Water world: Bottled water’s glow up
The still water market runs deep. Even as value brands dominate the category, much of the potential for growth resides in the premium segment, where brands are bringing innovation and message-driven marketing to bear on the ever-elusive millennial demographic.
For the 52-week period ended Nov. 5, the total size of the U.S. multi-outlet convenience/PET still water category was $7.95 billion — a 4% increase over the year-ago period, according to IRI data. The still water category is dominated by big names — Nestlé Waters North America takes the top spot, followed by private-label vendors, Coca-Cola, Glaceau (owned by Coca-Cola) and PepsiCo.
Based on IRI data, several of the top-20 brands have seen their price per unit decrease, sometimes alongside decreases in total unit sales. Nestlé has eight brands within the top-20 brands, with three of them posting negative dollar sales growth over the year-ago period — with its Deer Park brand seeing a 4.95% dip in sales dollars and a 5% dip in unit sales. A further three value brands posted negative sales growth. The difficulties these brands are facing seem largely due to pricing pressure — eight brands saw their price per unit decline or stay flat over last year.
“In the third quarter, our water business declined, particularly in the developed markets,” Nestlé CFO François-Xavier Roger told investors in October when presenting the company’s 2017 nine-month progress report. “We faced difficult comparables and also poor weather, which has impacted demand in both North America and Western Europe. Competition remained intense with sustained deflationary pricing pressure across several developed markets.”
As this happens, Americans grow less interested in sugary beverages and more interested in water. The journal Obesity recently published research showing that between 2003 and 2014, consumption of sugar-sweetened beverages fell among both adults and children at the same time that the study’s researchers found a significant increase in water consumption.
IRI’s data shows that premium brands Fiji and Evian both had sales increases around the 20% mark, with Fiji sales growing 23.6%, Evian sales increasing 19.6% and the two companies pulling in nearly 5% of total dollar share in the category.
As value water brands are facing difficulty, premium is booming, and companies are looking to get their piece of the 7% not occupied by the 20 top brands and the 5% occupied by the biggest premium companies. They’re doing this while innovating both through marketing that looks to target consumers interested in storytelling and — in the case of one company — the basic premise of the bottle.
In the premium category, much of what drives consumer interest comes down to where water is sourced from — in the case of both Fiji and Evian, the source is in the name. Essentia is looking to differentiate itself not based on its sourcing, but on the process by which it creates high-alkaline water. The Bothell, Wash.-based company uses a three-step process, through which it infuses electricity in the water to create alkaline water with a pH of 9.5 or higher, according to Essentia’s vice president of marketing Karyn Abrahamson.
“When competing in this kind of category — which is very competitive — you have to start with having a great product first,” Abrahamson said. “And we’re very proud of the product because of how we create it, the process we put it through and what the end result is in terms of the product experience and benefits — better rehydration.”
Essentia conducted a study, published in the December 2016 edition of the Journal of the International Society of Sports Nutrition, on the rehydration effects of its water. The study found that Essentia’s water showed a statistically significant better ability to bring a patient’s blood viscosity to above baseline level 120 minutes after exercise.
“At the end of the day, people want to drink water that does something for them physically and emotionally, and this water happens to be better at hydrating,” Abrahamson said. The physical benefits of the water, along with the need to connect emotionally with consumers, were the impetus behind the brand’s recent redesign and rebranding effort on its packaging and multi-pack designs, she added. The black-and-red packaging showcases a newly-designed logo with the company’s manifesto and new tagline.
“Our new tagline is ‘Overachieving H20’ because this water has functional benefits that do something meaningful for people,” Abrahamson said. “The people that we’re trying to have a relationship with — millennials ages 18-to-34 years old — is that they’re overachievers in their own right and they lead an overachieving lifestyle. Our mission is to help people be the best version of themselves — better hydration helps people do what it is they love, but do it more or better.”
The idea of connecting with consumers is key these days, particularly among younger consumers, who increasingly are looking for brands to not only deliver on product promises, but on the emotional level that Abrahamson discusses by tapping into their ethos. It is with this understanding that Grand Rapids, Mich.-based Boxed Water hit the market with in 2009, upending a fundamental part of the bottled water category — the bottle itself — and making a message of sustainability central to its brand identity and offering.
“All the other companies are looking at what’s inside the bottle; we’re looking not only at the package but at the whole life cycle of plastic,” Boxed Water chief marketing officer Rob Koenen said. “Different types of water are going to come and go. Right now high pH is very popular, a few years ago it was electrolyte water, and a few years from now it’s going to be something else. What’s not going away is the need to help our planet and the problems that are going on with plastic, and it’s only accelerating.”
The company’s boxes are 74% paper that it says come from forests that are constantly replanted in an effort to offset its carbon footprint. The company — which got its start in coffee shops and local stores — also has a social media campaign through which it plants two trees for every photo consumers post on social media featuring its product with the hashtag #ReTree. Koenen said the company has planted more than 600,000 trees as a result.
Boxed is now moving beyond specialty retailers and into grocery, mass and drug channels. Koenen noted that its products, already in one division of a national drug chain’s stores, would soon be hitting 16 more. He said that drug stores and college bookstores — which he noted tend to be frequented more by millennial consumers — are where the company sees the most growth, especially when its merchandising units that explain the company’s driving cause are displayed.
“Where we have the story, where consumers know what our story is and what we’re reaching for, we have three times the sell through — and it’s even more in drug stores and college book stores,” he said. “Millennials, they dig deep to find the whole story, that’s why they’re buying into the entire promise of who we are, not just that we’re selling a box versus a bottle.”
In terms of the space Essentia and Boxed Water occupy in the category, while Abrahamson describes Essentia as a “super premium” product, Koenen classifies his as “commercial plus.” But both are tapping into a tool used by premium brands — the lifestyle that accompanies the product — and hovering near their price points.
“It’s high design with an environmental consciousness,” Koenen said. “So think of all the people you know … who appreciate and are looking for design in their life to fulfill that need — our packaging and our lifestyle of cool, young and hip fulfill that need.”
Abrahamson, whose background is in rebuilding brands — most recently Microsoft — said that the connections Essentia builds drive loyalty among consumers.
“Once people find out about Essentia and try it, they stay incredibly loyal to Essentia,” she said. “On top of that, we’ve got people who don’t just want water — they want water that has functional benefits for them, and they’re willing to pay the money for that.”
Pet project: Owners will spend on food, products and services
A recent article published in the Whole Dog Journal included a number of therapeutic ways people can address their pets’ arthritis pain relief needs, including a lengthy discussion on laser and red light therapies. A few years ago, a similar article would have likely focused on prescription-based solutions, but now the conversation often centers on alternative methods for caring for our pets.
It is clear from articles such as these and others that pet owners are willing to go through many lengths to ensure their four-legged family members receive the best food and care throughout their lives.
It is estimated that $69.4 billion will be spent on pets in the United States this year. The lion’s share — some $29.7 billion — will be spent on food, while pet owners will shell out $15.9 billion on supplies and OTC medicines — which constitute the third-largest spending area for pet owners. Vet care is pet owners’ second-largest spending area and is set to reach an estimated $16.6 billion this year.
One of the biggest jumps in spending is on such pet-related services as grooming, boarding, training, pet sitting, pet exercise and pet walking.
In fact, the American Pet Products Association, or APPA, says the sector has been averaging $2.5 billion in growth each year since 1994. Underlying this is the larger trend in keeping pets healthier longer.
“We are so committed to our pets that for many people keeping them as healthy as possible is a top priority,” said Bob Vetere, president and CEO of the Stamford, Conn.-based APPA. “People are willing to spend more on food, products and services that they feel make a difference in their pet’s quality of life.”
It’s not that people have tons of extra money to spend, but as Vetere points out, more and more pet owners are willing to cut back on things that don’t mean as much to them in order to have the money to spend on things that make them feel good, including their pets. This is a trend Vetere expects to continue for some time.
Other category experts concur with Vetere, noting that all signs point toward 2018 being another stellar year for the pet category.
The category is in great shape and the outlook appears positive for the foreseeable future, according to Paul Cooke, vice president of trade and industry development at St. Louis-based Nestlé Purina PetCare.
“Pet care isn’t just ranked eighth out of 305 supermarket categories by IRI, it’s also growing two times that of the overall center store, according to Nielsen Scantrack data,” Cooke said, adding that the value of pet care goes well beyond just category dollars. “Pet care also has the potential to boost total store traffic, triggering more trips than any other category, according to a Nielsen shopper study.”
The renewed interest in products that promote and support health and wellness, as well those focusing on meeting pets’ specific nutritional needs with natural ingredients, are driving sales, Cooke said. As a result, he anticipates the natural products will play a large role in future category growth.
Among the categories whose growth is being driven by natural and eco-friendly products is cat litter, according to Jean Broders, senior brand manager at Kent Pet Group, based in Muscatine, Iowa. Broders noted that the top two features cat owners require are odor control and ease of use, but a growing number are looking for options for shoppers conscious of their ingredients and impact on the environment.
“[More than] 8 billion lbs. of litter end up in landfills each year, and this alone is driving consumers to look for products that are better for the planet,” she said, adding that health-monitoring litters that can help cat owners detect problems early also are a growing subset in the category. “Problem-solution products are a key focus for consumers across all categories, including cat litter.”
Given the mature status of the cat litter category, officials at Kent Pet Group said future growth is directly tied to any increases in the number of cat-owning households. Citing figures from Packaged Facts, Broders noted one-third of cat litter sales occur through mass-market channels (32%); 26% in supermarkets; 8% at wholesale clubs; 27% in pet specialty and 4% online.
Broders advised that retailers who are looking to grow share make sure they carry litters that go beyond traditional clay litters, as millennial consumers are interested in products that are environmentally friendly and healthy for their homes. Broders noted that at Kent Pet Group, the focus is on listening to their consumers’ needs and making sure their products address those needs while working to improve the relationship between the cat and its owner.
“Keeping in mind no one likes cleaning the litter box, we focus on litters that make it a quick and easy process, so owners can spend more time doing things they actually enjoy,” Broders said.
Where owners go, pets follow
One explanation for the strong growth seen in the pet category is the number of retailers moving away from sourcing their own products to focusing on brands that consumers recognize. Just because an item may be an impulse buy doesn’t mean consumers will give their pets just any old treat or toy, said Leslie Yellin, executive vice president at Moonachie, N.J.-based Multipet International. In fact, she noted, it is just the opposite, and discerning is the name of the game. “Consumers actually are more discriminating when it comes to products for their pets than they are for themselves,” Yellin said.
Therefore, given the emphasis on health, she suggested retailers concentrate on offering treats, food and toys that offer interaction and exercise. “Given that most of the traffic in the pet aisle is for food and litter, having branded products on the shelf creates trust and sends customers the message that the retailer has top-of-the line, on-trend products,” Yellin said.
Pet owners are among the group of shoppers who will go to whichever selling the products they desire. And research shows that often, their shopping is split among several retail channels, both physical and online. Mass retailers may have the foot traffic, but as Vetere points out not all are leveraging that asset as best as they can.
“Retailers need to listen to their shoppers more and offer a better selection of authentic products that align with their lifestyle choices versus giving them those you think they need,” he said. “Pet owners spending the most often are not enticed to go down the pet aisle because not enough of the products appeal to them.”
Developing the right assortment doesn’t have to be a mystery. For retailers operating drug, mass or grocery stores, Vetere said the answer to what pet products should be carried can be found right in the store, noting that sales of people-oriented products will often track with pet-related products.
Recognizing the need to play to the masses, experts said there also is room to cater to a smaller but growing segment of pet owners — those who follow a natural, organic and/or grain-free regimen with both food and treats. Some have suggested placing a set-within-a-set in the pet aisle to specifically appeal to this group. But category mainstay Purina’s latest efforts suggest an interest in bringing potentially niche consumer demands mainstream with a focus on nutrition and ingredients.
Officials at Purina said their ingredient- and nutrition-focused approach centers on creating food that nourishes the whole pet — from giving pets energy to chase a ball or conquer a feather to providing pets with cutting-edge nutrition that helps support their quality of life.
“The bonds we have with our pets nourish their lives, as well as our own — that’s why we’re always working hard to push pet nutrition forward,” Purina’s Cooke said. “We don’t study ingredients in a vacuum. We think the best ingredients are ones that aren’t just good solo players, but excellent team players, as well.”
With a team of more than 400 scientists that includes veterinary nutritionists, Purina conducts extensive, noninvasive studies to see how its formulas affect pets when they eat it, as well as further in the future, Cooke said. As a result, the company has found that a smarter nutrient blend is going to be more digestible and effective for a pet than a single ingredient.
“That’s why we don’t formulate our pet food on an ingredient by ingredient basis, but instead measure how different formulations affect a pet’s overall health,” Cooke said.
With this in mind, Purina has been busy introducing a host of on-trend products this year, including Purina Beneful Grain Free Dog Food, Purina ONE SmartBlend True Instinct, Beggin’ Strips Black Label,Beggin’ Skinny Strips, Purina Beneful Break-N-Bites, Purina Beyond Natural Grain Free Cat Snacks and New Beyond Natural Grain Free Cat Snacks that feature real poultry or fish as the No. 1 ingredient.
In noting the growing importance of natural and organic pet products growing importance, Vetere said for the past several years, the number of natural and organic pet product companies exhibiting at the APPA show has doubled each year.
“When we look at the trends such as buy local, transparency and free-form, it is logical to predict these trends will migrate to pet food and treats,” Vetere said. He suggested retailers use in-store sales to gauge what is important to consumers and apply that same metric to the pet aisle. “Retailers who tap into this do a heck of a lot better than those who don’t.”
My/Mo Mochi Ice Cream debuts products containing Mochi Bits
My/Mo Mochi Ice Cream, created with ice cream and traditional sweet rice mocha dough, has launched a new product to their collection. The new ice cream with mochi bits contains mocha dough nestled within ice cream.
Since launching in 2017, the Los Angeles-based company has expanded distribution to more than 6,000 retail locations across the nation. Most of the brand’s products can be found in the freezer aisle, with the exception of the My/Mo Mochi Ice Cream Mochi Bars, which are located in the bakery section.
"After the overwhelmingly positive response to My/Mo Mochi Ice Cream, we are excited to expand our offerings with the launch of My/Mo Ice Cream with Mochi Bits," shares Russell Barnett, the company's CMO, said "As our brand's vision is to bring the snackability of mochi ice cream to the masses, this was a natural progression and delivers another way for consumers to chew their ice cream."
New My/Mo Ice Cream with Mochi Bits will be gluten-free and come in five flavors: strawberry, mango, green tea, chocolate and salted caramel. The line is expected to hit retail stores in early 2018.