Soup-To-Nuts podcast: Three trends driving growth in the bottled water category

After years of steady growth in the high single-digits, consumption of water in the US has finally surpassed carbonated soft drinks to become the largest beverage category by volume in the United States, according to the Beverage Marketing Corporation.

By the research and consulting firm’s count, Americans drank 12.8 billion gallons of water in 2016 – a 9% increase from the prior year that translates to about 39 gallons per capita consumption. This is just slightly more than the 38.5 gallons of carbonated soft drinks consumed on average in the same year.

In terms of sales, bottled water’s rise to the top generated more than $15 billion in the US in 2015 – a 6.4% increase from the prior year, according to Mintel. The market research firm sales of bottled water will show no sign of slowing in the coming years with a projected increase of 34.7% overall through 2020.

A closer look at the sub-segments of the bottled water category show even stronger growth in specialty waters, which the Specialty Foods Association says grew 75% between 2014 and 2016. These waters, which include sparkling, mineral and functional waters will continue to grow this rate through 2020, according to Mintel.

With numbers like this it is no wonder new players are flocking to the category – creating a tough competitive landscape that require companies to offer more than just basic hydration. Mintel recommends newcomers to the category cut through the competition by catering to consumers’ evolving demands for premiumization, functionality and even natural and organic options.

To find out more about these sub-trends and what it takes to make it in the crowded bottled water segment, I caught up with companies in each of these three segments at the Summer Fancy Food Show in New York City earlier this week.

Premium water takes on fine wine and spirits

According to Mintel, more than half of consumers want premium bottled water, and while they are willing to pay more for it they want to know first what makes it so special.

At $15 a bottle, Tanzamaji Prehistoric water is squarely in the premium category, but the owner Rebecca Ruefer says there are two good reasons that justify the product’s higher price tag.

“One is the water itself,” she explains. “The fact that it has been isolated for millions of years means it has never been exposed to pesticides and no other human has ever consumed this water. … The water itself has a pH of 8.2 to 8.4, so it is a little alkaline, which is considered to be healthier.”

The other appealing aspect of the water is that it provides jobs and clean water to the community in Tanzania where it is produced, Ruefer said. She added that twice a day the plant opens the pipes to give away 12,000 liters of water for free to members of the community who can’t afford to buy it and who don’t have access to clean water.

Reflecting on what is driving the growth of premium water, the company’s director marketing Martha Joe Reeder said the water provides a unique drinking experience, which many millennials value more than physical objects.

Functional benefits add value to a crowded category

Even more popular than premium water is water that imbued with functional benefits, according to Mintel, which found 83% of shoppers want water that offers functional or nutritional benefits.

Industry newcomer SD Watersboten straddles the line between these two trends by offering premium herbal mineral waters that company founder Denise Shamro says are “endowed for the rarefied palate.”

She explained the company’s trio of bottled herbal waters offer a high-end alternative to wine and spirits that offers complex flavors and mood enhancing benefits that are not habit forming.

The three options –  Angelica, Blue Vervain and Rhodiola Rosea – all come in 12 ounce multi-serve brown apothecary bottles that protect the contents and herbs’ potency from the light.

Shamro also explains that the water should be consumed much like a person would a fine wine – so in a two to four ounce pour that is slowly sipped and savored not only for its complex flavor but also its aroma, color and functional benefits.

Asarasi makes organic water an option

Finally, according to Mintel, almost a quarter of Americans want organic water, which wasn’t an option up until the recent launch of Asarasi – a clean tasting carbonated water that is filtered through sugar maple trees.

The company’s CEO Adam North Lazar explained Asarasi water comes from sugar maple trees and is a byproduct of the syrup making process. The result is a clean tasting, purified water that is the first USDA organic certified water.

Based on the company’s growth in the past eight months, the premise for how the water is made as well as its unique properties are well aligned with consumer desires. Lazar explains that the water will be in about 1,500 locations nationwide within the next three months and sales are strong in the stores where the bottles already are sold.

“We are just flying like a bat out of hell,” he said.

Lazar hopes to continue building on this initial growth by also offering Asarasi as an ingredient for manufacturers that want to claim their product is 100% organic.

“We have a beautiful base water that ca be utilized in a lot of food and beverage. We have tens of millions of gallons under contract right now with maple producers all over the northeast, and we intend to be a quarter of a billion gallons under contract by the end of the year,” he said.

“Our goal is to replace what is used as water in the organic food industry,” he added.

As illustrated by each of these examples, there is still plenty of room for innovation and specialization in the water category – despite the crowded playing field and shelves.