sl business and management commentary to what … market market development diversification...

SL Business and Management Commentary

To what extent will the introduction of premium water brand, LIFEWTR, boost sales

for PepsiCo?

Word Count: 1500

Personal Code: glt101

ALL TEXTS BELONG TO OWNERS.TAKEN FROM WWW.INTERNALASSESSMENTS.WORDPRESS.COM

Table of Contents

Introduction ............................................................................................................................................................ 1

Main Findings, Analysis and Evaluation....................................................................................................... 2

Risk assessment ................................................................................................................................................ 2

Market for premium bottled water ........................................................................................................... 3

Target Market..................................................................................................................................................... 5

Marketing ............................................................................................................................................................. 6

Conclusion................................................................................................................................................................ 8

Source document references ............................................................................................................................ 9

Bibliography ......................................................................................................................................................... 10

Source documents ............................................................................................................................................. 12


1

Introduction:

PepsiCo is a U.S. multinational company operating in the food, beverage and snack industry. It is

perhaps best known for being the producer of Pepsi, an iconic carbonated soft drink (CSD) brand. The

company has experienced a continual slump in net revenue in recent years (Dybek, n.d.), partially due to

consumer interests shifting towards healthier beverages and away from sugar-filled CSDs. In response,

PepsiCo launched premium bottled water brand LIFEWTR to its U.S. market in February 2017, a purified

zero calorie water that is pH balanced with electrolytes (SD 1), in line with sustainability objectives to

ensure that at least two-thirds of its global beverage portfolio volume will have 100 or fewer calories from

sugar per 12-ounce serving (SD 1).

Sales in the bottled water industry are on a steep, continual increase. The premium bottled water

market in the U.S. is valued at USD$ 2.8 billion (SD 1). PepsiCo’s choice to expand into the premium

bottled water industry appears one that will benefit sales; however, there are considerable risks. The

question thus arises:

To what extent will the introduction of premium water brand, LIFEWTR, boost sales for PepsiCo?

Fig 1: LIFEWTR premium bottled water (Image retrieved from: http://fortune.com/2016/12/09/pepsico-new-premium-water/)


http://fortune.com/2016/12/09/pepsico-new-premium-water/

Main Findings, Analysis and Evaluation:

Risk assessment:

Existing Product New Product

Existing Market Market Penetration Product Development

New Market Market Development Diversification

PepsiCo’s expansion into the premium bottled water market is categorised as related

diversification; the product and the premium bottled water market are new to the company, but still within

the bottled water industry. Diversification is a high-risk growth strategy: PepsiCo is unfamiliar with the

premium bottled water market, having to gain insight into consumer and market behaviour as well as

acquire the abilities, resources and technologies for new product development.

Initial sales and success of LIFEWTR will not be certain as it lacks brand recognition.

Diversification may also reduce PepsiCo’s focus on other core brands like Pepsi. Less risky growth

strategies could have been chosen such as product development; PepsiCo could have considered

developing smaller sized CSDs for Pepsi as the American consumer is being increasingly drawn towards

smaller packages (Taylor, 2016). But it can be argued that the soda industry has already reached its

saturation point (SD 4) and it is time for PepsiCo to focus efforts instead on healthier beverages and spread

risks.

Related diversification is less risky than unrelated diversification. PepsiCo was successful in

establishing purified bottled water brand Aquafina as a dominant market player in the bottled water industry

(SD 2); LIFEWTR operates within the broader confines of the same industry, albeit tailoring to a high-end

market. PepsiCo need only build on existing product and market knowledge, thus mitigating expansion

risks.

Table 1: Ansoff Matrix for LIFEWTR


3

Market for premium bottled water:

P.E.S.T analysis:

Political and legal - Four Californian cities, Philadelphia, Colorado and Cook County passed

sugar-sweetened beverage taxes in 2016 with other locations in the U.S.

eager to join the initiative (SD 4)

- Aspartame, an ingredient found in CSDs is still declared safe by the Food

and Drug Administration (Kell, 2017)

Economical - Statistics report that millennials represent an estimated one-fourth of the

U.S. population with their buying power translating into USD$ 200 billion

annually (Schawbel, 2015).

Social Shift in lifestyles and attitudes:

I. Health concerns:

- Consumers increasingly fearful of the health threats of CSDs; volume of

soda consumption has been declining at an increasing rate for over a

decade (Kell, Soda Consumption Falls to 30-Year Low In The U.S., 2016)

- Health conscious consumers have become increasingly skeptical of diet

soda artificial sweeteners (Kell, 2017)

II. Food and beverage trends:

- research indicates ‘37% of consumers feel better about themselves when

they buy organic foods and beverages’ (SD 3)

- Sales of bottled water on a continual rise: sales increased by 6.4% in 2015

with projected growth of 34.7% by the year 2020 (SD 3)

- ‘"We are starting to see water play a greater role in the repertoire of a

consumer’s beverage consumption," said Brad Jakeman, president of

PepsiCo's Global Beverage Group. "I think we are seeing a secular and

irreversible trend toward healthier beverages."’ (SD 1)

2


4

III. Social attitudes towards the environment:

- Consumers increasingly aware and fearful of the threats that non-

disposable plastics pose to the environment. Research indicates that one-

third of consumers surveyed were willing to spend more on

environmentally friendly products (Trefis Team, 2014)

Technological - Advent of social media sites allows businesses to reach out to consumers

directly through their own accounts, giving them valuable information

about products, promotions and company objectives

- Social media sites largely free for users

- LIFEWTR has an official Instagram account, allowing attractive images to

be posted, appealing to the emotion and visual sensibilities of consumers

- “We believe the biggest equity of this brand is the label,” Kaufman told

Fortune, adding that creative labels (on the bottled water packaging)

produced by artists will play well on highly-visual social media channels.

(SD 2)

The PEST analysis indicates growth in the demand for bottled water shows no signs of slowing

down, providing PepsiCo with the opportunity to take advantage of this fast-growing sector. The increase in

demand for premium bottled water results from the decrease in soda consumption. Recently, Americans

have been looking for healthier alternatives to CSDs and are gravitating towards organic drink options (SD

3). The increasing want of consumers to purchase premium bottled water is emotionally tied to their desire

to feel good (SD 3). The large potential in the premium bottled water market can be attributed to conscious

consumerism. To capitalise on sales revenue, LIFEWTR should appeal to the consciousness of potential

consumers as premium bottled water is perceived to be healthy.

However, there are sceptics who believe that premium bottled water is merely overpriced filtered

tap water encased in a fancy bottle (SD 5). Furthermore, research indicates that premium bottled water

remains unfamiliar to over 51% of consumers (SD 3). To ensure the introduction of LIFEWTR proceeds

Table 2: PEST analysis for LIFEWTR


5

smoothly, PepsiCo should educate potential consumers about its health benefits through informative

advertising, thus alleviating doubts and increasing consumer awareness of premium bottled water.

Another risk is the high competitive rivalry in the premium bottled water market. The market is

dominated by Coca Cola’s Glacéau Smartwater (SD 1) which accounts for 45% of the US premium bottled

water market by volume (Tang, 2016). LIFEWTR lacks the first mover advantage that competitors in the

premium bottled water have and will have initial trouble gaining a strong foothold in the market. There is

also the threat of new entrants keen on exploiting the high profit margins in the premium bottled water

industry (SD 1) since ‘economy packs of plain bottled water’ are significantly less profitable (SD 5). A

recommendation is for LIFEWTR to exploit its USP of creative labels on packaging and to engage in

product differentiation.

Target Market:

PepsiCo might find it cost-effective to segment the market to target tech-savvy, high-income

millennials who are trendsetters with the potential to spread awareness of LIFEWTR across the globe. This

is supported by Jakeman’s view that the industry is ‘driven heavily by millennials’ (SD 1).

LIFEWTR should note that the spending power of millennials whose buying power translates into

USD$ 200 billion annually (Schawbel, 2015). Moreover, 32% of millennials indicate willingness to spend

more for healthier products in comparison to 21% of baby boomers (Watson, 2015). To effectively reap

more sales, LIFEWTR should specially target high-income, health-conscious educated millennials with the

disposable incomes to pay high prices for premium bottled water. Millennials are also notoriously brand

loyal (Baldassarre, 2017) and thus, LIFEWTR will be able to sustain sales if it manages to attract the

attention of millennials.

Overall, brand development will be central in retaining and increasing sales for LIFEWTR. PepsiCo

should keep in mind that the target market they are catering to will be searching to buy a healthy, trendy

and high-end lifestyle that comes attached to the image of premium bottled water. In effect, PepsiCo will be

selling a sleek, fashionable brand more than a product; an appropriate marketing approach will be market

orientation.


6

Marketing:

Marketing is instrumental in determining the success of a new product. A marketing mix evaluating

current marketing methods of LIFEWTR and further suggesting potential techniques to increase sales

revenue was devised.

Product:

Product differentiation is crucial for LIFEWTR to stand out in the competitive premium bottled water

market and rival Glacéau Smartwater. In today’s social media culture, aesthetic packaging designs that

translate well onto visual posts attract the eyes of fashionable millennials. LIFEWTR’s USP is a label

design that changes several times a year, featuring the works of emerging young artists across a broad

spectrum of media from graphic design to fine arts (SD 2).

From Figure 2, LIFEWTR’s bottle designs are lush with color and bold patterns, creating eye-

catching, energetic packaging suitable for connecting with millennials. LIFEWTR’s artistic nature contrasts

Glacéau Smartwater’s plain blue packaging. LIFEWTR provides a range of trendy designs for customers to

choose from (SD 2) unlike Smartwater which only offers one type of packaging. This perception of having

the power to choose will resonate with customers. This provides LIFEWTR with the opportunity to steal

Figure 2: Comparison between LIFEWTR and Smartwater bottle designs (Left image retrieved from:

https://www.amazon.com/Glaceau-Smartwater-Vapor-Distilled-Water/dp/B00KIG3WPQ; right image

retrieved from: http://creativity-online.com/work/pepsi-lifewtr/50257)


https://www.amazon.com/Glaceau-Smartwater-Vapor-Distilled-Water/dp/B00KIG3WPQ

http://creativity-online.com/work/pepsi-lifewtr/50257

7

customers away from Smartwater and exploit untapped consumer groups of stylish millennials unenthused

by Smartwater’s limited packaging.

Potential packaging options include manufacturing bottles from recyclable PET plastic. Consumers

are becoming increasingly conscious of the negative impact of plastics on the environment (Trefis Team,

2014) and having the PET recycling code emblazoned on packaging will reassure customers and increase

sales.

Price:

Pricing is premium; customers are aware they are buying a lifestyle and fashion accessory, not a

mere bottle of water. LIFEWTR has considerable power in deciding prices as it caters to high-income

customers with the means to pay for better quality and trendy products. However, prices must remain

competitive as LIFEWTR is not yet established in the market and has to contend with established

competitors like Smartwater with loyal customer bases.

Place:

Currently, LIFEWTR is sold through indirect channels of distribution in major retailers in the U.S.

and through online retailers (Where to Buy, n.d.). Benefits of e-commerce include convenience for the

customer and the ability to sell to customers without access to physical retailers. PepsiCo could consider

expanding distribution channels in the future, selling LIFEWTR to trendy restaurants or internationally

through online retailers to broaden sales outreach over time. However, since it caters to a niche market,

economies of scale for transportation costs cannot be reaped: expansion might not be cost-effective.

Promotion:

Promoting LIFEWTR to tech-savvy millennials includes social media advertising, especially through

visual sites like Instagram. To connect with customers, LIFEWTR can feature collaborations with young

artists on social media, even posting videos of the art process of label designs on their official Instagram

account.

Long-term partnering with celebrities is a feasible option; Smartwater’s successful advertisement

campaign featured actress Jennifer Aniston (SD 2). Similarly, LIFEWTR can produce advertisements

featuring young celebrities endorsing the brand and who are held up as role models by millennials.


8

However, traditional advertising techniques might not work with millennials. A survey indicates that ‘only 1%

of millennials…said that a compelling advertisement would make them trust a brand more’ whereas ‘33% of

millennials rely mostly on blogs before they make a purchase’ (Schawbel, 2015). LIFEWTR could instead

partner with popular millennial bloggers to increase its ethos.

Conclusion: Based on my risk assessment for LIFEWTR and analysis of the market for premium bottled

water, there are considerable risks to launching LIFEWTR that might affect its sales negatively initially,

most significantly, its lack of recognition in the market and competition from established brands. However,

these risks can be overcome through implementing a strong marketing mix targeted at high-income

millennials and concentrating promotional efforts on social media advertising. There are opportunities for

international growth which can be exploited in the future once LIFEWTR stabilises, making it a future

possible cash cow for PepsiCo, not only allowing it to reap high sales revenue but also high profits due to

LIFEWTR’s high profit margins.

Word Count: 1500


9

Source document references: Kell, J. (2016, December 9). PepsiCo To Launch Premium Water Brand LIFEWTR. Retrieved April 20,

2017, from http://fortune.com/2016/12/09/pepsico-new-premium-water/ (SD 1)

Buss, D. (2016, December 9). Pepsico Brings Art to Premium Water With LIFEWTR. Retrieved April 20,

2017, from http://www.brandchannel.com/2016/12/09/pepsico-lifewtr-120916/ (SD 2)

U.S. Bottled water market grows 6.4 percent in 2015. (2016, February 26). Retrieved April 20, 2017, from

http://www.bevindustry.com/articles/89123-us-bottled-water-market-grows-64-percent-in-2015 (SD

3)

Lee, B. Y. (2016, November 4). 5 More Locations Pass Soda Taxes: What's Next For Big Soda? Retrieved

April 20, 2017, from https://www.forbes.com/sites/brucelee/2016/11/14/5-more-locations-pass-

soda-taxes-whats-next-for-big-soda/#7ce86737ed19 (SD 4)

Choi, C. (2017, April 2). Selling water: Coke, Pepsi look to make water rain money. Retrieved April 25,

2017, from http://www.mailtribune.com/entertainmentlife/20170402/selling-water-coke-pepsi-look-

to-make-water-rain-money (SD 5)


10

Bibliography: Baldassarre, C. (2017, February 9). 10 Tips for Millennial Marketing. Retrieved April 25, 2017, from

https://www.entrepreneur.com/article/287905

Dybek, M. P. (n.d.). PepsiCo-Inc Analysis of Revenues. Retrieved April 25, 2017, from https://www.stock-

analysis-on.net/NYSE/Company/PepsiCo-Inc/Analysis/Revenues

Kell, J. (2016, March 29). Soda Consumption Falls to 30-Year Low In The U.S. Retrieved April 25, 2017,

from http://fortune.com/2016/03/29/soda-sales-drop-11th-year/?scrlybrkr=c7d42589

Kell, J. (2017, February 9). Retrieved April 25, 2017, from Coke’s U.S. Sales Get Boost From Pricey

Waters, Milk: http://fortune.com/2017/02/09/coca-cola-water-milk-sales-boost/

Schawbel, D. (2015, January 20). 10 New Findings About The Millennial Consumer. Retrieved April 25,

2017, from http://www.forbes.com/sites/danschawbel/2015/01/20/10-new-findings-about-the-

millennial-consumer/#7f71e46228a8

Tang, A. (2016, December 12). PepsiCo reveals water brand Lifewtr to challenge Coca-cola’s Smartwater.

Retrieved April 25, 2017, from http://www.marketing-interactive.com/pepsico-reveals-water-brand-

lifewtr-challenge-coca-colas-smartwater/

Taylor, K. (2016, March 30). Coke and Pepsi are facing a terrifying reality. Retrieved April 25, 2017, from

http://www.businessinsider.co.id/people-drinking-less-coke-and-pepsi-2016-

3/?r=US&IR=T#CbKgMSEpaAqtaz1A.97

Trefis Team. (2014, January 30). Beverage Companies Go Green In Hope To Sell More Water. Retrieved

April 25, 2017, from http://www.forbes.com/sites/greatspeculations/2014/01/30/beverage-

companies-go-green-in-hope-to-sell-more-water/#651078f5217d


11

Watson, E. D. (2015, April 10). Younger Consumers Are Trending Toward More Health-Conscious Eating.

Retrieved April 25, 2017, from http://www.huffingtonpost.com/elwood-d-watson/younger-

consumers-are-tre_b_6632166.html

Where to Buy. (n.d.). Retrieved April 25, 2017, from https://cu.pepsico.com/lifewtr/lifewtr-product-

locator?F5C077=testvalue&TabPage=


12

Source documents:

Source document 1:

Retrieved from: http://fortune.com/2016/12/09/pepsico-new-premium-water/

This year, PepsiCo is debuting a new premium water bottle brand called LIFEWTR. Photo by

Stephen Hamilton

PepsiCo

PepsiCo To Launch Premium Water Brand LIFEWTR John Kell

Dec 09, 2016

PepsiCo will next year launch a premium-priced bottled water called LIFEWTR, adding a new brand to the company's portfolio that plays to strengthening consumer interest in healthier beverages.

The food-and-beverage giant confirmed to Fortune that it will debut LIFEWTR at an

industry conference in New York City. A purified water that is pH balanced with



http://fortune.com/tag/pepsico

http://fortune.com/author/john-kell/

http://fortune.com/fortune500/pepsico-44/

13

electrolytes, the brand will start appearing on retail shelves across the U.S. in February 2017.

"We are starting to see water play a greater role in the repertoire of a consumer’s beverage consumption," said Brad Jakeman, president of PepsiCo's Global Beverage Group. "I think we are seeing a secular and irreversible trend toward healthier beverages."

Industry data suggests Jakeman is right. Since 2004, bottled water volume has more than doubled from 1.8 billion cases to almost 4 billion last year, industry observer Beverage Digest reports. Over that same period, carbonated soft drinks have shed 1.5 billion cases of volume. Though soda sales still represent 55% of the total liquid

refreshment beverages market—PepsiCo (PEP, +0.05%) and peers like Coca-Cola (KO, +0.34%) can see the writing on the wall.

In recent years, consumers have been consuming less soda in favor of bottled water, flavored waters, and other beverages that are seen as healthier and have fewer artificial ingredients. As sales of core soda brands like Pepsi, Coke and Dr Pepper decline, beverage companies are pivoting. Often, they scoop up beverages that are in better-

performing categories. That explains why PepsiCo and Dr Pepper Snapple (DPS, -0.33%) bought two startup brands on the same day in November—sparkling probiotic drink maker KeVita and antioxidant beverage producer Bai Brands, respectively.

The launch of internally developed brand LIFEWTR also contributes to a dramatic makeover PepsiCo vowed this fall. The company is promising that at least two-thirds of the company's global beverage portfolio volume would have 100 calories or fewer from added sugars per 12-ounce serving. LIFEWTR, of course, fits perfectly into this promise as it is a bottle of water—which of course has zero calories and no added sugar or preservatives.

The launch of LIFEWTR is especially intriguing because PepsiCo has a big, bottled water brand already. It owns Aquafina, which is one of the company's 22 "billion-dollar brands" and already dominates the $185 billion global bottled water market.

Bottled water is a segment that is splintered on price and branding like all other beverage categories. Cases of water are sold on the cheap for slim margins and there is a separate, "premium" segment where consumers are willing to spend more for a better tasting drink encased in a fancier bottle.

The premium water market is worth $2.8 billion in the U.S. alone, dominated by Coca-Cola's Smartwater (the brand beloved by actress Jennifer Aniston). Premium waters come with higher price points, though they also require more marketing because they are more often sold in single serving, while bigger brands like Aquafina get a lot of business from bulk case sales.


http://fortune.com/company/pep

http://fortune.com/fortune500/coca-cola-62/

http://fortune.com/company/ko

http://fortune.com/company/ko

http://fortune.com/2016/03/29/soda-sales-drop-11th-year/

http://fortune.com/fortune500/dr-pepper-snapple-group-413/

http://fortune.com/company/dps

http://fortune.com/company/dps

http://fortune.com/2016/11/22/pepsico-acquires-probiotic-kevita/

http://fortune.com/2016/11/22/dr-pepper-snapple-bai-brands-antioxidant-beverages/

http://www.pepsico.com/live/pressrelease/pepsico-launches-2025-sustainability-agenda-designed-to-meet-changing-consumer-a10172016

14

"What we see developing is a premium water segment of the water category, driven heavily by millennials," said Jakeman. He said those consumers want sleek bottle designs and labels, as they view the product almost as a fashion accessory. "It is an important part of people's image," Jakeman claims.

To differentiate LIFEWTR from Smartwater, Perrier and others already on the market, PepsiCo developed a label that will change several times a year and feature different artists that have a background in mediums like graphic design or photography. The artists that contributed the initial LIFEWTR labeling designs were mural artist MOMO, transatlantic duo Craig & Karl, and large-scale painter Jason Woodside.

"We believe the biggest equity of this brand is the label," said Seth Kaufman, chief marketing officer of PepsiCo North America Beverages. He contends that the creative labels plays strongly into today's social-media driven culture. LIFEWTR, he says, "has a beautiful piece of art on it. We think it’ll connect with consumers on a more inspirational way."

"Smartwater has done a good job in the premium water space," said Duane Stanford, editor of Beverage Digest. "It makes sense [PepsiCo] would want to be a player in that category." While Aquafina is also a bottled water, Stanford and PepsiCo executives both thought that it made more sense to create a new brand rather than try to sell consumers on the idea that Aquafina is "premium."

PepsiCo's move to internally develop the brand rather than buy an existing rival differs from what Coke did when it purchased the maker of Vitaminwater for $4.2 billion in 2007. But the result, PepsiCo hopes, ideally will be the same. Jakeman said PepsiCo wants LIFEWTR to achieve a billion in annual sales someday—though he declined to outline a timeline for when that could occur.

"What I think is really smart about LIFEWTR is that it has a much more authentic connection to the world we want it to be connected to—art, fashion and design," Jakeman said. "The brand's purpose is to help emerging artists make it and be popularized and get into pop culture."

And if it helps PepsiCo sell more bottled water in the process, shareholders won't sweat it.


http://www.nytimes.com/2007/05/26/business/26drink-web.html

15

Source document 2:

Retrieved from: http://www.brandchannel.com/2016/12/09/pepsico-lifewtr-120916/

Pepsico Brings Art to Premium Water With LIFEWTR Posted December 9, 2016 by Dale Buss

PepsiCo on Friday announced a major new brand launching in 2017:

LIFEWTR, a new premium bottled-water brand that “fuses creativity and


http://www.brandchannel.com/2016/12/09/pepsico-lifewtr-120916/

http://www.brandchannel.com/author/dale-buss/

http://www.lifewtr.com/

http://www.brandchannel.com/#facebook

http://www.brandchannel.com/#twitter

http://www.brandchannel.com/#linkedin

16

design to serve as a source of inspiration, as well as hydration, to usher in a

new era of thirst quenchers,” as PepsiCo noted in a press release.

Available across the US (to start) in February, LIFEWTR is a purified water

that is pH-balanced with electrolytes added for taste. But just as important as

what’s on the inside will be the exterior: LIFEWTR will “fuse creativity and

design to serve as a source of inspiration and hydration.

To that end, its visual identity will serve “as a canvas” for a variety of labels

designed by “emerging and developing artists to be seen and discovered on a

broad scale,” PepsiCo said.

Released in a series of three label designs at a time throughout the year,

LIFEWTR will provide exposure for artists and creatives from the worlds of

graphic design, fashion, fine arts, photography and more.

The trio of artists at launch: MOMO, a “post-graffiti” street artist (above) known

for his public murals; Brooklyn artist Jason Woodside; and Craig & Karl, a


http://www.multivu.com/players/English/7997851-pepsico-lifewtr-premium-bottled-water/

http://momoshowpalace.com/

http://jasonwoodside.com/

http://www.craigandkarl.com/

17

transatlantic duo who create “bold work which communicates simple

messages in a thoughtful and humorous way,” PepsiCo said.

“LIFEWTR is a huge priority for us and an exciting global big bet,” said Brad

Jakeman, president of PepsiCo’s global beverage group. “We’ve worked hard

to make a premium bottled water experience that combines the right mix of a

clean, pure taste with eye-catching packaging and an authentic connection to

the consumer.”

“Our LIFEWTR artists will turn the traditional bottle label into a unique

masterpiece that speaks to the creativity – and source of creation – linked to

the brand’s core,” he added.

“We created LIFEWTR to be as

inspirational as it is functional and we’re thrilled to introduce the brand into our

growing and diverse beverage portfolio,” stated Seth Kaufman, Chief

Marketing Officer – PepsiCo North America Beverages.

“We recently announced our renewed Performance with Purpose goals and

this is a prime example of this vision coming to life as we continue to

transform our portfolio to offer top-selling beverage choices for every

consumer lifestyle and occasion.”


https://twitter.com/sethakaufman

http://www.pepsico.com/live/pressrelease/pepsico-launches-2025-sustainability-agenda-designed-to-meet-changing-consumer-a10172016

18

As Jakeman also told Fortune, “We are starting to see water play a greater

role in the repertoire of a consumer’s beverage consumption. I think we are

seeing a secular and irreversible trend toward healthier beverages.”

Fortune also noted the biggest trend impacting the beverage industry—that

“consumers have been consuming less soda in favor of bottled water, flavored

waters, and other beverages that are seen as healthier and have fewer

artificial ingredients. As sales of core soda brands like Pepsi, Coke and Dr

Pepper decline, beverage companies are pivoting.”

That’s why on November 28th, PepsiCo and Dr Pepper Snapple Group both

announced they had acquired startup beverage brands, with the sparkling

probiotic KeVita now owned by PepsiCo and antioxidant and kombucha

beverage-maker Bai Brands now owned by Dr Pepper Snapple.

PepsiCo, of course, already owns a global bottled water brand in Aquafina,

one of the company’s 22 “billion-dollar brands” — one that dominates the

$185 billion global bottled water market, as Fortune notes, and which

PepsiCo doesn’t wish to take upmarket or premium.

The origins of LIFEWTR also have a corporate sibling thanks to PepsiCo’s

acquisition of SoBe (an acronym for the South Beach Beverage Company),



http://fortune.com/2016/03/29/soda-sales-drop-11th-year/

http://www.brandchannel.com/2016/11/28/indie-beverages-112816/

http://www.pepsico.com/brands

https://trademarks.justia.com/871/35/lifewtr-87135518.html

http://www.sobe.com/

19

a Connecticut-based brand of enhanced water beverages, teas and fruit juice

blends that it bought in 2000.

In 2008, PepsiCo introduced the SoBe Lifewater line of zero-calorie, naturally-

sweetened flavors featuring “the groundbreaking, all natural zero calorie

sweetener, PureVia™, made from a highly pure extract of the Stevia plant

leaf.” (That launch was also memorable for a provocative

ad campaign starring model Kate Upton and the Super Bowl XLII ad starring

Naomi Campbell.)

Now SoBe focuses on its Elixir and tea products, although SoBe Life Water is

still available online, while PepsiCo is launching LIFEWTR as a new,

standalone premium water brand in a bid to gain more of a market estimated

to be worth about $2.8 billion—just in the US.

That market is dominated by Coca-Cola’s Glacéau smartwater, which is

known for an ad campaign starring actress Jennifer Aniston promoting

its vapor-distilled water (with electrolytes).

PepsiCo announced its launch plans for LIFEWTR (which also taps into the

vowel-dropping beverage naming trend) on Friday at the annual Beverage

Digest Future Smarts Conference in New York. “Smartwater has done a good

job in the premium water space,” commented Duane Stanford, editor of


http://www.nytimes.com/2000/10/31/business/pepsico-buys-a-90-stake-in-south-beach-beverage.html

http://www.pepsico.com/live/pressrelease/pepsicos-sobe-lifewater-launches-first-ever-zero-calorie-naturally-sweetened-enh12172008

https://www.youtube.com/watch?v=vdIgrIdUSYI

https://www.youtube.com/watch?v=iwM4fborwJk

https://www.youtube.com/watch?v=5FU9sNxlgIY

http://www.sobe.com/

https://www.amazon.com/Sobe-Lifewater-Variety-Pack-Count/dp/B008HPRRUG?th=1

https://twitter.com/BeverageDigest/status/807211244923088896

https://wtrmlnwtr.com/

http://www.zenithglobal.com/events/207/Beverage%20Digest%20Future%20Smarts

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Beverage Digest, to Fortune. “It makes sense [PepsiCo] would want to be a

player in that category.”

LIFEWTR will be available in two sizes at launch: 700mL for a suggested

retail price of US$2.06 and 1L for a suggested retail price of $2.70. The 700ml

bottle also comes with a sports cap, but that’s not the biggest selling point.

“We believe the biggest equity of this brand is the label,” Kaufman told

Fortune, adding that creative labels produced by artists will play well on

highly-visual social media channels.

The Instagram-ready LIFEWTR, he added, “has a beautiful piece of art on it.

We think it’ll connect with consumers on a more inspirational way.”

It has worked for alcohol, with Absolut hiring artists for visually stunning labels,

and wine, which has long served as a platform for artists. So why not premium

water?


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Source document 3:

Retrieved from: http://www.bevindustry.com/articles/89123-us-bottled-water-market-grows-64-percent-in-

2015

U.S. Bottled water market grows 6.4 percent in 2015

New Mintel research finds category drivers

February 26, 2016

KEYWORDS beverage sales / bottled water sales / enhanced water / flavored water / sparkling water

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As Americans look for better-for-you alternatives to carbonated soft drinks (CSDs), the U.S.

bottled water category is reaching unprecedented heights, according to new research from

Chicago-based Mintel, which reveals that sales of bottled water increased 6.4 percent to top $15

billion in 2015. The market research firm expects sales to continue ascending at a rapid pace

through 2020, with projected sales growth of 34.7 percent for the category, including 75.1

percent growth for the sparkling/mineral water/seltzer segment, it says.

The market research firm notes that innovation in flavor is driving the category’s success, with

nearly half, 48 percent, of bottled water drinkers saying they are drinking more flavored waters

to replace high-sugar drinks. Consumption of flavored still bottled water is highest among

consumers between 18-34 years old (66 vs. 48 percent of consumers overall), who also are the

most likely age demographic to consume any still bottled water (93 vs. 85 percent of consumers

overall), Mintel adds.

A wide range of interest also has emerged in functional attributes for bottled water, according to

Mintel. More than two in five (43 percent) consumers are interested in bottled water enhanced

with vitamins; another three in 10 agree that the ideal bottled water should contain minerals (29

percent) and energy (29 percent). When it comes to calorie counting, consumers show a clear


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22

preference for zero-calorie bottled water (31 percent) as opposed to less than 100 calorie

offerings (13 percent), it adds.

The market research firm adds that two in five (43 percent) consumers say that the ideal bottled

water would have no artificial sweeteners, artificial flavors (43 percent) or artificial colors (40

percent), and one-quarter of consumers report that their ideal bottled water would be GMO-free

or organic (24 percent). The trend of increasing demand for organic food and drink options

continues as Mintel research indicates 37 percent of consumers feel better about themselves

when they buy organic foods and beverages, it adds.

“Bottled water brands benefit from the overarching consumer trend toward more healthful,

better-for-you alternatives to unnatural and high-sugar drinks. This has spurred sales growth of

bottled water with even greater projected growth over the next five years,” said Elizabeth Sisel,

beverage analyst at Mintel, in a statement. “In the coming years, consumers will likely put even

greater value on no artificial ingredients in bottled water. To capitalize on this trend, brands

should emphasize free-from claims on packaging as they release new flavors and functions in

order to engage the market’s most active consumers.”

Although consumers indicate that the overall top purchasing factor is price (62 percent), the

majority of consumers are interested in premium offerings with more than half (53 percent) of

bottled water drinkers preferring to drink premium bottled waters, the company says.

Additionally, 39 percent of consumers agree bottled water is worth the added cost. However,

there still remains some educating to be done as more than half (51 percent) of consumers are

unfamiliar with premium water, it adds.

“While price is a major purchasing factor for many consumers, the majority gravitate toward

premium water offerings despite its typically higher cost. To attract the more price-conscious

consumer, brands should look to incorporate product messaging that justifies a higher price point,

as well as communicate the health benefits and sophistication of premium products in order to

alleviate any confusion,” Sisel added.


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Source document 4:

Retrieved from: https://www.forbes.com/sites/brucelee/2016/11/14/5-more-locations-pass-soda-taxes-

whats-next-for-big-soda/#174869e7ed19

5 More Locations Pass Soda Taxes: What's Next For Big Soda?

San Francisco, California, is now one of six U.S. locations that have passed sugar-sweetened beverage taxes. (Photo by

Justin Sullivan/Getty Images)

The cap has loosened considerably on the bottle. Boulder in Colorado, three new Bay Area cities (San Francisco, Oakland and Albany) in California and Cook County in Illinois have now joined Berkeley, California, and Philadelphia, Pennsylvania, in passing taxes on sugar-sweetened beverages (SSB). Internationally, these locations join others such as Mexico, France, Hungary, Ireland and the United Kingdom in instituting a measure aimed at discouraging people from drinking sodas, sports drinks and other beverages that have added sugar. Will this lead to an outpouring (note: this is a pun) of more such measures


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throughout the country and world, and what is the potential tonic (second pun in one sentence) for the soda industry?

The global obesity epidemic, especially among children, has spilled (another pun) more attention onto soda consumption. Scientific studies such as this systematic review published in the American Journal of Clinical Nutrition have provided evidence that drinking sugar-sweetened beverages contributes to obesity. While soda and other similar drinks are not the only reasons for the obesity epidemic, many public health specialists consider curbing their consumption to be "low-hanging fruit," since such drinks offer little nutritional value and only "empty calories." This Huffington Post piece, "Sugar, Where Are You Hiding?" includes a picture from Cara Shipley, RD LDN, and the Baltimore Healthy Communities for Kids (BHCK) project at the Global Obesity Prevention Center (GOPC) showing the amount of sugar in soda. All four California cities and Cook County will have a one-cent-per-ounce tax, Philadelphia a 1.5-cent-per-ounce tax, and Boulder will have a 2-cents-per-ounce tax. As Joel Gittelsohn, PhD, professor of international health and director of community interventions at the GOPC at Johns Hopkins University, tweeted on the soda industry's response: Big soda is pulling out all the stops to

oppose #Ssb policies!! https://t.co/RYTapXiE0v via @youtube

— Joel Gittelsohn (@globalfoodman) April 8, 2016

On the other side, former New York City mayor and billionaire philanthropist Michael Bloomberg provided financial backing to support the ballot measures in California. Philanthropists Laura and John Arnold, who made his fortune as a hedge-fund manager, also contributed. Early evidence suggests that the taxes are indeed popping (yet another pun) consumption. A study published in the American Journal of Public Health and led by Jen Falbe, ScD, MPH, from the University of California at Berkeley, found that in Berkeley, SSB consumption dropped by 21% (compared to 4% increases in comparison cities) and water consumption increased by 63% (compared to 19% in comparison cities). A study published in the British Medical Journal


http://ajcn.nutrition.org/content/84/2/274.full

http://ajcn.nutrition.org/content/84/2/274.full

http://www.forbes.com/sites/brucelee/2016/10/12/the-one-thing-to-do-to-stop-the-obesity-epidemic/#135c4bbc1bdf

http://www.forbes.com/sites/brucelee/2016/10/12/the-one-thing-to-do-to-stop-the-obesity-epidemic/#135c4bbc1bdf

http://www.huffingtonpost.com/bruce-y-lee/hidden-sugar_b_7426192.html

http://www.huffingtonpost.com/bruce-y-lee/hidden-sugar_b_7426192.html

http://www.globalobesity.org/about-the-gopc/our-people/staff/cara-shipley.html

http://www.globalobesity.org/our-projects/bmore-healthy-communities-for-kids/

http://www.globalobesity.org/about-the-gopc/our-people/faculty/joel-gittelsohn.html

http://www.globalobesity.org/about-the-gopc/our-people/faculty/joel-gittelsohn.html

https://twitter.com/hashtag/Ssb?src=hash

https://t.co/RYTapXiE0v

https://twitter.com/YouTube

https://twitter.com/globalfoodman/status/718498658287620096

https://www.bloomberg.org/about/mike-bloomberg/

https://www.bloomberg.org/about/mike-bloomberg/

http://www.arnoldfoundation.org/

http://www.arnoldfoundation.org/

http://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2016.303362

http://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2016.303362

http://www.bmj.com/content/352/bmj.h6704

25

(BMJ) and authored by M. Arantxa Colchero and Juan A. Rivera from the Instituto Nacional de Salud Pública, Mexico, and Barry M. Popkin and Shu Wen Ng from the Department of Nutrition and Carolina Population Center, University of North Carolina at Chapel Hill, found decreases in soda purchases in Mexico as well.

Now, other locations, especially those thirsty for more sources of revenue, may join the current six-pack of U.S. cities. A statewide tax in Illinois is possible. Initiatives may start bubbling in other California cities and Santa Fe, New Mexico, and cities with active public health advocates in government such as Baltimore, Maryland. Philadelphia and San Francisco are two places where soda taxes initially failed but then with re-tooling eventually succeeded. These successes may embolden other locations to introduce sugar-sweetened beverage measures. Therefore, if soda manufacturers want to continue to fight such taxation, they may have their cups full.

The soda industry may be approaching a crossroads. Soda consumption in the U.S. has been dropping over the past decade, and some nutrition experts such as Marion Nestle have drawn parallels between the soda industry and the tobacco industry, making the question "is soda the new tobacco?" more and more common. What, then, are the soda industry's options?

Seems like business is usual is not a viable option. Soda has had a remarkable run. Coca-Cola began in 1886 when Atlanta-based pharmacist Dr. John S. Pemberton concocted a flavored syrup that could be mixed with carbonated water. Thus, with relatively low production costs and corresponding high profit margins, Coca-Cola has been able to reap massive profits from essentially the same product for well over a century. While there has been some tinkering with the formula (most notably, an unsuccessful attempt with New Coke in 1985), most of the innovation has occurred on the marketing side and expanding other product lines. But times change, and few products have had the staying power of soda.

One option has been to expand into markets that have no sugar-sweetened

beverage taxes. Coca-Cola and Pepsi have already been making efforts to boost

sales in India, China and various Southeast Asian countries. However, as reported


http://www.bmj.com/content/352/bmj.h6704

http://www.ajmc.com/journals/evidence-based-diabetes-management/2016/march-2016/is-soda-the-new-tobacco-an-expert-and-new-cdc-data-say-yes

http://www.ajmc.com/journals/evidence-based-diabetes-management/2016/march-2016/is-soda-the-new-tobacco-an-expert-and-new-cdc-data-say-yes

https://www.ft.com/content/7d733946-a864-11e5-955c-1e1d6de94879

26

by the Financial Times, Asian countries such as Indonesia, India and the

Philippines, where obesity rates are rapidly increasing, are considering instituting

soda taxes as well.

There is also talk of re-branding, changing the can or bottle size and advertising

so that soda doesn't quite look like soda. However, this may not be likely to

overcome growing momentum against soda. Revelations that Coca-Cola paid

researchers to shift blame for obesity away from bad diets, as reported by the New

York Times, certainly have not helped.

The most viable long-term strategy seems to be shifting the product portfolio

towards other types of drinks such as water, juices and drinks flavored with sugar

alternatives such as artificial sweeteners, fruit juices and so-called natural

sweeteners. A previous FORBES piece shows how bottled water sales may overtake

carbonated beverage sales at some point. (The margins for bottled water can be

even higher since it is, after all, water.) Coca-Cola's purchase of Vitaminwater has

been a success, with annual sales going from $350 million to more than $1 billion.

Moreover, juicing (meaning fruits and vegetables and not steroids) seems to be a

continuing trend that has many possible directions, given the number of fruits

and vegetables out there.

While the soda industry can continue to battle against soda taxes and other

measures to curb soda consumption, at some point such actions may do the

industry more harm than good through damaged public relations. All products

that are not staple commodities have their life spans and eventually must yield to

other more innovative offerings. The soda industry may want to consider more of

a major pivot before the century-long soda run finally fizzles out.


https://www.ft.com/content/7d733946-a864-11e5-955c-1e1d6de94879

http://well.blogs.nytimes.com/2015/08/09/coca-cola-funds-scientists-who-shift-blame-for-obesity-away-from-bad-diets/

http://well.blogs.nytimes.com/2015/08/09/coca-cola-funds-scientists-who-shift-blame-for-obesity-away-from-bad-diets/

http://www.forbes.com/sites/greatspeculations/2015/06/26/bottled-water-is-a-potential-growth-category-that-cant-be-ignored/#11dc92193a42

http://www.investopedia.com/articles/markets/081315/vitaminwater-has-been-cocacolas-best-purchase.asp

http://www.latimes.com/health/la-he-juice-20150131-story.html

http://www.latimes.com/health/la-he-juice-20150131-story.html

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Source document 5:

Retrieved from: http://www.mailtribune.com/entertainmentlife/20170402/selling-water-coke-pepsi-look-to-

make-water-rain-money

Selling water: Coke, Pepsi look to make water rain money

Bottles of Lifewtr and Smartwater are displayed in Philadelphia. As bottled water surges in

popularity, Coke, Pepsi and other companies are using celebrity endorsements, stylish packaging

and fancy filtration processes to sell people on expanding variations of what comes out of the tap.

Theyíre also adding flourishes like bubbles, flavors or sweeteners that can blur the lines between

what is water and what is soda. [AP Photo/Matt Rourke]

Sunday Posted Apr 2, 2017 at 12:01 AM

Share

By Candice Choi AP Food Industry Writer

NEW YORK (AP) — Bottled water is starting to seem more like soda, and sometimes taste like it, too.

As bottled water surges in popularity, Coke, Pepsi and other companies are using celebrity endorsements, stylish packaging and fancy filtration processes like “reverse osmosis” to sell people on expanding variations of what comes out of the tap. They’re also adding flourishes like bubbles, flavors or sweeteners that can blur the lines between what is water and what is soda.

For this year’s Super Bowl, PepsiCo even ran an ad for its new Lifewtr, promoting the drink in a spotlight typically reserved for sodas. Also running their first Super Bowl ads were Fiji and Bai Brands, which sell “enhanced waters” made with fruit juice and stevia sweetener.


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28

Michael Simon, Bai’s chief marketing officer, says its drinks “give people that healthy profile they’re looking for, but now they no longer have to sacrifice on taste with the neutrality of water.”

Bottled water has been gaining ground for years, and overtook soda as the No. 1 drink in the U.S. by sales volume last year, industry tracker Beverage Marketing Corp. said. Some of the fizzy, sweetened drinks are considered water by the companies and industry trackers, as the distinctions between them lose meaning. Companies aren’t as interested in the big, economy packs of plain bottled water that have been fueling the growth, says Ali Dibaj, a Bernstein analyst who covers the industry, because those are less profitable than sodas and are a “horrible business to be in.”

So Coke and Pepsi are focusing on pricier options that compete with brands like Evian and Perrier. And they’re introducing fizzy and fruity varieties to get a better foothold in an increasingly crowded marketplace where options like LaCroix and others are gaining popularity. Showing just how blurry the lines are getting, PepsiCo launched a drink last week that it describes as “sorta juice, sorta soda, sorta sparkling water.” Such options can capture people looking to cut back on sodas or juices, and may get people who might buy lower-priced waters to upgrade.

“You can get up the ladder in terms of water and get out of the categories that don’t drive a lot of value,” Coca-Cola’s incoming CEO James Quincey said in September.

Quincey cites Smartwater, which has enjoyed sales growth in North America, as a way for Coke to profitably expand its water business. The brand is billed as “vapor distilled” and features actress Jennifer Aniston in its ads.

He also said that in the crowded Chinese market, Coke is upgrading people to a water brand it markets as “socially responsible” with a different blend of minerals, which costs twice as much.


29

Exactly what makes water seem like it’s worth the extra money varies, but image is key.

PepsiCo had toyed with names like “Qua” and “Om” before settling on Lifewtr. The company points to the artwork featured on its bottles, and the “reverse osmosis” filtration the water undergoes, with electrolytes added for taste. “This is where consumers are heading,” said Todd Kaplan, vice president of marketing at PepsiCo, about lower-calorie drinks like Lifewtr.

Both Lifewtr and Smartwater, which account for a small portion of the overall packaged water market, are made with municipal water and were selling for $2.79 for a 1-liter bottle at a 7-Eleven in New York City. The convenience store chain’s private label brand was selling for $1.50 for the same size bottle.

The challenge for Coke and Pepsi is people like Andrew Allen. The New York City resident said he is trying to drink more water, but isn’t loyal to a particular brand and buys whatever he can get a deal on.

“I just wanted to stop drinking soda — just give it up,” Allen said.

Julie McKnight, who also lives in New York City, said the distinctions made by some bottled waters are not worth the extra price. “It doesn’t seem any different,” she said. Mostly, McKnight uses reusable bottles that she fills with filtered tap water.

To help address people’s concerns about the environment as well as paying for a variation of what they could get from the faucet, companies like Nestle have been “light weighting” the packaging to use less plastic and keep prices down.

In addition to the still, unflavored versions, Coke’s Dasani and Pepsi’s Aquafina have been rolling out sparkling and flavored extensions. Such options are making it trickier to define drinks that may be fizzy and sweet, yet marketed as water. Beverage Digest, another industry tracker, counts flavored sparkling varieties in its water category, as well as Sparkling Ice, which is made with artificial sweeteners.


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“Someone could argue with a straight face that maybe those belong with (sodas),” executive editor Duane Stanford noted. But, he said, people drink Sparkling Ice with the “mindset” that it is water.


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