HIGH WATER MARK

RICHARD TURCSIK

Sales of premium bottled waters are still rising, with no crest in sight, despite the onslaught from ready-to-drink iced teas, iced coffees and soda pops.

Several bottlers have expanded the category by seeping into low-calorie flavored waters, like mandarin orange, tangerine, lemon-lime and cranberry, which many retailers expect will further build product popularity. Retailers say the premium waters, often characterized by fancy fluted or ribbed bottles,

imported origins and upscale or imported-sounding names, offer high margins several points above their jugged, processed tap and spring water brethren.

"Premium bottled water margins are at least 6% to 7% above the jug waters. The everyday water margins are 21% to 23%, while the upscale stuff is 28%. And there are people in our industry who are not as cheap as us. They are getting better than 30% margins," said Dick Salmon, senior vice president at Melmarkets Foodtown, Garden City, N.Y.

Salmon says he advertises "at least two" bottled water items every week in his circulars to help build sales.

"The market for the premium waters is growing. Evian is hot. The premium waters offer good margins," said Greg Gustafson, corporate direct-store-delivery buyer at Copps Corp., Stevens Point, Wis.

"We have been expanding our bottled water category to make room for all of these new varieties of carbonated beverages, and it seems to be taking off. Sales have skyrocketed in the last eight to 10 months," said David DiGeronimo, vice president and buyer of grocery at Victory Supermarkets, Leominster, Mass.

"The premium bottled waters are selling quite well. They are a growing category and offer our stores good margins," said Dave Lynam, advertising coordinator at Harding's Market West, Plainwell, Mich.

"We don't even have to advertise them frequently, only from time to time. Premium water sales haven't been hurt by the introduction of new products, like liquid iced teas. In fact, that whole new-age beverage category seems to be growing pretty well," he said.

Sue Hosey, vice president of consumer affairs at P&C Food Markets, Syracuse, N.Y., also found the premium water category to be expanding.

"We carry the premium waters in the bottled water section, which can run anywhere from 8 to 12 feet. They are planogrammed in with the other waters. We could probably even carry more, but that would require a whole lot of resetting and other logistics," she said, noting that sales vary according to store size, geographic and demographic populations.

Hosey said the premium waters appeal to a different customer than the regular jug waters.

"Price is always important, but I don't think the premium water category is as price-sensitive as the jug waters," she said.

"We know that when we use multiple pricing, like two for $3, for example, we sell more. It works as a marketing strategy, and we find that type of promotion really increases movement," Hosey said.

"The margins are good, and a little bit higher than a soda category," she added.

"The premium waters are not as price-sensitive as the jug waters and offer us good margins of 25%," said Harland Polk, senior vice president at Hughes Family Markets, Irwindale, Calif.

"We merchandise the premium bottled waters using a separate 12-foot new-age beverage section," he said.

"The category is still continuing to grow for us. The jug waters continue to increase as we give them more space. Iced teas also continue to increase in sales, but our soda sales have been flat," Polk told SN.

Melmarkets also merchandises the bottled waters in a new-age beverage section in its Long Island, N.Y., Foodtown stores, according to Salmon.

"We have all of the waters, iced teas, iced coffees and related products in our new-age beverage section that is categorically a separate department," he said.

"People who want to spend the extra cost for that have it all in one place to select and pick what they want, including Mistic, Clearly Canadian and La Croix water, which just came out with flavored waters. We also have the Poland Spring flavored waters and Sun Springs," Salmon said.

He noted that Sun Springs, a product of New Day Beverage Co., Chicago, is heavily involved with the Mothers Against Drunk Driving campaign. He said the company got heavily involved in a big event for the Christmas-New Year's holiday.

"They're trying to show that you can have drinks like Sun Springs and you don't have to select a driver. We built some big displays," Salmon said.

"The premium waters are really doing very well against the other beverages, and Evian always sells better than all the others. Perrier has made some inroads in coming back, but they are nowhere near what they used to be when they were king of the mountain. They fell off that perch and have never recaptured that," Salmon said. (Perrier was recalled in the late 1980s because carcinogenic benzene was found in the product.)

Gustafson of Copps said the flavored waters are gaining popularity in his market.

"Evian just flies [and] 2 Calorie Quest is doing quite well. It is probably doing about 50% of what Clearly Canadian is doing, but it is definitely gaining. They are putting a lot of money behind it," he said.

"We find the waters are taking sales away from the diets. Diet soft drinks have been flat over the past few years," Gustafson added.

Copps has found success merchandising the premium waters along with the jug waters in a water department. The size of the department varies, running up to 24 to 28 feet in Copps' larger stores.

"The size of our water department really depends on the individual store and the market. There are some markets where the city water is excellent and people aren't used to paying money for drinking water, but in others they've had some water scares," he said.

DiGeronimo of Victory said his chain has a bottled water section that was expanded during the summer because of the popularity of the category and the proliferation of new flavored products.

"The premium waters seem to be gaining in popularity. We carry the Nordic Mist, which Coke distributes in our area, and also Clearly Canadian and Sun Springs, a new line that seems to be taking off and is really fantastic. It is not as sweet as soda and people are acquiring a taste for less sugar in their drinks," DiGeronimo said.

He noted that the flavored waters were initially merchandised with the soft drinks, but did much better in the bottled water section.

"We have relatively large sections of fresh water, well water, etc. We expanded the category and did some in-store remerchandising and opened up the category. Some stores now have 24 feet or so of bottled water, with all the new and carbonated lines of beverage. Sales have been great and the margins are there, too," he said.