VALUE-ADDED BRANDS BOOST WATER CATEGORY

CHRISTINA VEIDERS

CHICAGO -- The number of value-added waters is expected to catapult summer retail sales in the already hot-selling bottled water category, according to Valerie Skala, vice president, analytic product management, Information Resources Inc., here.

Consequently, retailers will be challenged to find shelf space in an already overcrowded category, she warned. "There's a ton of new product initiatives coming into this space, and keeping these products on the shelves is going to be a huge challenge for us all," Skala said during a presentation on new product trends during the Food Marketing Institute's convention here this month.

The value-added water segment -- containing added flavors, vitamins and nutrients -- may cause some consumer confusion regarding how the products are defined and their potential to cross over into other category segments, such as fruit juices or full-calorie beverages.

Skala said water is not supposed to have calories, and consumers don't believe that water has calories. However, most of the value-added waters do have calories, she noted. "People are going to try these products and say they taste good. However, women aren't going to keep drinking bottled waters that have 120 calories. That's not water anymore."

Regardless, she sees a number of new entries as good retail buy-ins. Among these are Propel (PepsiCo), Veryfine Fruit20 and Dannon Fluoride to Go. Key to sales success is taste, said Skala, who urged retailers to taste all new entries. "If you think the product tastes bad, chances are the product isn't going to sell that well."

Skala gives Gatorade Propel Fitness water high marks for its low calorie count and good flavor. With distribution at only 21%, sales are at $18.6 million, well above IRI's definition of a pacesetter brand, which must achieve $7.5 million in sales in its first year of distribution to be designated as such. With national distribution, the brand could propel its way to being what IRI terms a $50 million, mega-success brand.

"Its calorie count is close enough to zero that I think people are going to see this as a water substitute. It's going to do extremely well," Skala said.

With only an 11% distribution, Veryfine Fruit20 also is showing promise, according to Skala. So far, the brand has achieved $17.9 million in sales. "I don't know what's going on with this brand and why it's not getting good distribution. I think it could be a huge product with its low calories and good flavors," she said.

Skala pointed to Dannon Fluoride to Go as a different kind of value-added product. It's targeted to parents of children who drink bottled water and are not benefiting from the fluoride in tap water. Skala advised retailers to monitor this category niche and include some fluoride waters in their mix.

It will be in the Glaceau Fruit and vitamin waters where some fallout may occur, Skala cautioned, due to these brands' high calories and crossover characteristics into juices, isotonics or ice-tea types of beverages. She noted that Aquafina has entered the segment with Essentials and that Dasani plans to enter the segment in 2003.

Meanwhile, the water category continues to post healthy sales growth, with the category up 14% over a year ago for the period ended in March. Single-serve packages were up 27%, according to IRI data.

What's driving growth in the overall water category, said Skala, is the $326 million private-label jugs, up 8% for the first quarter of the year; the strong distribution, merchandising and advertising support given to Aquafina and Dasani waters; and the demand for single-serve waters.

With the new entries in value-added brands, "the last thing you want to do is short-shelve your existing, unflavored bottled waters," said Skala. The solution will be for retailers to frequently restock their shelves and keep extra stock on hand. She also told retailers to examine performance and the shelf space devoted to energy drinks as a possible way to find extra space for waters this summer.