Tuesday, September 18, 2007

Is Aquafina heading for a watery grave?

Bottled water consumption is increasing both in the US and in Europe.
Whenever there is a growing market, there is aggressive marketing.
Clever marketing campaigns have created consumer perceptions that bottled waters are purer or healthier than tap water.
What is inside the water bottle often remains a mystery to the consumer - not in the least due to lack of a defined standard for bottle labeling.
It gives water producers creative freedom in their product positioning.

Take Aquafina, the top selling water in the US. Due to clever branding, it is perceived as generating from a distant spring in a glen or mountain. However, this PepsiCo Inc. product is pws: from a public water source. In plain language - tap water.
A US watchdog group called “corporate accountability international” took action and forced Pepsi to reveal the source on the bottles.

Pepsi tried some crisis management.
North American spokeswoman Michelle Naughton declared:
If this helps clarify the fact that the water originates from public sources, then it's a reasonable thing to do.”
In contrast, Pepsi’s competitor Coca-Cola (producer of Dasani) was a lot smarter marketing wise. It clearly states on the Dasani website that it comes from local water supplies, is then filtered using a process called reverse osmosis, followed by enhancing it with minerals.
Coca-Cola spokeswoman Diana Garza Ciarlante went on record and stated:

we don’t believe that consumers are confused about the source of Dasani water. The label clearly states that it is purified water.”
Coca-Cola further leveraged the Aquafina story by informing Reuters that it will post online information about its quality control testing later this year.
Coca-Cola is ahead on its competition in the social conscience arena as well – it supports nearly 70 public water projects in 40 countries, in partnership with such groups as CARE and the World Wildlife Fund.

Is Aquafina heading for a watery grave? Not likely.
For starters, the demand for bottled water rose by nearly 10 percent in 2006.
The average annual consumption per person is around 26 gallons.
Industry observer Beverage Digest estimates annual sales in 2006 at $15 billion.

Dave Kolpak, a portfolio manager at Victory Capital Management, said the environmental objections will have little impact on the bottom line for either Pepsi or Coke, though he admitted it could slow the market's growth rate.
According to Dave Kolpak, portfolio manager of Victory Capital Management, people may talk about the issue, but will likely continue buying bottled water.
If Pepsi launches a clever marketing campaign, addressing the source issue and combining it with support for selected social causes; they will not even feel it in their financial results.

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