Bubbling to the Top How Sparkling Water Brands Are Standing Out from the Crowd By Brad Avery
From shelves to coolers, the fizz is in. But how long before the influx of sparkling water brands begins to bubble over? As of August 10, sparkling flavored water reported $2.45 billion in annual retail dollar sales, according to Nielsen all-channel sales data. While the category is still a fraction of the much larger carbonated soft drinks category ($26.74 billion in sales in the same period), its growth has continued unabated against muted and declining numbers for soda. Some sparkling water brands – such as PepsiCo’s Bubly and Massachusetts-based Spindrift – reported triple digit spikes in the 52-week period as retailers continue to build out sets for low and zero calorie sparkling drinks. In the past few years, most major beverage players have laid stakes in the sparkling water space – The Coca-Cola Company purchased Southwest regional player Topo Chico and rolled out flavored sparkling lines for Dasani and Smartwater; Nestlé owns Perrier, San Pellegrino, and has launched sparkling varieties of its regional bottled water brands including Poland Springs and Ozarka; and in addition to Bubly, PepsiCo owns the at-home sparkling water appliance brand SodaStream. The rollout and expansion of these products come as National Beverage Corp.’s LaCroix brand – which just over a year ago made headlines as the breakout success story of the category – has faltered and experienced months of declining dollar sales, rough press, and distribution struggles. LaCroix’s issues are its own (and the brand still reported more than $460 million in year-to-date sales with double digit volume growth), but they are mitigated by the rush of new competing brands entering the category. In addition to products like Bubly and Spindrift, newer players such as Waterloo and Ugly have begun seizing shelf space in independent and natural channel accounts, while New England legacy brand Polar Seltzer has upped its distribution to grow the brand nationwide. According to Laurent Grandet, lead food and beverage analyst for Guggenheim Securities, the wave of sparkling water entrants
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can be explained by the category’s low barrier to entry: “Everybody can do it, from private label to any sort of brand.” With a standard formulation of tap water, stock flavors, and carbonation, sparkling water brands are now finding new ways to differentiate in order to stand out from the pack, from functionality to branding to premiumization.
FUNCTIONALITY CREATES NEW USE OCCASIONS The definition of “sparkling water” can be rigid – stray too far from the traditional formula of water, carbonation, and natural flavoring and you might find yourself in a different space altogether. Category leaders are mostly staying within that lane by innovating on packaging or flavor, but new entrants to the space are stretching the parameters and introducing functionality into their products without losing the core elements of the category. Energy has been one way for sparkling water brands to create added value beyond refreshment. Positioned as an alternative to high sugar energy drinks, Anheuser-Busch InBev’s HiBall sparkling energy water has been in the market since 2005 and was acquired by the beer giant in 2017. But more recently startups such as Clear/Cut Phocus, Pep Talk, and Limitless have emerged with their own spins on caffeinated sparkling water. Caffeinated water brand Avitae has introduced a sparkling line and companies that established themselves in other categories – such as Zola and Caribou Coffee – have broadened their portfolios with caffeinated, zero-calorie offerings. Clear/Cut Phocus, founded by CEO Tom O’Grady in 2018, produces a line of flavored sparkling waters containing L-theanine and 75 mg of caffeine sourced from tea per 11.5 oz. can. According to O’Grady, L-theanine offers a more balanced and “focused” energy boost and the formulation gives the brand a unique play in the category. According to the brand’s internal sales data, O’Grady told BevNET, Phocus has drawn some con-
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