what happened to vitaminwater?

vw+vw0 canada line-up courtesy of @vitaminwater_bc

Since the explosion of vitaminwater on to the beverage scene years ago, momentum appears to have subsided for the brand and enhanced waters.  It seems that a variety of market conditions has reduced excitement for vitaminwater to just another product on the shelf.  There are certainly more reasons behind the brand’s continued decline, but BevWire will detail three major contributing market conditions.  

Market Condition #1 – vitaminwater has benefited and been obstructed by being a part of Coca-Cola’s beverage family.  As highlighted briefly in an earlier post about Zevia, vitaminwater saw immense benefits from the Coca-Cola acquisition.  The enhanced water brand entered a broader distribution network that vastly improved the brand’s availability.  At the same time, their initial marketing strategy was to be driven by “consumer demand”, relying on key influencers to spread word for the product.  This type of demand ensured that consumers and retailers were willing to pay a premium, and made discounting less unnecessary.  However, as Pepsi’s Aquafina Plus (in Canada) and SoBe Lifewater (in the U.S.) kept on promoting at enormous discounts, vitaminwater was compelled to react.  Without their premium positioning, vitaminwater became just another brand in Coca-Cola’s portfolio that had to fight for promotional dollars.  And with Coca-Cola focused on growing its sparkling business of Red (Coca-Cola),  Silver (Diet Coke), and Black (Coke Zero), a host of beverage brands lost promotional funding.  After initial success in the Canadian market from 2007 to roughly 2010, the vitaminwater has slowly lost market visibility as advertising support shifted more to other Coca-Cola properties.

Evolution Fresh - courtesy of drinks-business-review.comMarket Condition #2 – shifting consumer trends and preferences, highlighted by more juice, tea and energy drink entrants.  Since 2010, we have seen more product releases coming out from the juice, energy drink and ready-to-drink tea segments.  Starbucks was a strong force that expedited this trend.  Their acquisitions of Evolution Fresh and Teavana, along with their Starbucks Refreshers product launch gave them greater market coverage and allowed them to capitalize on the consumer trends.  In energy, the big three of Red Bull, Rockstar, and Monster all had product innovations enter the marketplace.  And also some negative media attention that led to consumers increasingly purchase these products to find out what whether all the extra attention was merited.  With consumers increasingly empahsizing health benefits – and vitaminwater also paying attention to this with their vitaminwater zero production introduction – the natural benefits of juice and tea became top of mind.  Because vitaminwater was relatively less healthy than these other products in the emerging segments, consumers shifted their purchase dollars from enhanced waters to juices, teas, and energy drinks.

 

via forum.smartcanucks.ca – just one of many Aquafina Plus coupons. This one is a fairly reasonable 33% discount.

Market Condition #3 – retailers react to new reality of people’s purchase habits.  Following the economic recession (that some still think we’re in), many Canadians buying behavior has focused more intensively on price.  That is not to say that they are not willing to pay more, but the value-benefit equation is more influential of their purchase decision.  Retailers have long pressured manufacturers for price concessions and finally Coca-Cola gave in to price promotions on vitaminwater in 2010 – around the time its descent began.  What happened next was more price cutting by its competitors to maintain their own sales – Aquafina Plus discounts became much deeper than before.  Ultimately this leads to the current situation, which is reduced segment value.  Since vitaminwater is no longer the premium brand that it once was, retail support started to transfer to other segments.  Shelf space for vitaminwater was compromised, and sku rationalization also start to slowly creep in.

While these three conditions do not represent the entirety of why vitaminwater is losing steam, it summarizes what is happening.  There are both internal and external contributors.  However, all hope shouldn’t be lost on the segment itself.  More competitors will look to redefine the value equation because the market leader is down.  Bottled water sales itself is on the incline.  And other vitamin beverages like Karma, Activate, and even Rockstar Energy Waters look to carve out their own niche in the marketplace.  Liquid enhancers such as Dasani Drops, Kraft MiO, Crystal Light Liquid are also seeing sales gains too.

Just wait to see how vitaminwater will react to the competitive pressure and what they might do to revive the one-time darling of the beverage industry.

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Rockstar Energy To Launch Energy Waters

courtesy of Beverage Digest's Twitter feed - October 9, 2012

At the National Association of Convenience Stores (NACS) show earlier in October, Rockstar Energy revealed that they plan on launching a line of energy water.  While the timeline has not be revealed, the initial assortment listed on the sell sheet image include the following flavors:  Tropical Citrus, Blueberry Pomegranate Acai, Orange Tangerine.  BevNet has some more information and a quick video on Rockstar Energy’s new products from the show (link here).

This launch from Rockstar Energy pits them against Coca-Cola’s glaceau vitaminwater lineup, and PepsiCo’s SoBe Lifewater and Aquafina Plus lineups.  The question becomes how Rockstar Energy can differentiate themselves against these already established brands.  Despite their positioning as “energy water”, it will be difficult for them to be considered a dissimilar product from flavored water.  It is still an enhanced water beverage and may very well be shelved alongside Aquafina Plus or SoBe Lifewater (Rockstar Energy products are distributed by Pepsi).  And since consumers already have certain expectations for the price point, the new energy waters will have to be priced in a similar range.  There really isn’t that much room for differentiation given what we already know.

So with Product, Place, and Price (the 4 P’s of the Marketing Mix) already determined and largely out of their control, Promotion is the remaining lever Rockstar Energy can use to stand out.  Even then it is still a uphill battle.  In Canada, Aquafina Plus has constantly been on price promotions, to the point where there’s also expectations for feature price points.  In the U.S., many retailers had ran similar promotions but also drove unit sales with a “$10 for 10” feature strategy.  How can Rockstar’s Energy Water stand out?  Featuring on price – especially for a new entrant – will only upset the market dynamics and reduce profitability.

Rockstar Energy Water Lineup

One option may be co-promoting with their energy drinks, which has an established presence that is much stronger than that of Amped, Nos or Full Throttle (possibly only Amped and Nos in the future, read about Full Throttle’s de-emphasis here).  Leveraging on their stronger identity in energy drinks, they can offer consumers an alternative or additional Rockstar beverage when they are in-store.  Enhanced waters also do not carry the negative stigma that energy drinks have, so transitioning the “energy” equity from energy drinks to energy water may be a tactic to completely re-position themselves.

Another option would be to fully leverage their entertainment and sponsorship properties to feature this new product – in tandem with their energy drinks.  Offering samples of their energy water at their music and sporting events will increase their exposure to a captive audience.  Especially when their competitive products (vitaminwater, lifewater, aquafina plus) are shut out from these venues.  Especially when they offer a differentiated product than Red Bull and Monster Energy, should it be a multi-sponsor event.

While this is a very unique expansion from Rockstar Energy haloing off their “energy” brand association, it will be interesting to see how it can defend against the pressures of larger and more established brands.  This impending product launch has a chance to succeed, but only if they can carve out their own niche against glaceau, SoBe, and Aquafina Plus.

Will Sobe Lifewater Come to Canada?

courtesy of thedieline.comIn the past, BevWire has blogged about glaceau’s vitaminwater leading the Canadian enhanced water beverage category, but what about Sobe Lifewater?  The current enhanced water category really only has two players right now, Coca-Cola’s glaceau vitaminwater, and Pepsi’s Aquafina Plus.  Vitaminwater has pretty much dominated the market landscape with more than 50% market share, stealing Aquafina Plus’ market share hand over hand.  What if Pepsi were to launch Sobe Lifewater into Canada?  Would that combat the market share decline for Pepsi in this category?  In the United States, while vitaminwater is the leader, Sobe Lifewater is a strong second.

In Canada, Aquafina Plus has done everything it can to try and appear like a strong second compared to vitaminwater.  They have made a bottle adjustment to provide easier grip (and also copy the Sobe Lifewater bottle shape).  They have changed the packaging copy to show more focus on the vitamins.  They have changed and enhanced the formula to include natural sweeteners and lower the calorie content (Aquafina Plus10).  Aquafina Plus has also gone to price reductions such as Buy One Get One offers to give consumers incentives to buy their product over glaceau vitaminwater.  However, these actions have only really led to a temporary increase in sales and market share.  Most of all, when the product is on a price reduction consumers that are price sensitive will choose Aquafina Plus and when the price rises again they will choose something else.

The Sobe brand itself has morphed a lot from when it was first introduced on the market as a ready-to-drink tea beverage.  It has also become an energy drink and an enhanced water.  The Canadian marketplace’s strongest brand association is tea, but even then Sobe had to re-brand itself.  Sobe has to revive the tea offerings through re-packaging from glass bottles to plastic bottles.  This indicates that even though Sobe’s strongest association in Canada is with tea, they are not the leader in this category (having to revive the brand and change the packaging).  Therefore, this may be the perfect time to introduce the Lifewater series and provide a stronger competitor against vitaminwater than Aquafina Plus.  And seeing Sobe Lifewater’s strength in the United States, Pepsi should strongly consider introducing this enhanced water beverage into Canada as well.

Canada’s Enhanced Water Category in 2010

As of November 2009, the Canadian enhanced water beverage market was around $50 million dollars, and nearly half of that was Glaceau Vitaminwater sales.  Aquafina Plus controlled about 35%, and the remaining percentages was divided between Aquafina Flavor Splash, Dasani Essentials, Nestle Pure Life flavors, and the private label brands.

Some notable brand’s disappearing in 2010 include Dasani Flavors and Propel, with Dasani Essentials possibly being discontinued as well.  Not that it’s a surprise, but the overall number of players in this category are mainly Glaceau Vitaminwater and Aquafina Plus.  And Glaceau Vitaminwater has been gaining market share consistently since their release – while the enhanced water category itself grew nearly $20 million dollars, Glaceau Vitaminwater increased by close to $25 million dollars.  Not only is Glaceau Vitaminwater growing this category, they are taking it away from its competitors.  As a result, both Aquafina and Nestle have resorted to compete through pricing promotions, trying to limit their losses and temporary maintain their market share.  In the end however, both Aquafina and Nestle may be perceived as inferior brands because  of this.  They will be selling more product but still make less money, and consumers will still choose Glaceau Vitaminwater because it’s the “premier” brand of enhanced water.

So as we go forward into 2010 (actually when BevWire posts this it will already be 2010), what will happen to the enhanced water category?  BevWire sees the market stabilizing and continued growth, albeit at a slower rate.  Barring any major player coming in the landscape won’t change too much.  Sobe Lifewater does not have an expansion plans into Canada yet (maybe PepsiCo will run Sobe Lifewater and Aquafina Plus in the US, and just Aquafina Plus in Canada) so they aren’t a major factor.  Smartwater is still slowly being launched and promoted across Canada, and they are still not listed at a majority of retail chains which limits their market impact.

Any one want to venture a guess of what might happen to this category in 2010?