Bottled water sales are tanking, and the brand makers heat up a price war to win share in a declining market.
Bottled water sales are tanking, and the brand makers heat up a price war to win share in a declining market. They can’t possibly think that any less-than-spectacular discounts would click with consumers and help restore demand, once people have decided that (practically free) tap water is a fine alternative and safer for the environment too.
Many of these beverage makers are brilliant beverage marketers - Coca-Cola and PepsiCo among them - so we find it hard to believe that after all their consumer insights, and all of their years of successfully selling bottled water, that dropping prices to margin-evaporating levels is their best idea.
Bottled water brands sold for $1.35 per gallon on average in the first quarter of 2009, down from $1.94 in 2001, the Beverage Marketing Corp. consultancy told The Wall Street Journal recently. Wow, do they think they’re selling computer memory chips? Some analysts predict further drops by the summer of 2010, “as PepsiCo absorbs its two biggest bottlers and makes expected changed to lower its delivery costs,” reported WSJ.
When bottled-water sales hit the wall at a whopping $7.6 billion U.S. sales (IRI year ended July 12, 2009, excluding Walmart, down 6%), it was the fallout of the recession, and concerns over food safety, water sources and the environment. In SupermarketGuru.com coverage on July 20, we told of Congress looking into the integrity of dozens of bottled waters sold in the United States. We said demand would likely fall further if public confidence in the regulatory oversight of the sector were shattered, and if sources were shown to be less than the pristine images consumers might have in their minds.
All of these issues are converging at once, which makes us think the bottled-water industry needs some game-changers in product formulations to secure an image of greater value with consumers. Price wars alone won’t do anything but rob these companies of any potential first-mover advantage and the resources to make significant shifts in what they offer at the shelf.
We’re talking more minerals (one of the initial reasons bottled water caught on initially), vitamins and flavors so people get more out of the product and feel better about spending money on it. The concept of ‘giving more for less’ works with the snack and candy categories because they offer consumers a small indulgence in a tough time. Bottled water won’t rise to this value level until there’s more substance in the products.