Sparkling Water Flowing to New Channels (with Brand News)

BUBBLING OVER:

Sparkling Water Embraces New Channels

The sparkling water category continued its steady, upward trek throughout 2021, making space for new fl avor innovations, functional ingredients and format extensions despite ongoing supply chain disruptions, labor shortages and transportation constraints. With its strong grounding in the better-for-you space, analysts say the sparkling water category is poised for continued momentum.

According to a recent report from IRI, total dollar sales in the category accelerated 9.8% year-over-year, reaching over $4 billion in sales across most retail channels, including c-stores, over the 52-week period ending October 31. Additionally, total dollar sales in the category jumped 7.2% during the two-week period ending October 23, according to a report of NielsenIQ data by Goldman Sachs Equity Research.

However, as the sparkling water category continues to welcome new brands and line extensions to the market, securing on-shelf space is becoming increasingly competitive. Despite points of differentiation like fl avor and function, newer sparkling water brands are looking to embrace opportunity in channels where the category has not traditionally operated, including e-commerce, cstores and on-premise partnerships.

CONVENIENCE OPPORTUNITIES

With premium positioned and functional products driving innovation, Joan Driggs, VP of Content and Thought Leadership for market research fi rm IRI, emphasized the growth opportunities for

BY ADRIANNE DELUCA

sparkling beverages in c-stores. Driggs noted that continued supply chain challenges could be the push brands need to explore different formats, for example switching from cans to plastic bottles that are resealable and more appropriate for placement in convenience.

“I think there’s really an opportunity in the convenience channel because as we gain mobility and people are increasing their time at work and their commute time, they are going to be looking for more convenient beverages and sparkling waters are such a great, clean, no-pressure beverage,” Driggs emphasized.

Talking Rain’s Sparkling Ice set its sights on convenience several years ago, and it still maintains its lead in c-stores, holding the highest percentage of unit sales; it’s closely followed by brands such as Topo Chico and antioxidant-infused seltzer water Bubbl’r, according to data from Skupos, a tech company that collects sales data from over 14,000 independent c-stores in the U.S. In independent convenience, sales of Nestle’s Perrier jumped 12% this year, accelerating the carbonated mineral water into the fourth top seller spot ahead of brands such as Vita Ice, San Pelligrino and PepsiCo’s Bubly.

Overall sparkling water unit sales have decreased slightly, at a rate of 4%, in c-stores this year according to data from Skupos. According to Driggs a decrease in unit sales has been experienced across multiple channels and non-alcoholic beverage categories as brands grapple with supply chain constraints and are forced to take on price increases.

Within Skupos’ network, distribution of sparkling waters has declined during the month of October with only 62% of its 14,000 stores carrying a sparkling water product at all -- a 9% drop from the rate of 72% distribution that has been consistent over the past year. Skupos’ data analytics team noted that the decline in availability may be due to supply chain hold ups, forcing brands to prioritize their highest velocity products into channels with higher demand such as grocery and club. for new and emerging brands to gain traction before seeking in-store shelf space. As out-of-stocks continue to disrupt pre-planned on-shelf displays, retailers may give those “challenger brands a fi ghting chance” to capitalize on their points of differentiation and move from online platforms to in-store placement, Driggs noted.

“If you can’t deliver or are inconsistent about your delivery then retailers are going to feel they have the right to go to where they are going to get [what they need],” Driggs said. “As they think about their own assortment… many of them are going to say we only need two unfl avored sparkling waters, we don’t need six… they will start to differentiate with more interesting blends, more fl avors or more products that have a bit of a health-halo attached to them.”

E-COMMERCE EXCELS

One of the most notable and lasting impacts of the pandemic is the shift in consumer buying habits alongside the rise and increased reach of e-commerce platforms. Sparkling water brands, like other beverage companies, have leaned into the shift.

Some brands have found their niche entirely online such as premium, naturally carbonated mineral water brand Found Bubbly, which relaunched as a strictly direct-to-consumer business over the summer after a period of suspended operation at the onset of the pandemic. Prior to the pandemic, the majority of Found Bubbly’s sales were on-premise but the brand now boasts 1,200 active subscription-based customers and drives trial through free sample packs online, according to an earlier interview with Found Bubbly CEO Onur Kece.

E-commerce beverage sales increased almost 20% at the onset of the pandemic before it eventually plateaued, according to a joint report on U.S. Online Grocery sales from market research fi rms IRI and Forrester. Although the channel hasn’t experienced continued upward growth, Driggs believes that the prominence of e-commerce will not dwindle.

“Particularly consumers who were using e-commerce before the pandemic, they have just expanded their reliance to include a lot of grocery items and fresh foods -- so they are really the big win,” Driggs said. “Retailers and brands have invested so heavily in e-commerce and they are continuing to do so.”

Retail platforms and online marketplaces offering click-andcollect and rapid delivery-type services present a fairly untapped opportunity in the e-commerce realm for sparkling water brands, Driggs believes, noting the weight of the product makes it diffi cult to ship in the sense of a typical online platform.

Retailer marketplace platforms also present an opportunity THE STRONGHOLD IN HIGH-TURN RETAIL

For the major players such as Coca Cola and PepsiCo, the pressure is on to innovate with new brands into the premium, functional space as they try to hang onto their broad shelf sets in high-turn retail channels across the country.

They have fought back gamely with brands like Coke’s AHA and PepsiCo’s Bubly, both of which have grown quickly through their owners’ in-house distribution networks. According to recent data from IRI, AHA’s total dollar sales grew 123% year-over-year for the period ending September 10. With a variety of caffeinated options and eight fl avors ranging from Blueberry + Pomegranate to Raspberry + Acai, AHA has differentiated itself with fl avor and function from Coke’s premium sparkling line, Topo Chico, which saw a 36% increase in sales reaching $277 million this year, according to IRI.

Similarly, PepsiCo’s Bubly brand still holds the lead in the category, seeing 10% growth and reaching $377 million in sales this year.

But those brands are attempts to match (or in the case of Topo Chico, purchase) the independent brands that lead the category. Brands like Sparkling Ice, La Croix, Polar, Spindrift, and Waterloo are all free agents, as are exciting newcomers like botanical-infused sparkling water brand Aura Bora. Launched in January 2020, the sparkling fruit water has excelled in natural retail, claiming three of the top 10 best selling single SKUs in the category and channel in September, per SPINS data.

This year, La Croix saw a 13% increase in sales reaching $552 million while Waterloo expanded its reach to over 3,000 doors and Spindrift saw a 67% increase in total dollar sales, according to IRI.

And in a world where sampling has virtually disappeared in conventional channels, Waterloo has looked outward to continue fueling growth, utilizing consumer feedback to introduce its new seasonal fl avors, Pineapple, and most recently, Cranberry, and driving trial through a high volume of on-premise partnerships, including music festivals across the country.

FINDING FLAVORS AND FUNCTION ON-PREMISE

While Waterloo is looking to events as a marketing channel, other brands are looking to on-premise partnerships, both as a sales channel and as a way to get product noticed within that ongoing sampling void.

With lockdowns lifting and beverage volumes shifting back to on-premise, according to Nielsen scanner data, Driggs believes partnerships with bars and restaurants present the most valuable opportunity for new brands looking to drive trial.

Industry analysts from Whole Foods and IRI, among others, predict that consumers’ interest in beverages positioned as alcohol-alternatives will continue to increase throughout 2022, especially with drinks that offer relaxation benefi ts without any buzz. In terms of functional sparkling products, on-premise could present an opportunity for hemp-infused brands like Rhythm, Cloud Water and Recess to gain exposure win both on and off

as they await FDA guidance to allow broader distribution across conventional channels.

And while that presence in bars might make for a sober-curious alternative, sparkling water brands are actually trying to win both on and off the wagon. Following along with the pandemic-infl uenced rise of at-home cocktail making, some sparkling water brands have also seized the opportunity to position themselves as mixers and alternatives. While celebrities like Blake Lively have gotten in on the action with the launch of Betty Buzz, a sparkling water line she has positioned as an alcohol-alternative or mixer, even national brands such as AHA and Bubly and fairly new lines including Nixie and Waterloo have promoted their product for alcohol-adjacent use occasions.

“Sparkling water is the new CSD,” Driggs concluded. “I have been amazed over the years at the level of competition and it just keeps coming and people just keep drinking it up.”

Organic Probiotic sparkling water brand Kaylee’s Culture has been accepted to Amazon’s Launchpad program and launched its own Ambassador program. The San Diego-based company currently offers three flavors -- Elderberry, Watermelon and Strawberry -- which are available in single flavor and variety packs.

Water brand Crystal Geyser added a Black Cherry flavor to its sparkling water lineup this month. The water contains no sugar or calories and is flavored with non-GMO verified essences. The water is available in the Western U.S. for $1.29 per 1.25 liter bottle.

Waterloo Sparkling Water just launched its first, limited-time-only flavor for the fall season - Cranberry. The seasonal flavor balances the tartness of Cranberry with juicy and tannin notes and is free of sugar, calories and sweeteners like all Waterloo varieties. The debut of Cranberry follows Waterloo’s seasonal spring launch - Pineapple - which was created in response to fans’ ongoing requests for the tropical flavor.

Kombucha-infused sparkling water brand Agua Bucha by Mother Kombucha announced it has expanded distribution to Publix Super Market throughout Florida. The retailer will now carry the brand’s three gut-healthy flavors -- Meyer Lemon, Grapefruit and Key Lime -- in the water aisle at 720 stores across the state.

Kombucha maker Buddha’s Brew unveiled its latest portfolio extension: Sparkling Water Kefir. The new innovation comes in Raspberry, Calamansi Lime and Guava flavors which contain water kefir culture and real fruit juice. The non-dairy, Kefir line launched at Whole Foods locations in the Southwest as well as The Fresh Market on the East Coast and are available for a suggested retail price of $3.99. Asarasi has partnered with The Nature Conservancy and launched nine SKUs available in 4-packs with branding to reflect the partnership. The waters are positioned as premium sparkling waters and mixers and come in flavors including Pink Grapefruit, Andean Tonic, Valencia Orange, Persica Peach, Manila Mango, Wild Cherry Lime, Peruvian Lime, Lisbon Lemon and Natural. Additionally, the brand supports the Plant a Billion Trees project and the Colorado River Basin Preservation Project. Asarasi will donate $100K to The Nature Conservancy over a period of two years and has launched these new products in Central Market in Texas and Festival Foods in Wisconsin with more distribution expansion coming soon.

Aiming to establish a strong following in one of its core markets, probiotic seltzer brand HUZZAH will be conducting hundreds of sampling events at Safeway locations throughout Northern California. The brand will also take over the coolers at Erewhon in November, receive end cap placement and promo pricing at the Berkeley Bowl, and execute numerous other promotional activities. HUZZAH is also rolling out its brand ambassador program across California and plans to invest heavily in key retail partnerships for on-shelf product placement by early next year.

This fall Hint Energy Water launched exclusively with Sam’s Club and Walmart and online on the brand’s ecommerce website and Amazon. The product contains 60 mg of natural caffeine and comes in three flavors: Blueberry Grape, Citrus and Black Raspberry. Additionally, Hint has added new investors following its Series D funding round last year including Springboard Growth Capital, which is an investment partnership, run by Amy Wildstein, that provides visionary women founders with the capital to build market-leading consumer brands.

Found Bubbly officially relaunched in the United States exclusively as a direct-to-consumer product this fall and also closed a seed round led by two female leaders in the DTC space –– Eloise Monaghan, founder of Australian lingerie company Honey Birdette, and Jackalope Ventures, backed by the former CFO of Glossier, Vanessa Wittman. Found Bubbly is a sparkling water company that produces premium carbonated water through earth’s naturally-occurring mineralization process and sources its liquid from underground reservoirs which produce naturally carbonated water due to pressure from Earth’s shifting tectonic plates.

Last month, all three flavors of Sanzo’s Asian-inspired sparkling water – Calamansi, Mango and Lychee – landed in all 50 mid-Atlantic Whole Foods stores including locations in D.C., New Jersey, Maryland, Pennsylvania, and Virginia. Sanzo now has over 500 retail partnerships across the U.S. in addition to foodservice accounts such as Panda Express and online marketplace FreshDirect.

For the first time in the brand’s history, Perrier entered the functional beverage category with low-calorie caffeinated beverage, Perrier Energize. The new line is made with mineral water from France and plantbased caffeine from organic Green Coffee and Yerba Mate extracts and contains no artificial sweeteners. The line is available in three flavors -- Pomegranate, Grapefruit and Tangerine -- with each can offering approximately the same amount of caffeine as an 8 fl. oz cup of coffee. Additionally, Perrier launched its first limited-edition offering this fall with a new blackberry flavor and can art inspired by Día de Los Muertos. As part of the overall celebration, Perrier committed support to The Hispanic Heritage Foundation and United Farm Workers - two organizations who work to empower members of the Latino community.

Sparkling water maker Aura Bora is leaning into LTO releases with its new Elderflower Grapefruit flavor, available online now for a limited time. The brand also plans to release a seasonal holiday flavor in December.

Organic sparkling water brand Nixie secured new distribution for its latest flavor -- Strawberry Hibiscus -- at Target, Stop & Shop, The Giant Company, Giant Food, Natural Grocers Vitamin Cottage, Raley’s, Harmon’s, Bristol Farms, Nugget, Good Eggs, Central Market, Yes Organic Market, Metropolitan Market, Erewhon, Market of Choice and Oliver’s Markets. The new flavor debuted in August 2021 and was the top new item launched in its category in the natural channel over the last 12 weeks, according to SPINS data through October 3.

As seen at this year’s NACS show, flavored sparkling water AHA is early next year set to launch a new caffeinated entry (40 mg) in its c-store friendly 16 oz. cans: Fuji Apple White Tea. AHA will also be integrated into Coke’s fountain options for foodservice, with Peach + Honey, Blueberry + Pomegranate and Lime + Watermelon flavors.

In celebrating the brand’s 30-year legacy, Mineragua has launched a new brand identity, complete with a new logo, packaging, and slogan (“Life, With Sparkle”). The formula has also been updated to include fewer ingredients and lower sodium.

Hydrogen-infused flavored sparkling water HyVida has undergone several changes recently, including raising the pH higher (thus reducing the acidic burn) and making its hydrogen bubbles smaller and softer to allow the organic flavors to pop.