From Vitaminwater’s Roots, Many Branches

When The Coca-Cola Company purchased Glaceau in 2007 for $4.2 billion, its acquisition of electrolyte-enhanced water brand Smartwater was more added bonus than essential component of the deal. At the time of its purchase, Smartwater accounted for a small fraction of Glaceau’s $350 million-plus in sales, and was considered largely an afterthought to the behemoth beverage brand that was Vitaminwater.

“The jewel of Glaceau is Vitaminwater, which is vitamin-fortified and offered in flavors. It is among a fast-growing category known as functional foods, which market themselves as offering an additional benefit beyond basic nutrition,” wrote New York Times writer Andrew Ross Sorkin at the time.

But the real diamond in the rough and the saving grace of the Coca-Cola/Glaceau deal turned out to be Smartwater. In 2009, Vitaminwater got slapped with a class action lawsuit from consumer watchdog nonprofit Center for Science in the Public Interest, which claimed the brand’s marketing deceived consumers on the true benefits of the product. The damage was significant. Alongside category contemporaries like PepsiCo’s Sobe LifeWater, sales of Vitaminwater slowed and dropped, as consumers began seeking low or no calorie beverage options with a newfound willingness to give up sugar.

But as one brand was on the decline another one arose to take its place, and luckily for Coke, it was Smartwater, which made up lost ground and, while unflavored, began carrying the torch for a new, different generation of the enhanced and functional waters category – the category that Glaceau had helped to pioneer. The new generation features nuances that magnify the differences between Smartwater and Vitaminwater while forming the core branches of the family tree. Like Vitaminwater, some of the brands are nutritionally enhanced, often to the point where they’re almost unrecognizable as water, although they’re labeled as such; unlike Vitaminwater, those products are often enhanced through juices and other naturally-derived ingredients. Like Smartwater, another set of brands has been made more functional, often by restructuring the water itself – through their manufacturing processes, and the occasional dusting of electrolytes, these scientifically enhanced waters are supposed to bring an increased level of functionality to the table.

ON THE SIDE OF SCIENCE

“People started flocking to the purest form of hydration which was water,” said Hal Kravitz, a long time Coca-Cola executive who also held a stint as president of Glaceau following its acquisition by Coke. “They didn’t want calories. They didn’t want coloring. They didn’t want vitamins. They wanted pure water. But [Smartwater’s success] made it clear that there could still be some variance of that without violating those other requirements.”

Kravitz is now chief executive officer of AQUAHydrate, an electrolyte-enhanced alkaline water brand out of Los Angeles that quickly established itself in the space upon its launch in 2013 through its high-profile affiliations with actor Mark Wahlberg and music mogul Sean “P. Diddy” Combs. With added electrolytes and a pH of 9+, AQUAHydrate’s been positioned as a “performance lifestyle” brand.

AQUAHydrate is just one of many science-based enhanced bottled waters that have found success following the rise of Smartwater. From high pH alkaline waters like AQUAHydrate, Alkaline88 and Essentia, to oxygenated typeslike Penta and Reliant Recovery Water, to CORE Water, which boasts a “perfect pH”, there’s a range of different purported benefits and functionalities under the “premium hydration” subset that can now be found across the category.

“Consumers have come around to the idea that not all waters are created equal and they’re interested in a more beneficial hydration solution,” said Neil Kimberley, vice president of strategy and brand development at Essentia. “That is what’s driving the innovation and creation of new ideas in the space.”

JUICY ENHANCEMENTS

Vitaminwater’s heyday also brought about the trend of using the word “water” (albeit loosely), to communicate a lower-calorie beverage to consumers, even when the product is more than just H2O and some added electrolytes. That’s something that’s played out in the marketing and positioning of naturally-enhanced “waters.” The result: things like a coconut water (juice?), maple water (sap?) or products enhanced with extracts of aloe, artichoke, or cactus.

These products boast a range of antioxidants, nutrients and other beneficial properties that have expanded the parameters of the space even further, and we’re not just talking about random coconut water-spinoff “plantwater” ideas. There are heavy hitters in the space, as well. In 2014 Ocean Spray, the world’s leading producer of cranberry juice, introduced PACt, a cranberry extract water boasting 80 milligrams of proanthocyandins, which the company says contains cleanse-like benefits.

One place where branches of scientific alteration and natural enhancement intersect is around caffeine, which is naturally occurring – but can be measured out in druglike doses.

Former Glaceau COO Carol Dollard launched Agua Enerviva in 2013, introducing a naturally flavored, electrolyte-enhanced, purified water containing 100 mg of caffeine. Upon its introduction, Enerviva was playing in the caffeinated water subcategory alongside brands like Avitae and Hint Water’s new ‘Kick’ line, but the company just made a much broader move as part of a greater brand overhaul. In addition to dropping its “Enerviva” surname Dollard and co. also introduced its Agua Fruit Essence line extension this summer, consisting of zero-calorie, sugar-free, caffeine-free water with electrolytes. Between the two, Agua’s got a lineup, Dollard says, that not only achieves functionality and meets the low or no calorie and sugar requirements that today’s consumers are demanding, but also provides consumers with something they begrudgingly gave up in their exodus from sugary beverages: flavor.

“A lot of these enhanced waters are interesting ideas but appeal to a pretty specific buyer,” Dollard adds. “I’m looking to bring great taste and those health benefits to the masses. Beverages that people want to drink every day.”

And then there’s Bai. Perhaps more than any of the other aforementioned brands, the coffeefruit-powered brand seems angled to replace the flavored, low-cal functional water set that Vitaminwater pioneered. But with a ten SKU lineup of its five-calorie Bai 5 flagship beverage, a carbonated ‘Bubbles’ line, some new teas, and its recently introduced ‘Antiwater’, which will look to compete with the likes of Smartwater and the rest of the premium hydration crowd, Bai doesn’t appear to be content settling for being an established force in just one category.

“Bai will be the brand that’s ubiquitous across every channel of trade. That’s the goal,” says company founder Ben Weiss. “That will be driven by this new consumer in town and that consumer isn’t going away. The millennial is very much drawn to this franchise we’ve created.”

Undoubtedly more crowded than ever before, the enhanced and functional water category today plays home to a wide spectrum of beverage products, with brands that offer seemingly disparate value propositions overlapping in their functionalities and benefits. Still, everyone seems to have room to play, at least for now. People are drinking more water and word is they’re not slowing down anytime soon. According to a recent report from industry forecaster Beverage Marketing Corporation, sales of bottled water are expected to surpass those of carbonated soft drinks (the longtime number one beverage category) by as early as 2017.

But the growth of the category means that consumers aren’t drinking just any water. Their shift away from CSDs and other sugary beverages has boosted the enhanced water category, but so has existing bottled water drinkers’ decision to level up after years of pursuit of low-cost, commodity waters. So even though the longest branches in this post-Vitaminwater category might not be fully defined yet, there are certainly some strong limbs in the family tree.