According to the Beverage Marketing Corporation, New York, NY, the plain bottled water category (excluding enhanced and flavored varieties) was valued just shy of $11 billion last year, up nearly $1 billion since the previous year. Flavored waters, like Fruit2O and Dasani Flavors, were worth $616 million in 2006—a 35% increase over 2005.
But perhaps the most compelling of the three water sub-segments continues to be enhanced waters, which is defined by the addition of vitamins, minerals and other functional ingredients, and is driven by brands like Propel and vitaminwater. This category, worth $592 million in 2005, swelled to $884 million in 2006—a 49% profit increase in the span of one year.
Functional waters continue to entice curious consumers because they offer more than just pure, clear hydration, they also provide a variety of good-for-you ingredients in an easily gulpable format, creating the ultimate go-to beverage of choice when it comes to low calorie and calorie-free refreshment.
The Early Days
The functional water category essentially debuted in the late 1990s with the launch of the Propel and Glaceau Vitaminwater brands. What’s interesting to note is that these two brands continue to be the segment leaders today. In fact, they are the only two functional waters that have broken into IRI’s list of top 10 bottled water brands—vitaminwater ranks number five with over $226 million last year in food, drug and mass merchandise outlets (excluding Wal-Mart), and a nearly 6% market share; and Propel ranks number six, with $194.7 million in sales and 5% market share. (Technically they could be considered numbers four and five, respectively, when referring to branded waters because the top “brand” on the list is private label.)
The functional category was borne out of two trends occurring at the time: double-digit growth in bottled water and the emergence of functional beverages. Today it is also being led by a third trend: the move toward lighter-tasting, less sweet products. It used to be that most beverages had the same flavor profile—different flavors, perhaps, but the same sweetness level and flavor intensity. The functional water category (and to a greater degree, the flavored water category) is part of a trend that recognizes consumers have diverse flavor preferences and a number of them find a less-intense flavor to be more refreshing.
Business is Booming
The functional bottled water segment is a bona fide moneymaking segment that hasn’t escaped the attention of beverage industry giants Coca-Cola and Pepsi. Not to be outdone by its competitor, Coke made headlines when it snapped up Powerade and Dasani, while Pepsi built its alternative beverage stable with the acquisition of Propel, Aquafina and SoBe brands.
Coke’s Dasani brand recently launched an enhanced offshoot of its plain bottled water brand. The zero calorie line comes in three varieties: Refresh + Revive Kiwi Strawberry, which has 10% of the reference daily intake (RDI) per serving of vitamins B3, B6 and B12; Cleanse + Restore Pomegranate Blackberry, which contains 10% of the RDI per serving of vitamins E, B3, B6 and B12, plus one gram of fiber; and Defend + Protect: Orange Tangerine, which provides 10% of the RDI per serving of vitamin E and zinc.
In May, Coke upped its stake in the water and energy drink segment when it announced it would purchase the maker of perennially popular Vitaminwater, Energy Brands (also known as Glaceau), for $4.1 billion.
Functional Front Runners
Functional waters are currently benefiting from a wealth of formulation creativity. Vitamins are easily the most well-represented functional additives and ingredients, as are electrolytes. Propel was the first major brand to tout electrolytes, and there have since been many products geared toward “fitness” endeavors. Skinny Water from Skinny Nutritional of Bala Cynwyd, PA, is positioned as an “appetite-suppressing flavored fitness water,” due to the use of Super CitriMax and ChromeMate to help “curb hunger, maintain healthy blood sugar levels and normal metabolism, and promote fat loss and lean body mass—all leading to reduced body weight.” Skinny Water also provides 15% of the U.S. Recommended Daily Intake of calcium, and 9% of the U.S. Recommended Daily Intake of potassium in each 16.9 oz. bottle.
Clearly Canadian (pictured above) recently unveiled three new non-carbonated functional water lines: daily Vitamin, daily Energy and daily Hydration. Available in blueberry and tropical flavors, zero calorie daily Vitamin is enhanced with vitamins C, B6, B12, folic acid and magnesium. Raspberry and pink grapefruit flavored, daily Energy is fortified with taurine and caffeine for a “sustained energy boost,” while daily Hydration features the use of orange and lemon flavors to add a hint of flavor to pure unsweetened Canadian artesian water.
Metromint, from Soma Beverage Company, LLC of San Francisco, CA, employs mint extracts for both flavor and functionality. In addition to acting as a natural breath freshener, the company says mint helps settle the stomach and aids in digestion, while the natural menthol can reduce inflammation in the nasal passages and clear congestion related to colds and allergies.
Penta Water forged a second functional water branch—“structured” ultra pure premium waters that don’t include functional ingredients, per se, but impart functional benefits because of their structured nature. RAPID Hydra-Cell from Dallas, TX-based ORBIS Companies, is one such water and is said to get “more energized, pure H2O into the cells of the body tissues and organs thanks to numerous filtering and purification processes (no distillation) and additional non-chemical processes that break down the water molecule bonds into smaller, more easily absorbed molecules.
And the final branch of functional water is comprised of products that aren’t as much nutraceutically “functional” waters as they are flavored waters that play up the fact that they do not contain sugar or other sweeteners and are low- or zero calorie. Some examples are O Water and Hint, products that feature refreshing fruit “essences” as an alternative to sugary carbonated beverages and juices.
The types of functional beverages are vast, but there is a singular tie that binds most of them together—the use of ingredients that are easily recognizable to consumers. Bottled water is a great delivery vehicle for ingredients, but the products that are out there today are primarily about refreshment first and function second. Functional waters are truly bonus beverages. Water is a universally accepted beverage and if beverage companies can incorporate functional ingredients and processing steps that deliver actual benefits to the consumer, it’s a win-win situation. As long as there is an interest in healthy lifestyles there will be an interest in functional waters. The real obstacle will be sticking to the “water” platform and resisting the urge to morph these products into soft drink-type beverages that use the same flavor profile, number of calories, etc.—a move that could sour the consumer’s perception of water as healthy, natural hydration.