the United States' bottled water volume, according to
Beverage Marketing Corp.'s 2001 figures. Among the most recent trends is
the demand for enhanced and functional bottled waters.

You might think that health and fitness is the main drive
for such water varieties, but actually it is the aesthetics that people seemed
to be most interested in. Taste is the number-one reason people select bottled
water, according to the International Bottled Water Association's
consumer attitude and usage survey.

That being said, WQP spoke with Barry Willson, senior vice
president of operations at BEVsystems International, Inc., based in Miami,
about the current enhanced water trends that seem to be driving the industry
and giving marketers a lot to work with.

How Did This Category of Bottled Water Get Its Start?

All of these enhanced waters began very much as a business
decision. Bottlers were making money on bottled water products and enjoying the
high margins. Bottled water became an excellent opportunity for people involved
in bottled beverages. Beverage giants such as Coca-Cola and PepsiCo decided to
enter the bottled water market with their brands--Dasani and Aquafina.

"Coke came in and started giving away a free box of
water with every 10 cases of Coke purchased," reports Willson.
"Price wars broke out, these special offers broke out and margins were
driven down, the value of the bottled water was driven down. Water then becomes
very cheap, not to the consumer but to the retailer."

In addition, the bottled water category found itself in direct
competition with other beverages such as fruit juices and carbonated products.
Children were not targeted at all and many adults were not interested in plain
bottled water either. For instance, Nestle had problems with its bottled water
product because it was not generating the attention of many younger consumers.
"Nestle's advertising agencies were telling them that they had to
make water more exciting for a younger consumer or it would not make it,"
Willson says.

Companies were forced to find new ways of selling their
bottled water products, and so the enhanced waters category was born.

There have been several ways to differentiate water
including flavors and vitamins, so companies were charged with discovering new
ways to make bottled water more appealing and create a need for consumers.
"If it comes from the Appalachian Mountains, who cares? You have to find
some value in the mind of the consumer to make them prepared to pay more for
the [enhanced] water than if they buy regular bottled water," Willson

In our information-driven society, consumers are more aware
of the benefits of water, and they seek out a variety of portable beverages.

The secret is in the marketing of such products. What is the
most important marketing tool? The label. "You see people reading the
labels while eating or drinking--and that's advertising
magic," Willson explains. "The consumer is going to draw a
conclusion from what he reads on the label as to whether the product is right
for him. And, depending on how convincing the label copy is, he either will buy
it again or not. The message is credible or it isn't."

Types of Enhancements

Enhanced waters is a general term used to describe bottled
waters with additions including such things as flavors, colors or vitamins.
Willson lists three main categories of these waters.

The sports water segment includes bottled waters that
contain such additions as vitamins and flavors. These waters contain added
vitamins that the body needs and are marketed to the active population who are
seeking extra enhancement from their water to aid in their workouts. For
example, Gatorade's Propel fits into this category. Propel contains three
B vitamins that are claimed to facilitate metabolism at the cellular level.
Active people will seek out drinks such as these as aids in helping to improve
their workouts.

Modified waters are quite different. These types of water
demineralize the water to free it of "bad" minerals by running it
through a reverse osmosis system or similar treatment and then adding the
"good" minerals--the ones the manufacturers think a consumer
should have--back in. A well-known example in this category would be
Essentia brand bottled water.

Super-oxygenated water actually can be split into two
subcategories. The first is where the water is treated with chemicals such as
peroxides to increase the bound chemical oxygen content to the water.

The second technique is done by a process called
microdiffusion, patented by BEVsystems and sold as Life O2 bottled water. This
process creates very small bubbles of water. "This enables us to make
stable solutions of oxygen up to 200 parts per million (ppm)," explains
Willson. "Once the bottle is opened, there is a gradual release of
oxygen. After 12 hours, you still will have more than 100 ppm in the

Why would someone want to drink it? "If your favorite
sport is changing the television channels, then it isn't going to do very
much for you," says Willson. "If you are into any kind of strenuous
exercise, it will give your levels of saturation of blood oxygen a
boost." It is explained that if you have an extra storage of oxygen in
your stomach, you are maintaining higher oxygen levels, and this can serve as a
second source of oxygen. Willson adds, "Your blood won't be at
saturation levels for oxygen as fast, which wouldn't slow you down as


The FDA takes a liberal stance on regulating these enhanced
waters. "With super-oxygenated water for instance, it is water with
oxygen in it, and oxygen is a natural ingredient in water. Therefore, there is
nothing new about it and you can sell it," Willson says.

The FDA wants to know if you are putting something noxious
into the water. Vitamins are in a person's diet, and oxygen already is in
the water. So, all that is needed with vitamins in the water is a nutrition
panel explaining how much of everything is in it. Making specific claims about
what a bottled water can do for you such as live longer or run further needs to
be backed up with documented proof.

Market for Small Bottlers

With beverage giants such as PepsiCo moving into bottled
water territory, how can a smaller bottler compete in the enhanced waters
category? Although many small- to medium-size bottlers believe they can compete
in this category--and some will even become a success in it--Willson
doesn't express much hope in that particular segment. "[Large beverage
companies] came in and busted something up," he says. "They either
break it up by pricing, confuse the consumer or block the trade such as what
PepsiCo and Coca-Cola did with particular restaurants. It is increasingly more
difficult for smaller bottlers to compete in this market segment. Many of the
small operations that grew during the mid-90s have gone broke or been bought up
by larger conglomerates."

Enhanced Water's Future

Flavored waters definitely seem to be where most interest
lies right now. Consumers are searching for better tasting, less bland
beverages that will quench their thirsts. These products are capturing the
younger generations as well as the health-conscious consumers.

As consumers become more health-conscious and informed, the
enhanced water product category will become even more important. "There
is growing importance in the value-added waters," Willson concludes.
"It is the value and credibility of the claim that will establish whether
the consumer will continue to buy."             

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