forbes.com
Quick-what's the trendiest bottled beverage today?
A monster beverage event
By Robert Lenzner
TAKE A WALK around New York City on a warm weekend afternoon and observe
what people are drinking. Coca-Cola? Starbucks coffee? A can of beer? All
these, but by far the greatest number of people are quaffing plain aqua
from plastic bottles. Bottled water, which used to be available only in
health food stores, can now be found in supermarkets and convenience
outlets, on pushcarts and at newsstands.
Bottled water is the fastest-growing beverage category in the U.S. "Water
has expanded from a tap water substitute into the beverage arena," says
Gary Lamont, marketing vice president at McKesson Water Products Co., a
division of McKesson Corp., a supplier of health products. "What used to be
just for the upper elite is now a monster beverage event."
As one might expect from a consumer economy, people aren't drinking water
just from the tap. They are buying the stuff. Paying handsomely, too. A
large bottle of S.Pellegrino-a favorite mineral water among the hip,
well-heeled crowd-costs $1 to $1.25 wholesale. At Gotham Bar & Grill, one
of New York City's top restaurants, the same bottle costs $6.25. Quite a
markup.
"People are willing to pay $3 for a cappuccino coffee, sometimes more than
once a day. So why not pay $1.50 for water?" asks William O'Donnell,
president of SanPellegrino USA.
If switching to plain water isn't necessarily easy on the American
pocketbook, it promises to do something for the American waistline. Bottled
spring water has no calories, no additives, no sugar. Some of it carries
calcium, magnesium, potassium and sulfates needed by the body.
A lot of people think the bottled stuff tastes better. Publicity over rusty
urban water pipes and scares about contamination from animal feces have
scared many people. They object to the taste of chemicals like the chlorine
necessary to purify city water systems.
The International Bottled Water Association suggests that a 200-pound
person doing moderate activity should drink 88 ounces of water a day. The
association may be a suspect source, but the fact is that it is almost
impossible to drink too much water. That's more than you can say of
competing beverages.
Compared with soft-drink sales of about $30 billion, the $3.4 billion
bottled water business is small change, but it is growing at an annual rate
of 9%. In 1976 Americans consumed on average 1.5 gallons of bottled water;
by last year this had grown to 11 gallons. In Europe the figure averaged
out to 19 gallons per head.
Large companies like Nestl‚ have gotten the message. Among its holdings,
the Swiss food giant owns Perrier and ten American brands, including Poland
Spring and Arrowhead. All together, Perrier Vittel S.A. has some 27% of the
U.S. market. Suntory Water Group, the U.S. arm of the giant Japanese
brewing company, is also growing through acquisition. McKesson, and Great
Brands of Europe-part of Groupe Danone, the French food giant-are major
factors, too.
PepsiCo's already got an entry, Aquafina. Rumors abound about Coke joining
in.
If you want a pure play in bottled water, there's Vermont Pure, a small
regional company. Based in Randolph, Vt., it is selling at around $2 a
share in the over-the-counter market. "In three years we've gone from $6.5
million sales and a $4 million loss to over $17 million sales and making
money," says Timothy Fallon, president and chief executive officer. |
