Spring, Tap or Aquifer: Premium PET Waters Are Sourcing Success

PET bottled water accounts for nearly 45% of the volume in the $8 billion US bottled water market. The PET segment owes its roots to premium spring waters such as Evian, Volvic and Fiji which pioneered the territory during the 1990′s. Premium PET water has since become an increasingly competitive and diverse segment. Packaging, purity, and source all contribute to a given brand’s ability to sell at a premium price. In this article, we examine three premium PET bottled water brands, each of which draws on a different source.

Filtered Water
@@img4 One of the most successful premium bottled waters on the market has made is mark by transforming ordinary tap water through an extensive and scientifically-based filtration process. Launched by Carlsbad, CA-based Bio-Hydration Research Lab in 1999, Penta is the top-selling PET bottled water in the health foods channel. Amazingly, the company achieved this position with a single SKU, a .5 liter PET bottle. The bottles carry an SRP of $1.89 or $37.99 per 24-pack, making Penta the most expensive bottled water on the US market. Given that many premium waters of the same volume don’t sell for half that price, the question must be asked: What is Penta offering that is so compelling?

First, at less than .5 ppm of total dissolved solids, it is the purest known drinking water on the US market according to the company. Second, Penta undergoes a patented process that alters the molecular structure of the water. What does that mean and what does it do? Water is a simple molecule, two hydrogen atoms attached to a oxygen atom H2O. In its liquid form, water molecules tend to “cluster” together in groups. Bio-Hydration Lab claims their process reduces the size of these clusters and says that this reduced cluster size may have important consequences for hydration and health in general.

Ultimately, the question of whether “restructured water” actually works better is less important than what its consumers believe, and Penta has an extremely loyal and growing customer-base. The company says that it does at least 60% of its sales in case form. The typical display for the product is a row of 10 cases, 8 of which will be sealed and 2 of which will be open. This permits the customer to inspect the individual bottles and, perhaps more importantly, to access the educational brochures and CD-ROM contained inside the case.

Bio-Hydration says that educating the customer has been the cornerstone in their marketing efforts. The company relies strongly on customer loyalty and word-of-mouth to acquire new customers. In addition, Bio-Hydration has an impressive list of celebrities and athletes endorsing the brand. These include Sting and international Ironman superstar Chris McCormack.

Penta’s acceptance within the health food channel is still more impressive given the traditionally organically-inclined, scientifically-averse nature of the health food shopper. Penta prides itself on the extent to which the water has been processed and on the technology used therein. And yet, the health food consumer has embraced the brand.

On July 21, 2004, the company introduced Penta in a 1.0-liter size and also began offering its .5 liter bottle in a 12-pack case. The 1.0-liter bottle has suggested retail price of $2.79 and will be sold primarily as singles. Suggested retail price for the .5 liter 12-pack case is $19.99.

The company says its sales grew 20% in 2003, hindered only by production limitations. With the recent move into a larger production facility in Carlsbad, CA, Bio-Hydration is now equipped to meet demand in the marketplace. Accordingly, the company is focused on establishing Penta in the Grocery channel during 2004. The company says it expects 2004 sales to grow 50% over the previous year.

Penta is not the only restructured water on the market. Rancho Santa Margarita, CA-based Cluster Solutions has been selling its “clustered water” Vivo since the early 80′s. The product is a big seller in Asia, particularly in Japan and China. Clustered Solutions is now pursuing the US market more aggressively.

Also due out this fall is Fitness Express Water, a clustered water that is being launched in support of Fitness Express device. The Fitness Express device is a biometric unit to be worn on the body and which measures such important bio-stats as caloric output and hydration level.

Uncontained Aquifer
@@img2 New to the market in 2003 is the premium water Aspen Pure. Based in the upscale resort town of Aspen, Colorado, Aspen Pure was created by entrepreneurs Barry Gordon and Mark Friedland in 2003. The water is now sold in over 500 locations in and around the Colorado market and has recently branched into a number of markets nationwide including Chicago and Phoenix.

The product is available in 16.9 ounce (SRP $.99), 24 ounce ($1.29), and 1 liter sizes (SRP $1.59). The 16.9 oz bottles are sold as singles, in six packs and in a 24-case. The 24 ounce are sold singularly and in a 24-pack case. The liter bottles are sold in singularly and in 3-packs.

Aspen Pure’s water source has its roots in the snow-melt streams that fill an aquifer located under 90 acres of farmland in Colorado’s San Luis Valley. The company then puts the water through the following five-step filtration process:

1) Multi-media filters remove suspended solids such as dirt and rocks from the water;
2) Dual softeners filter the water to eliminate calcium and magnesium;
3) Cartridge filtration removes additional, smaller particles;
4) Ultraviolet disinfections eliminate all bacteria;
5) Reverse osmosis removes any remaining dissolved solids from the water, including sodium, sulfate, potassium, nitrate, cryptosporidium (parasites) and organics.

The brand packaging smartly captures the inspiring beauty of Aspen’s mountains on the Aspen Pure label. Painted by local Aspen artist Tammie Lane, the label features Aspen’s well-known Maroon Bells peaks and Castle Creek.

The company actively promotes its product within the super-premium market that is Aspen, Colorado. The brand has a strong presence in the Whole Foods network of stores and in the health food channel in general.

Building on its position as a premium brand, the company is engaged in a variety of promotions designed to reinforce its image of premium quality. For instance, the company supplies Denver, Colorado’s many art galleries with its water on the first Friday night of each month during what’s known as First Friday. This means that every open-house event in the many art galleries in Denver is stocked with Aspen Pure.

The company is also actively involved in local charities, donating approximately 2% of its revenues to health-related causes. Aspen Pure sponsored the most recent Aspen and Chicago segments of the Race for the Cure, a 5k run/walk held in locations throughout the United States that raises money to fight cancer.

The company is well-funded. Dan Carney, cofounder of Pizza Hut and a part-time Aspen resident, became a substantial investor in Aspen Pure. The company is also establishing its pressence vertically within the business. Aspen Pure president Barry Gordon, recently led an investor group in the purchase of Denver-based New Age Beverages (formerly Beverage Express), the largest independent distributor of soft drinks in Colorado.

Spring Water
@@img3 Spring water is the predominant and traditional source for premium waters. Iceland Spring is a great example of a premium spring water brand that is on the upswing. The brand is sold internationally and in the US by Skae Beverage International.

Iceland Spring has a long history behind it. Formerly known as Thorspring, it was launched in 1990 by Thorspring LTD, itself formed by several of Iceland’s foremost business leaders, including Coca Cola of Iceland and the City of Reykjavik Water Works. A distribution contract with Kemmerer Beverages in 1992 enabled the Thorspring to enter the US market in the Midwest.

In 2001, a separate sales organization was launched, which enabled the brand’s transformation into Iceland Spring. Major distribution was acquired within one year of the launch however, by the end of the 2001 financial resources had drastically depleted. CATCO division of Eglis purchased assets of Iceland Spring in 2002 and chose to downsize the US entity. 2002 concluded with investments in Iceland Spring Holding by David Lominitz and the acquisition of US distribution rights by Eric Skae of Skae Beverage International, LLC.

Skae attributes the product’s success to its quality. “Iceland Spring has some of the lowest total dissolved solids of imported premium waters. This is due to the natural filtration process that occurs when glacial water filters through Iceland’s porous volcanic bedrock. Think of your standard carbon water filter.. now think of that filter extending miles beneath the earth’s surface. That’s why our water is so pure.”

The brand has 3 SKUs:

. .5 liter SRP $ .79 to $ .99
. 1 liter SRP $1.49 to $1.79
. 1.5 liter SPR ~$1.99

Iceland Spring traditionally does most of its retail business in single serve (rather in case sales). The company has a national presence in Health Food channel through Wholefoods and Wild Oats.

More recently the brand has been experiencing success through direct distribution (DSD), particularly in the New York, Washington DC, and Philadelphia markets. The company also recently sealed a deal with Walgreens which will have the brand in 5000 stores nationwide in a new 24 ounce bottle.

Thus far, marketing for Iceland Spring has focused primarily on grassroots efforts in the NYC-area. These include providing water at concerts, sporting events and community gatherings. Iceland Spring is also working from the top down, providing water to celebrities in the NY area. For instance, Iceland Spring is the official water on the set of The Tony Danza Show.

The company is very excited about Iceland Spring’s sales. The company says it saw 35% growth in 2003, and that it expects to double its sales in 2004.

In Conclusion…
Premium bottled water faces the same challenge today that is has faced since its inception, namely to stave off pricing pressure exerted by the abundance of high-quality, lower-priced products. This challenge will never disappear, nor for that matter will the premium water segment.

What is less certain is how consumer awareness of bottled water sources will affect brand loyalty. As the US market matures, consumer education with regards to source (tap water, aquifer or spring) will likely feature more prominently in purchase decisions. This may result in a sway toward a specific source type and away from another. For now, however, premium bottled water is drawing upon multiple sources for its success.