Pepsi's future pure in US water fight
With growth running at 15% per annum since 1995, it is little wonder that a host of drinks companies have been eagerly tapping into the US bottled water market. What is arguably more exciting for companies such as Coca-Cola, PepsiCo, Danone and Nestle is that per capita consumption is still relatively low.
According to market analysts, Canadean, the total bottled water market in North America stood at 12.9 billion litres in 2001. However, while this makes it the largest market for packaged water in the world in terms of per capita consumption it does not even get into the top ten.
This gives brands such as PepsiCo's Aquafina genuine cause for optimism. Aquafina senior brand manager, Chad Dick said: "You are supposed to drink eight glasses of water a day. The fact of the matter is, consumers don't come anywhere near that. We are maybe a quarter of the way there from a per capita consumption point of view. Per capita consumption is likely to triple in the next 10 to 15 years and even if that happens, according to our research, people still wouldn't be consuming the recommended daily amount of water."
That said, annual per capita consumption in North America has risen from 19.6 litres in 1995 to 43.5 million litres in 2001. Clearly the US accounts for the large majority of the market though the same trends can be seen in both countries, with Canada generally considered to be about two years behind in terms of evolution and development.
Aquafina and Coca-Cola's Dasani brand have been the big spenders in the bottled water market and have been driving the growth. They are both purified waters rather than "source" products. As such, they are positioned at a popular price point rather than the premium niches where most of the imported source waters and regional mineral waters are to be found.
The degree to which Aquafina and Dasani have taken the initiative is illustrated by the declining market share represented by imports which fell from about 7% in 1996 to 4% in 2001.
In terms of cachet it could be argued that purified waters lack something in comparison with the likes of Evian or Perrier but PepsiCo does not see it as a disadvantage. Moreover, the brand trades on the fact that it is purified, using "purity" as its prime selling point in advertising.
"From a brand positioning standpoint, purity is very motivational territory. For us the answer to that is very simple. It is about the purity of the water, the consistency and the taste. That's what we talk about in our communication."
The brand's latest campaign is a case to point. Featuring the voice of Lisa Kudrow from Friends, the new ads stress the merits of a drink that offers pure refreshment with no added flavours or fizz. The tag-line is "Aquafina. So pure, we promise nothing."
“Aquafina#;s new advertising emphasises exactly what consumers have been telling us they want from bottled water – a consistently pure, crisp, refreshing experience – and nothing else,” said Dawn Hudson PepsiCo's senior vice president of strategy and marketing.
Thus far, the purity concept appears to be paying off handsomely for Aquafina, with substantial growth across all sectors of the market. "In general I would say our growth is in the 45% to 55% range depending on the channel," Chad Dick told just-drinks, "and I would expect that growth to continue at least for the next couple of years."
While growth can be seen across the board, it is the expanding off-premise market which is providing big volume development. "People are consuming more and more water and they want to buy water in larger and larger packages. About half the consumption takes place in the home. People are taking a habit they once had on the move and are taking it into the home. We are seeing triple digit growth in the grocery and large format sector. There are tremendous opportunities in those channels."
Interestingly, although female consumers had historically represented a larger proportion of the bottled water market, sales of Aquafina are marginally skewed towards male consumers. In fact, the brand takes credit for bringing more male consumers into the category. "Our marketing was very universal. It made it OK for men to drink the brand."
The bottled water market as a whole is heading towards a 50/50 split between male and female consumers. Aquafina's slight bias towards male consumers was principally a function of the brand's particular distribution breakdown and it too is heading towards an even split. PepsiCo describes the target market for the brand as young adults in the 18 to 34 age bracket. "That is not to say we ignore kids or people over the age of 34. We strive to have a balanced media delivery against men and women."
To what degree the growth in packaged water has stemmed from consumers' dissatisfaction with tap water for drinking is hard to gauge but it is clearly a factor.
"The biggest concern for people first and foremost is taste and the thing you can't get from tap water is that consistency of taste from tap to tap. Bottled water consumers are most interested in brands like Aquafina that offer purity guaranteed, and a consistent crisp, clean taste. That is what brands are about."
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