Water is a growth area in the soft drinks market, and Nestlé has been a key player in this fast-expanding category. But the Swiss food and drinks giant has particularly high hopes for its Pure Life brand, writes Hope Lee, soft drinks analyst at Euromonitor International, and has taken an unusual path to building the brand internationally.

Created in the developing world and now building momentum in the US, Nestlé Pure Life is emerging as a key challenger to major water brands like Volvic and Evian.

While most multinationals are inclined to introduce already established international brands to emerging markets, Nestlé is working on a reverse strategy, establishing Nestlé Pure Life in developing countries first, and then cultivating the brand in the US, with the ambition to build it into the world's leading branded water.

Affordability is the main factor behind Pure Life's success in developing markets. Launched in Pakistan in 1998, the brand was originally designed to target the mass market in developing countries where consumers are generally price-sensitive, and value brands with some international cachet but which are affordable.

Pure Life was envisaged as a "multi-site" brand, meaning it is produced at various locations, helping to keep transportation and production costs down, and allowing it to compete with local brands.

This strategy saw Pure Life's market share in Egypt increase by five percentage points since its launch in 2002 and hold a volume share of 15% in 2006, according to Euromonitor International data. Moreover, it has given Pure Life a competitive price advantage over rival brands such as Volvic and Evian which rely on imports. In Saudi Arabia, Pure Life retails for SAR2 (US$0.53) for a 1-litre bottle, compared with SAR6 for a 1-litre bottle of Volvic. Unsurprisingly, Pure Life has achieved consistent share gains in China, Egypt, the Philippines, Saudi Arabia and Nigeria over the past few years.

However, to make Pure Life a truly global brand, Nestlé understands the brand needs to be present in developed markets which offer a stable and predictable environment for growth, but it also realises the price factor which brought success elsewhere would still apply.

Nestlé spotted an opportunity in the many American consumers who buy water for convenience but are not necessarily loyal to a particular brand, and shop on price. Potentially, Pure Life could be priced lower than other regional brands which appeal to the mass market. Therefore, the US became the priority developed market for Nestlé Pure Life to crack.

In the US, Nestlé did not launch Pure Life as a completely new brand. Instead, it acquired the long-established regional brand Aberfoyle in 2000 and transformed it into Pure Life. This strategy served two purposes; it cut down on costs and allowed Nestlé to be more focused in terms of brand management.

Pure Life is the only Nestlé brand with national distribution, and this has significantly helped to boost large volume sales. Holding a 3% market share in the bottled water category in the US, Pure Life managed to outperform its sister brand Arrowhead and keep pace with rival brands such as PepsiCo's Aquafina and Coca-Cola's Dasani, despite the two giants investing heavily in promotion. Globally, Pure Life is now ranked ninth, overtaking Danone's Volvic and narrowing the gap on Evian in 2006.

Going forward, Pure Life's main growth strategy is to further develop low-calorie flavour extensions in order to add value to the brand and give it more flexibility in pricing. In the US, it introduced Nestlé Pure Life Natural Fruit Flavours Water, comprising lemon, raspberry, orange and strawberry varieties, which were all well received. This is a direction of development widely followed by major players.

Looking ahead, with the outlook for bottled water in the US modest, Euromonitor International believes the company would do well to continue with its flavour-led strategy as the category is forecast to post a CAGR of 9% by volume between 2007 and 2011. However, an even shrewder move may be to extend the brand into the functional realm which would also improve Nestlé's global position in the growing functional water category, currently a weakness for the Swiss company.

In terms of geographical expansion, Nestlé may consider extending the brand into the European market. While Western Europe is potentially a more challenging market to crack due to the existence of strong established brands, Eastern Europe could offer better prospects, particularly given the success Nestlé has already had in building Pure Life on a price proposition in other emerging markets.