Bottled water has been making headlines lately. And not for new high-priced, ultra-premium brands, but for fears that bottled water’s popularity could impact the environment. Some are concerned that the increased popularity of petroleum-based packaging is more often clogging landfills than being recycled.

Additionally, bottled water made headlines this summer when PepsiCo’s Aquafina brand responded to criticism regarding its source by labeling its bottles as “From a municipal or public source.”

Yet, consumers seem unaffected by the buzz. The overall bottled water category, including convenience/PET still water, bulk still and sparkling water, reported $5 billion in sales and nearly a 10 percent increase, according to Information Resources Inc., Chicago, for the 52 weeks ending Aug. 12, 2007. The convenience/ PET still water category alone was up more than 13 percent.

While the category has grown, issues have attracted public attention. The International Bottled Water Association, Alexandria, Va., responded to the packaging criticism with full-page ads in The New York Times and San Francisco Chronicle. The ads explained the benefits of water, how America’s on-the-go lifestyle has grown bottled water and the need for recycling programs. The IBWA, which is a founding member of the National Recycling Partnership, is collaborating to create a national program to encourage recycling.

Top 10 bottled waters (Individual brands)
Brand	DOLLAR SALES	% change vs. prior year	Market Share	% change vs. prior year
PRIVATE LABEL	$611,824,100	22.2%	15.5	1.14%
AQUAFINA	$513,538,600	4.1%	13.0	-1.2%
DASANI	$449,246,500	7.8%	11.4	-0.6%
GLACEAU VITAMINWATER	$296,146,900	128.2%	7.5	3.8%
POLAND SPRING	$253,421,700	5.0%	6.4	-0.5%
PROPEL	$195,695,700	-2.0%	5.0	-0.8%
ARROWHEAD	$180,202,100	6.6%	4.6	-0.3%
DEER PARK	$146,958,600	13.9%	3.7	0.0%
NESTLé PURE LIFE	$113,328,000	51.7%	2.9	0.7%
CRYSTAL GEYSER	$107,630,700	27.1%	2.7	0.3%
TOTAL CATEGORY	$3,938,557,000	13.3%	100.0	—
Source: Information Resources Inc., Chicago, Total food, drug and mass merchandise outlets (excluding Wal-Mart) for the 52 weeks ending Aug. 12, 2007.

“We also are taking steps to reduce PET and we are committed to creating a comprehensive plan regarding our environmental impact,” explains Joe Doss, president and chief executive officer of the IBWA. “It shouldn’t just target bottled water because if you look at plastic PET it’s just one-third of 1 percent of total plastic in the waste stream.”

Others in the industry feel that PET is not the problem, but rather a lack of recycling programs. Icelandic Glacial has always strived to be a green company and finds the packaging issue to be a problem beyond the bottled water industry, explains Jon Olafsson, chairman and co-founder of Icelandic Water Holdings, Reykjavik, Iceland.

“PET is not the problem with plastic bottles; it’s recycling,” Olafsson says. “People are attacking bottled water companies, but there are not enough dedicated recycling facilities. People want to recycle and we need to address that issue.”

Tom First, co-founder of O Beverages, Cambridge, Mass., agrees, “In the bottled water industry, we all benefit from consumers’ desire for portability,” he says. “The main issue with PET is the amount of recycling that is available. Only well below 30 percent of PET is ever recycled. We need to increase consumer awareness of the need to recycle.

“We also need to look into plastic materials that are more recyclable or biodegradable, but hearty enough,” First continues. “Hopefully, over time we’ll use less and less plastic and more and more natural materials.”

The identification of a product’s source has resurrected the tap water vs. bottled water debate.

“Consumers are not uniformly replacing tap water with bottled water,” IBWA’s Doss says. “We have survey data that 75 percent of people who drink bottled water also drink tap water, depending on the circumstances. Our competition is not tap water, it’s juices, teas, etc.”

In July, PepsiCo decided to label its Aquafina purified water brand as coming from a “public source.” Shortly thereafter, Aquafina began a marketing campaign, which explains its multi-step purification process. According to IBWA’s Doss, the FDA requires bottled water sourced from municipal authorities to be labeled only if it is not filtered.

Despite these issues, consumers still flock to bottled water and have encouraged it to grow.

“The growth in the past 20 years can be attributed to people overall becoming more conscious of health and trying to eliminate or reduce their intake of calories, sugar, caffeine and the concern for convenience,” Doss says.

Plain bottled water has its appeal with consumers who are focused on the benefits of plain water and the convenience of portable packaging. While new flavored and functional waters have been flooding the marketplace, a majority of the brands on IRI’s list of top brands are solely dedicated to bottled water in its pure form. Private label brands take the top spot with nearly $612 million in sales this year.

But seven of the 15 brands ranked by IRI belong to Nestlé Waters North America. This spring, the Greenwich, Conn.-based company began rolling out its Eco-shape shape bottle. The half-liter Eco-shape is reported to use 30 percent less plastic, weigh 15 percent less and is estimated to save 65 million pounds of plastic resin compared to typical bottled water packaging for the same size container. In addition, the new bottle uses less paper because the label size was reduced, and the company removed color from the cap to make it more recycling-friendly. Nestlé Waters debuted the packaging with its Ozarka and Arrowhead brands, and most recently introduced Nestlé Pure Life in Eco-shape bottles. Pure Life also showed a 51.6 percent growth over last year’s sales, according to IRI data.

Icelandic Glacial ranks environmental concerns as a vital part of its business practice. Icelandic Glacial is a certified Carbon Neutral product by the CarbonNeutral Co. The company also recently broke ground on a state-of-the-art facility that will take its capacity to 200 million bottles per year. In addition to global goals, the products will be distributed in the United States by Anheuser-Busch, which also has joined as an equity partner.

Also leveraging packaging’s appeal is Kids Only LLC, Westborough, Mass. The company partnered with famous names such as Scooby-Doo, Bratz and Marvel Heroes to feature the icons on its bottled water packaging. The purified water features colorful character packaging aimed to get kids to drink more water.

“Our goal is to not only help parents encourage their kids to drink more water, but also to help kids start to make healthy choices,” said Ron Cohen, president of Kids Only LLC, in a statement. “Kids Only Bottled Water lets kids enjoy their drink choice by connecting with their favorite characters, so they will be more apt to choose that healthy drink again in the future.”

Flavored and functional waters have been launched with increasing frequency. Whether it’s for variety or necessity, consumers are attracted by the latest options in fruity flavors and added benefits.

One of the pioneers of the enhanced water category, Glaceau, had a big year. Its sale to Coca-Cola in May brought it expanded distribution and attention, which may have encouraged the triple-digit increases reported by Vitaminwater and Smartwater brands. Vitaminwater introduced a new Lemon-Lime flavor formulated with electrolytes, as well as ‘XXX’ antioxidant variety this year. Within the ‘enhanced’ water field, the Whitestone, N.Y.-based company is often referred to as a groundbreaker.

“[Glaceau’s Chief Executive Officer Darius Bikoff] pretty much invented the term enhanced water, but it’s really interesting that people look for functionality in beverages,” First says. “They always have in beer, whisky and coffee, but Glaceau and Red Bull were really at the front on the marketing campaign. Whether it’s plain water with electrolytes, energy or antioxidants, it’s amazing how focused customers are on function. And it’s not just the 18 year olds, it’s the 55 year olds as well.”

After its introduction two years ago, O Beverages is growing its business. Expanded consumer interest and distribution have worked in favor of its O Water line, which is plain water sweetened with fruit essence, and Infused line, which is sweetened with pure cane sugar. Expansion is in the works as First hints at new flavors for both lines.

Also joining the category this year was Organic WaterPlus by Healthy Hydration LLC, Englewood Cliffs, N.J. Available in plain electrolyte-enhanced vapor distilled water, as well as a number of flavors and formulations, the products are certified USDA Organic. The flavor options combine functional benefits such as Passionfruit Citrus for energy, Acai Berry for antioxidants and Dragonfruit Kiwi for vitamins.

Known for its quirky sodas, Seattle’s Jones Soda branched out this year, unveiling its new 24C line. The vitamin-enhanced water beverage was introduced in May, and more recently underwent a packaging makeover. The new bright packaging matches the beverage’s vibrant colors, which coincide with their flavors. Cranberry Apple, Peach Mango and Berry Pomegranate are among the initial variations, which offer 500 percent of the daily recommended value of Vitamin C.

Designing with kids in mind was Wateroos by Maddie’s Beverage Co. Inc., Belmont, Calif. Created by a mother, Wateroos is packaged in juice box-style packaging and features no calories, artificial sweeteners or flavors. The zeros on its nutrition panel are in contrast to some kid-aimed flavored waters on the market, explains Roberta Greenspan, founder of Maddie’s Beverage Co.

“There aren’t many waters that make a play for kids and don’t have some degree of sweetener or sugar,” Greenspan says. “We are pure water and we’re not hiding behind that. There are some products on the market that have 18 grams of sugar, at that point you’re not choosing water, you’re choosing a diluted juice.”

Greenspan says Wateroos is winning many fans among parents searching for healthier beverage options for their children. Wateroos’ plain water, Apple, Grape and Berry flavors are expanding distribution through regional grocery chains. In order to spread the word about the product in its new areas, Wateroos is working on a word-of-mouth marketing campaign.

Kraft launched the functional formulas of its Fruit2O brand in May. Organized by their benefits Hydration, Relax, Immunity and Energy, the line has zero calories and is fortified. Relax features a Tropical Fruit blend flavor with added hibiscus and chamomile. Energy’s Raspberry flavor is boosted by B vitamins and caffeine. In addition, the company still offers the full lineup of eight flavors of Fruit 2O.

The spring also saw the launch of Dasani Plus from Coca-Cola. The zero-calorie line of vitamin-enhanced flavored waters features three multi-functional flavors: Refresh + Revive in Kiwi-Strawberry; Cleanse + Restore in Pomegranate Blackberry; and Defend + Protect in Orange Tangerine. Each option is fortified with a unique blend of vitamins.

At PepsiCo, much is in the works for its functional water brands. A new look is planned next year for PepsiCo’s Aquafina Alive, which initially launched in January. The products still will be available in Berry Pomegranate and Orange Lime flavors, and Lemon will replace the Peach Mango flavor that is currently part of the lineup. Planned for a 2008 launch, the reformulation will feature a new sweetener and individual formulas, such as Energy and Immunity.

PepsiCo also announced it will re-launch a refreshed version of SoBe Life Water. The new formula will be formulated with sucrose, or table sugar, herbs and feature 30 percent fewer calories. Later this year, the brand will roll out the new formulations in new 20-ounce packaging with updated graphics for the line that includes Challenge Your Life, Shield Your Life and Enlighten Your Life formulas.

IRI data reports PepsiCo’s Propel brand had $195 million in sales last year and its Propel Calcium showed 81.5 percent growth over the past year. Capitalizing on the growth of its Propel line, the company announced a new addition. Propel Invigorating Water features 20-mg. of caffeine, B vitamins and a low-calorie formula. The Strawberry, Citrus and Berry flavors are planned for retail launch in early 2008, the company says.

Offering its own “nutritionally enhanced water product” is TrimWater from Lifestyle Beverage Co., Garden City, N.Y. The product is low in sugar and calories and features glucosamine hydrochloride for functional benefits, such as stabilizing blood sugar, explains David Sackler, chief executive officer and founder of the company. TrimWater recently added Blueberry Pomegranate to its lineup of flavors.

Hinting at extensions in the works, Sackler forecasts, “I think we’ve only scratched the surface of what functional waters could do. It’s a great part of it.”