Despite the fact that retailers are doing little to promote bottled water, the category continues unabated along a spectacular growth curve.
Bottled-water sales increased by more than 45% from 1992 to 1997, according to Beverage Marketing Corp., New York. Not surprisingly, the region of the country that has the highest bottled-water sales is the West Coast, where most health trends begin before expanding to the rest of the country. But Western sales have now stabilized and even lag a little in growth behind the rest of the country, while the Midwest is now experiencing strong increases.
"Bottled-water sales at retail were up 30% last year," said Gary Hemphill of Beverage Marketing, "and the overall bottled-water category was up 10% last year. The most popular selling retail size is the 1.5-liter plastic bottles and smaller.
"Smaller-size packages are really growing," he reported. "Many companies are now selling those sizes in multipacks at retail. The pricing on those has become really aggressive, and is driven by two factors: one is the dissatisfaction with tap water, and two is general lifestyle trends. Water is a beverage with no calories or additives."
Hemphill went on to explain that water has a big advantage over other beverage categories, since it can be consumed at any time of the day, unlike orange juice or soda, for example. In addition, water does not need to be refrigerated, so it is more versatile. And, of course, it is healthy.
Moreover, consumers often perceive bottled water as a higher quality product than what comes out of the tap, although this is not always the reality. For example, some municipalities have exceptionally good water supplies that are even used as the source of bottled water sold at retail. The bottled-water industry also came under fire recently, in a study released by the Natural Resources Defense Council, Washington. The NRDC found that one-third of the water brands it tested contained bacteria or chemicals that exceeded allowable limits under either state or bottled-water industry guidelines. Nonetheless, bottled water is one of the most highly regulated food products under the jurisdiction of the Food and Drug Administration. The FDA has been regulating the bottled-water industry for 37 years. According to the International Bottled Water Association, Washington, 85% of the brands consumed in the United States are members of the IBWA, which adheres to guidelines even stricter than those imposed by the FDA. Zail Dugal, public relations director for the IBWA, told SN that, in addition to meeting state and industry standards, members must submit to an annual, unannounced plant inspection, administered by NSF International, an independent, third-party inspection organization.
Clearly, consumers have a lot of confidence in the bottled-water industry, which is evident in recent sales statistics. Matt Bell, director of media relations for ACNielson, said "A review of information from our Homescan consumer panel shows that in 1996 about half of all households bought bottled water at least once. In 1998, that figure grew 65%."
Bottled water does especially well with affluent households (annual income of $70,000 or more) as well as in younger, childless households. These households tend to have a healthy profile, and also buy less than their fair share of products like candy, ice cream and cookies.
SN visited the San Francisco area, which has some of the highest bottled-water sales in the country, to see how supermarkets were merchandising and promoting the bottled-water category.
According to ACNielsen, in the 52-week period ended Feb. 20, 1999, total dollar sales for bottled water for the San Francisco region was $68 million, an increase of 6.6% over the previous 52-week period. The increase in sales units for that same period was 14.3%, or about 107 million units. Still water, by far the most popular, had dollar sales of $58 million in the San Francisco market, an increase of 6.2% over the previous 52-week period. Sparkling water sales also increased 8.8%, to $10.3 million.
Major chains visited by SN to investigate the bottled-water category were Whole Foods (California Street), Beverages & More (Colma), Lucky Food Stores (Sloat Boulevard), Safeway (La Playa), Smart & Final (Seventh Avenue) and Cala Foods (Geary Boulevard). "Basically, everyone at Whole Foods buys water," said manager David Cesare. "It's a necessity for them, and a consistent sale for us."
Whole Foods also offers a filtered-water option in the store to customers who bring in their own plastic jugs. "People don't use that method much," Cesare said. "We have an upscale clientele, and they want to purchase brand-name products. Regional brands are very popular, and still water is still more popular than the sparkling waters.
"It seems that our customers purchase bottled water as a replacement to tap water, but they purchase the sparkling waters as a healthy alternative to soda or alcohol." Cesare said that the 1.5-liter size is most popular. In addition to regional brands such as Calistoga and Crystal Geyser, and the "regulars" such as Perrier and Pellegrino, Whole Foods also offers smaller name brands.
For example, SN saw Lemon Grass Spring Water from the Bottle Green Drinks Co. at $3.59 for 25 ounces, and Essentia Micropure Water, whose label read "alkaline and electrolyte enhanced for hydration," at $1.69 for a 1.5-liter bottle.
Bottled water was merchandised in a back corner of the Beverages & More unit that SN visited. Beverages & More is a discount chain that sells mostly beverages, along with some snacks. This unit devoted 20 feet to bottled water. On a freestanding display of Calistoga sparkling water, plain and lemon-flavored, half-liter cases sold for $7.96; six-packs of 10-ounce bottles sold for $1.99; and 12-packs of 1-liter plastic bottles sold for $9.99.
The bottled-water section displayed the larger bottles on top, and the smallest on the lowest shelves. Top shelves held Evian 1.5-liters for $1.99, 1.5-liters of Ice Age still water for $1.69, and the same size of Pellegrino water, for the same price.
The section had a variety of smaller-sized bottled waters, including half-liter six-packs of Evian for $5.39; Coastal Fog 1-liters for 89 cents and six-packs of half-liters for $1.99; 1-liters of Sole, an Italian sparkling water, for $1.39; and 25-ounce Perrier in glass bottles. In addition, there was a variety of Mendocino sparkling waters, in flavors such as orange-mango, lemon kiwi, lime, strawberry and natural, priced at $3.49 for six 10-ounce bottles.
"We carry a huge variety of regional waters," said Michael Hamilton, manager of the Beverages & More unit. "People tend to purchase those more than national brands or even Italian waters.
"Bottled water is a strong seller for us. In fact, it is one of the leading no-alcohol beverages in our store in terms of dollar sales," he continued. Hamilton said his store consistently sells 35 cases a week, with six-packs of 10-ounce packages selling extremely well, and still water moving more quickly than sparkling water.
At the Lucky Food store, one side of an aisle was devoted to still water and the other to sparkling water. The front end of the aisle was used to merchandise 2.5 gallons of Arrowhead water. Normally $2.49, Arrowhead was on sale for $1.49 during SN's visit.
According to Alvaro Martinez, store manager, the most popular bottled water is the 2.5-gallon size of Calistoga still water. "We sell a lot of bottled water," he observed. "As a result, we don't really do a lot of promotion or merchandising for the product. People purchase it as a necessity, and tend to buy more of the 2.5-gallon size for home and the smaller sizes for on-the-go."
At the Safeway unit on La Playa, 20 feet were devoted to bottled water, which was merchandised in the liquor aisle. Calistoga was promoted with a "buy-one, get-one-free" offer in 2.5-gallon and 1-gallon sizes, as well as six-packs of 16-ounce bottles.
Safeway also offered its own brand of water: 1-gallon containers sold for 99 cents, while six-packs of half-liters were $1.79. Alhambra sport bottles sold in six-packs of one-liter bottles for $3.87. Alhambra 2.5-gallons were also on special, with a buy-one, get-one offer.
Store representatives were not available for comment.
At Smart & Final, bottled water sells well, with about 90 cases a week moving, according to manager Brian Chow. San Pellegrino was selling for $14.99 per case of 750-ml bottles. Arrowhead brand 24-ounce sport bottles, in cases of 24, sold for $4.99, while Palomar Mountain still water in sport bottles of 1.5 liters and packed in cases of 12 sold for $4.99. According to Chow, the most popular bottled water in his store is Crystal Geyser 12-packs of 1.5-liter bottles, selling for $5.96.
At the Cala Foods store on Geary Boulevard, bottled water is not a huge seller. "Bottled water is not refrigerated in this unit," observed manager Janine Peluso. "Some of our stores have refrigerated bottled water, some don't. The ones that do sell more.
"I've also found, having worked in various Cala Foods stores, that it also depends on the store location. In the more affluent neighborhoods, bottled water sells better, especially sparkling waters," he continued. "Demographics are definitely a factor. Of the water we sell though, the 1.5-liter is by far the most popular at this location, and still water is by far the better seller."
Only 8 feet at the Cala unit were devoted to bottled water. The selection was likewise fairly small, offering only five brands to choose from: Perrier, Calistoga, San Pellegrino, Crystal Geyser and Clearly Canadian. No brands were on sale.
