Nestle banks on consumer return to bottled water
VEVEY, Switzerland For the past couple months, Nestle Pure Life, manufacturer of Perrier, Poland Spring, Vittel and Awuarel, has been aggressively pushing its new health-and-wellness advertising campaign. The company has been informing consumers of the healthy benefits of drinking water and the harmful effects of drinking soda through new labels on their packaging, as well as TV commercials on Hispanic channels. Some Poland Spring bottles stated, “A typical 12-ounce soda contains the equivalent of 10 teaspoons of sugar,” and popular talk-show host Cristina Saralegui did voice-overs saying, “Kids don’t jump in pools of high-fructose corn syrup,” in commercials portraying children jumping in clear pools.
The new campaign is meant to combat plummeting water bottle sales, which were down to $17 billion in the U.S. last year, a number significantly impacted by people viewing bottled water as environmentally unfriendly. In an interview with Ad Age, Nestle Waters North America president and chief executive officer Kim Jeffery stated that he disagreed with critics. “I would argue that we’re good for the environment, and we’re good for human health, as opposed to being an environmental villain.”
By targeting sodas, Nestle is fighting its main competitors—Coca-Cola, which owns Dasani, and PepsiCo, which owns Aquafina. In 2006, 70 percent of the increase in sales of bottled water in the United States came from people switching drinks, according to Bob Davino, a vice president of marketing for Nestle Waters. Jeffery said Nestle’s Eco-Shape bottle is proof of their efforts to reduce their carbon footprint. The Eco-Shape bottle is the lightest half-liter bottle being made for beverages today, Jeffery said, and the company is planning to eliminate another 20 percent of its weight.
Jeffery claimed cited a small media budget as the reason for not being quite as transparent as critics. “We’re half the size of the soft-drink industry, and our media budget is about 10 percent of theirs.” The new campaign includes nine messages rotating through Nestle bottled water labels, and according to Ad Age, the commercials featured on Hispanic channels are gaining traction. “One of the things we know is that when people migrate to this country from Latin American countries, they are very familiar with the Nestle trademark,” Jeffery said. “There’s a high level of trust, and they index very high in bottled-water consumption because of the quality of tap water in their native countries.”
Jeffery also explained to Ad Age that it is impossible to trust tap water, since it often flows through an “infrastructure that’s as much as 100 years old.” He believes people should drink Nestle Pure Life bottled water because the company can guarantee that the product is “high quality,” healthy and is contained in packaging that has gone through a significant reduction in plastic.
Walgreens recalls plush animals with chocolate bars sold in September
DEERFIELD, Ill. Walgreens has issued a recall of 173 teddy bears that were stocked in some U.S. stores in late September, the company said Friday.
The recall was issued after the Food and Drug Administration tested chocolate that was packaged with the bears and found traces of melamine. Customers who purchased the bears are advised to return the toys and candy to Walgreens stores for full refunds.
Walgreens issued a statement to its stores to discontinue sales of the bears, described as “Dressy Teddy Bears,” which are nine inches high and include a 4-ounce chocolate bar. The bears are marked with the UPC number 047475864485 and product tag item number 291332.
At the time the recall statement was issued, Walgreens said that no injuries had been reported. More information on the recall can be found at www.walgreens.com/images/pdfs/recalls/TeddyBear_Product_Safety.pdf or by calling the Walgreens Product Quality department number, (847) 315-2755, between 8 a.m. and 4:30 p.m. (Central time), Monday through Friday.
Manufacturers look to add lost pop to beverage category
Changing consumer tastes, increased commodity costs and the economy have taken a big toll on the carbonated beverage category and have left manufacturers scrambling to develop strategies to meet the demands of a new marketplace.
The biggest problem carbonated beverage manufacturers face is an undeniable decline in consumption.
“The trend is against them,” said Greggory Warren, an analyst with Morningstar. “Consumers are looking to other beverages, and I don’t know how you reverse that trend.”
Coca-Cola Co.’s president and chief executive officer, Muhtar Kent, addressed the issue in his recent speech at InterBev 2008. “It’s tough out there, and it’s probably only going to get tougher,” he said. “Customer preferences…expectations have shifted dramatically over the last decade…commodity and energy prices have soared.”
Rather than write off the future of carbonated soft drinks, Kent believed sparkling beverages have a strong future with such products as Coca-Cola Zero, which he called the biggest product launch in 22 years. Coca-Cola Zero, he said, was “central to driving sparkling beverage leadership” and was bringing consumers back into the category, as well as generating great interest among new users.
PepsiCo has its own plans to revitalize its carbonated beverage business. In a recent meeting with bottlers in Westchester County, N.Y., Pepsi executives outlined the company’s new commitment to the carbonated soft drink category, which includes redesigned graphics and a broad range of new products and packages in both carbonated and noncarbonated beverages. New packaging in 2009 will affect many Pepsi brands, including Mountain Dew, Gatorade and Tropicana.
Morningstar’s Warren said the companies face a challenge. “The consumer has gotten very price-sensitive, so it’s not a matter of whether they should spend a little more for an enhanced water; it’s about not buying anything and drinking tap water instead,” he said.
The biggest hit to retailers is at the point of purchase. Bottlers are reluctant to shave their margins, and consumers are not buying product, so retailers are left with coolers generating slow turns. “There’s a real hesitation on the part of bottlers to get more promotional in the single-serve category,” Warren said. “They are already taking a hit absorbing a lot of increased costs, and there’s an unwillingness to take a hit in a high-margin category.”
While Warren is hard-pressed to find any segment in the beverage category that shows promise in this current economy, other industry experts said such segments as enhanced waters and functional beverages provide some lift to the category.
“Enhanced waters are holding up pretty well,” said John Sicher, publisher of Beverage Digest. “Fuze, for example, is a small but strong brand, and Coke is doing OK with Glaceau’s Vitaminwater.”
A number of product introductions for the Vitaminwater brand in 2009 and a strong distribution system that will allow Coca-Cola to increase the availability should provide some additional growth. Vitaminwater already has a strong profile in Costco, where multipacks are very visible in the club store’s aisles.
Energy drinks also are showing good growth. Dollar sales for the category were ahead nearly 22 percent for the 52 weeks ended Oct. 5, according to Information Resources Inc. There are threats to the segment as pressure mounts to crack down on the sale of caffeinated energy drinks to young people. One hundred U.S. scientists and physicians recently petitioned the Food and Drug Administration for greater regulation of energy drink products.
Another growing segment is functional beverages. “People are more interested in functional beverages,” Sicher said. “This is one segment of the beverage category where price isn’t the top priority.”
“As price becomes more important due to economic conditions, it helps a lot that we provide real nutritional benefits to our customers,” said Jason Dolenga, brand manager of Coca-Cola’s Odwalla. “Even when times are tough, there are some things that consumers tend to continue as part of their routine, and we know that attention to good nutrition is one of them.”