Beware of Pepsi and Coke, Dave.
businessweek.com@@IcpMO2YAd25KpwEA/cgi-bin/premium/issue/premium_story.pl?url=premium/99_09/b3618082.htm
Coke and Pepsi Want to Make a Splash in Water
Will the soft drink giants leave smaller bottlers high and dry?
First came the Cola Wars. Next, the Juice and Iced Tea Wars. Now, beverage
giants Coke and Pepsi are about to fight another beverage battle: the Water Wars.
And the market may never be the same.
The $4.3 billion bottled-water business has been divided among countless small
regional players producing brands such as McKenzie Mist and Alaska Ice Age
Premium. There are a handful of premium brands such as Evian and Perrier. But the
biggest, Poland Spring, has only a 7.5% share. And with bottled-water consumption
increasing 10% annually--triple the growth rate of the much larger but more mature
soda business--it's a tempting market for both Coca-Cola Co. (KO) and PepsiCo
Inc. (PEP). Pepsi jumped in two years ago, and its Aquafina has become one of the
top 10 brands.
Now Coke is taking the plunge. Dasani, which Coke plans to unveil on Feb. 19, isn't
the product of some newly discovered spring but municipal tap water that is purified
and distributed by Coke bottlers. Coke says it plans to tiptoe into water ''to be
careful that we don't replace high-margin soft drinks with low-margin water,'' as
CEO M. Douglas Ivester has put it. But analysts nonetheless expect the
Atlanta-based beverage giant's entry to cause seismic shifts in the U.S. water
business. ''Coke will be a big player--and fast,'' says Gary Hemphill, vice-president
of Beverage Marketing Corp., a New York research firm.
Indeed, analysts predict that Coke's move will dramatically hasten the consolidation
already occurring in the water business. Most vulnerable are Vermont Pure, Evian,
Naya, and the dozens of bottled-water makers that are currently distributed by
Coke's vast network of bottlers. Naya, for instance, depends on Coke distributors
for 60% of its U.S. sales. ... |
