Trumping tap: converting tap water drinkers to bottled water fans is clearly profitable

Cheers, May, 2006 by Sherry A. Hatlestad

WHY GIVE AWAY A BEVERAGE WHEN YOU CAN SELL ONE?

Sounds like a silly question, but consider how much tap water is consumed by full-service restaurant guests every day. Imagine if they each ordered a beverage instead. Upselling them to a cocktail, glass of wine or beer is always an option, but before servers even get to that they could offer bottled water and get the meal off to a good start for everyone involved.

Bottled water became the second largest commercial beverage, surpassing coffee and milk, in 2005 according to Beverage Marketing Corporation, the New York, N.Y.-based beverage industry tracking firm. Americans of all ages drink bottled water everywhere--in their cars, on airplanes, at the ball fields and the beach--and they can now order it at their favorite fast-food restaurants. They've come to expect bottled water in many situations, and savvy full-service restaurateurs are capitalizing on this trend by working to convert tap water drinkers into profitable patrons by selling them bottled water at the bar or dining table.

How much are bottled water sales worth? On-premise accounts for nearly six percent of the $9.8 billion bottled water market, according to Beverage Marketing Corp. Not exactly just a drop on the bucket, but it could become a flood. One supplier did more than imagine what would happen if tap water guzzlers were converted. Coca-Cola North America's researchers estimate that if one in 10 tap water drinkers were to opt for a beverage alternative, it would increase yearly sales in the full-service restaurant channel by more than $300 million. Todd P. Leach, senior channel marketing manager for the Atlanta-based soft drink giant was blunt in his assessment of the industry's efforts in that direction: "Restaurants are just pouring money down the drain by not focusing on bottled water sales."

Avoiding such waste requires that operators get serious. First, treat bottled water as a bona fide member of the beverage portfolio--not just an add-on. Next, position it as a distinct beverage on the menu, and then apply the same best practices to bottled water as are applied to other beverages: select appropriate products, price strategically, merchandize it effectively and build promotions around brands, leveraging supplier support whenever possible.

Some operators are hitting all the high points with aggressive bottled water programs. "These are operators that have elevated water to a 'wine' status and often have special waters that reflect their culinary point of view," says New York foodservice consultant Arlene Spiegel of Arlene Spiegel & Associates. "Some actually place the bottled water in ice buckets and treat it as if it were Dom Perignon."

HAUTE WATER

Indeed, some full-service restaurants recognize the profit potential of bottled water and have changed their beverage service accordingly. Irving, Texas-based Omni Hotels & Resorts restaurants have done just that.

"Servers and servers' assistants are trained in the characteristics of the waters being offered and are also trained to approach the table with chilled bottles of water. They offer it to the guest as an option to tap water," explains Fernando Salazar, corporate director, food and beverage operations.

Omni Hotels began offering bottled water in restaurants three years ago, according to Salazar. Today Evian and San Pellegrino are mandated bottled water choices at all Omni venues. Some specialty restaurants also carry high-end waters such as Hildon from England, Panna or Blue from Italy, among others. "It's just part of the server's presentation to offer bottled water first before offering tap water," says Salazar. "Those restaurants that are not yet doing this are missing an opportunity to increase profits."

The key to a successful bottled water program is in the pricing structure, he notes. "Make a reasonable profit but do not gouge the customer. You might make a couple of dollars extra on the sale but you will lose a client for life," warns Salazar. "Be reasonable in the pricing structure."

Spiegel agrees: "The public has a love/hate relationship with purchasing bottled water. They love the cachet, the taste and the feeling of celebration when ordering bottled water at the beginning of the meal. They resent the cost."

The Sun Dial Restaurant, Bar & View sells bottled water and sells it well. Situated atop the Westin Peachtree Plaza in downtown Atlanta, The Sun Dial is a fine dining restaurant offering breath-taking views of the city, which many diners enjoy while quaffing a bottle of water. "Fifty percent of our covers order bottled water," explains Antoinette Poodt, general manager. "Foreign travelers have also helped water sales. People from overseas almost always order sparkling bottled water." The Sun Dial offers Aqua Panna and San Pellegrino.

FRONT AND CENTER

Many beverage pros share the observation that a large number of guests order bottled water in fine dining restaurants. Given that trend, water service must be incorporated into the fine dining experience: Servers should approach the table with bottled water in hand and present the bottle to the guest, as they do in Omni dining rooms, or be trained to immediately suggest bottled water and name the brands offered.