Bottled water hydrates drug chain beverage category

Drug Store News, July 20, 1998 by Jennifer Kulpa

Although we're guzzling more iced coffee and soda than ever before, our glasses are actually half empty because these caffeinated beverages actually rob the body of water, making those recommended eight glasses all the more critical, according to a recent study by Yankelovich Partners for the Nutrition Information Center at the New York Hospital, Cornell Medical Center and the International Bottled Water Association.

While alarming, the news is music to the ears of bottled water suppliers that lean heavily on the health benefits and pure refreshment of their products in vying for the beverage dollar. While they said it's too soon to tell how the results will flow into marketing efforts, at least one major company has already agreed that the news should lead to increased sales of bottled water.

According to the study, the average American drinks eight "hydrating beverages," such as water, juice and caffeine-free soda, per day, but that effort is undermined by the effects of the nearly five servings of "dehydrating beverages," such as coffee and alcohol. "The net result is that most Americans are probably only getting about a third of the valuable hydration benefits they need," said Barbara Levine, director of the Nutrition Information Center.

Furthermore, while 2-out-of-3 survey respondents knew the eight glass rule, one in two admitted to slacking in their compliance. The average was only 4.6 servings per day, and nearly 10 percent consumed no water at all, leaving water bottlers still more room to grow.

"This look at America's hydration habits suggests what could be a significant and widespread health concern," Levine said. "The survey clearly demonstrated the need for much more public education about the benefits of proper hydration." This tie to general health makes bottled water even more appropriate for drug stores.

Not that the bottled water industry is in need of rescue. In 1981, bottled water represented 1.8 percent of the U.S. liquid consumption, according to the Bottled Water Web. By 1997, that number had climbed to 6.9 percent, and the stuff had become the fastest-growing beverage industry segment, with no signs of slowing.

More recently, too, bottled water continues its reign as star beverage in all three channels of trade, posting overall dollar sales growth of 13.5 percent to $1.14 billion for the 52 weeks ended April 26, according to Information Resources Inc.

While food is still the dominant channel, with sales of $996.6 million last year and 84.7 percent market share, it did not keep up with industry growth, posting a slightly lower 11.1 percent increase in dollar sales.

Drug stores embracing the consumables category pushed the channel's performance to an 18.5 percent growth in dollar sales to $78.4 million. "Bottled water sales have been growing in double digits at CVS for the past three years," said a company spokesperson for the Woonsocket, R.I.-based chain.

Still, at only 6.8 percent of the bottled water market, drug is a close third behind the as-usual well-performing mass merchandisers, which captured an 8.4 percent market share after increasing sales an impressive 38.4 percent to $95.5 million.

"Mass merchandisers do very well-by virtue of their size alone," said Ed Lauth, president of the AquaPenn Spring Water Company. "With the [larger] square footage, obviously they can offer a lot more than a drug chain could. Sales per square foot would be a better way to look at it, and when you look at how well drug chains have done per square foot, it makes more sense."

Segmentation

Municipal tap water and local well water sources have been the targets of criticism for their often-high levels of contaminants and unpredictable taste. Reports of PCPs and other chemical enemies have instilled fear of the unknown in residents, many of whom now use filters on their faucets and their refrigerators or reach for bottled water instead. "Tap may be free, but pure water may not be," Lauth said. "Consumers have questioned the quality of their tap for years."

But, with the explosion of this segment, the focus for bottled water has shifted more toward being a beverage option just like a can of soda, rather than just a tap water alternative. "People want healthy choices, and clearly this is the perfect lifestyle beverage--it has no calories and it is good for you," Lauth said. Next to the other individual-sized beverages, such as soda, tea and juice, water has many selling points that go beyond cleanliness.

There is a sense among beverage marketers that with this positioning, bottled water is attractive to various market segments and this segmentation has allowed for continued growth of a category in which all the players offer essentially the same product. Clear demographic targets have become essential to bottled water success. Baby boomers are going back to more natural, healthy beverages that quench their thirst without adding inches or jitters, moms use it in kids' lunches instead of sugary sodas, and weekend warriors and serious athletes alike have long been users of bottled water.