Pepsi and Coke are planning to add enhanced bottled waters to their product lineup. The arch-rivals are increasingly fighting outside their traditional cola battleground. Pepsi's Aquafina Essentials and Coke's Dasani Nutriwater will be the newest entrants in the fortified bottled water sector in early 2002.

Building on strong brand recognition, they should allow their parent companies to stay at the top. Time to market, however, will be a critical measure of success.

Coca-Cola (KO) and PepsiCo (PEP) are both reportedly planning to launch nutrient-fortified bottled waters. According to Goldman Sachs analyst Marc Cohen, Pepsi is planning to add a vitamin-enhanced and flavoured extension to its bottled water brand Aquafina. Meanwhile, according to Reuters, Coca-Cola is also poised to add nutrients to a new line of bottled water. US bottled water sales have grown at a CAGR of 14.8% since 1998, topping $2bn in 2000, while the carbonated beverages market has declined for two years running.

Bottled water has been especially popular with younger consumers, a key demographic for the beverage industry. Morgan Stanley estimates that in 1990, 23% of adults aged 18-24 used bottled water versus 49% in the spring of 2001.  As a result, Coke and Pepsi have shifted their focus to bottled water and alternative drinks. Coke has come under pressure in recent months from several deals that give PepsiCo an apparent edge, but both firms clearly mean business when it comes to bottled water. Pepsi's product, Aquafina Essentials, an enhanced version of its current water product, is set for a regional launch early next year and a possible national roll-out in late 2002.

However, Pepsi has deflected questions about the new product, admitting that consumers are interested in enhanced waters but refusing to say anything specific. According to the Wall Street Journal, Coke's Dasani Nutriwater will include flavours such as 'Lemon Tangerine' for 'bone strength' with calcium, magnesium and B vitamins. Other planned versions include 'Pear Cucumber,' for 'balancing,' with B and C vitamins; 'Mandarin Orange' for 'immunity,' with vitamin C and zinc; and a 'Wild Berry' multivitamin version with B, C and E vitamins.

Until now, Pepsi and Coke have been able to sweep through the US bottled water market with little resistance, holding the number one and two spots, respectively. However, as more competitors enter the vitamin and enhanced-water segment, Coke and Pepsi must respond or be replaced. These new launches should help them maintain their position.

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