Coke Enters North American Bottled Water Market With 'Dasani'

Soft drink titan Coca-Cola Co. said Friday it will launch its first bottled water brand in North America in a move to compete head-to-head with rival PepsiCo Inc. for control of the fastest growing segment in the U.S. beverage market. Coke, whose chief executive said in January that the company was studying a major entry into the $4 billion bottled water market, will launch its new Dasani brand in the first half of this year.

Dasani is a purified, non-carbonated water with minerals. The beverage will line up against PepsiCo's Aquafina, which is currently the top seller in the United States. Internationally, Coke markets a bottled water brand, BonAqua, in about 35 countries. Dasani will be the seventh brand the Coca-Cola Co. has added to its portfolio in the United States over the past five years.

According to Michael Bellas, chairman of Beverage Marketing Corp., a New York-based beverage industry research and consulting firm, the bottle water category grew 10.1% last year, making it the fastest growing segment in the U.S. beverage market. "So there is a huge market for growth in a business that saw production shortages last year," commented Bellas.

Coca-Cola officials said the company was being pressured by bottlers who were carrying competing products to come up with a Coke brand that they could sell. "Many of our bottlers have felt that consumers in their territory wanted a bottled water brand, and we did not have one," said Scott Jacobson, a spokesman for Coke. "Bottlers can more fully leverage the growth in bottled water category if the brand they carry is a Coca-Cola brand so they can take advantage of synergies within the Coke system."

Bellas said Coca-Cola should see immediate financial benefits from its move into the mineral water arena. "They should show a profit from this in the first year," Bellas projected, adding that Coke was not saying how much it would invest in the business.

Coke's bottled water business will work like its soft drinks business in that Coke will supply Dasani mineral packets, just as it supplies soda concentrate, to bottlers who will add water and distribute to stores. The new product will feature blue packaging and "Dasani" printed in white across the bottle. It will be sold in 20-oz PET bottles (single-serve and multipacks of six) as well as 1-L and 1.5-L sizes.

As for rival Pepsi and its grip on the domestic market, it is too early to tell who will emerge a winner in the new bottled water battle between the two cola giants because of the growth potential, according to Bellas. "There is so much opportunity that its hard to say if it will hurt Pepsi," Bellas said. "Coke's move will help evolve and develop the segment and expand the market with Coke's power behind their distribution network."

Bellas said Coke would direct its marketing toward immediate consumption channels, such as vending machines, smaller convenient stores and gas stations. The immediate consumption segment is the fastest growing segment of the bottled water business with a 40% growth rate, according to Bellas. Coke will then enter larger stores with the new bottled water product, however it likely will not move quickly into supermarkets, where aggressive pricing is the key to strong sales, Bellas said.