There is a shift happening in homes across the United States and some of the biggest corporations in the world are taking notice. In 2016; bottled water sales overtook sales of soda and the trend never looked back.
Research and consulting firm Beverage Marketing Corp. said Americans drank an average of 39.3 gallons of bottled water in 2016, and 38.5 gallons of carbonated soft drinks.
Rising bottled water sales has impacted soda, as consumption in the U.S. has fallen every year over the last decade to reach a 30-year low. Major players from Coke, Pepsi, to the Dr. Pepper Snapple Group have been acquiring businesses in a global market valued around $170 billion (USD) to chase consumer preferences and protect market share.
Beyond consumer desires to drink healthier beverages, some big factors driving bottled water growth are flavour and functional claims, as part of a wider movement toward meeting consumer preferences.
These consumers don’t want just bottled water, they want premium bottled water. Let’s take a deeper dive.
Infographic images via Visual Capitalist. To see it in its entirety, click here.
At the forefront of this shift in consumer taste is a growing sub-sector of the rising water industry - enhanced water, led by the unique product created by The Alkaline Water Company Inc.(TSXV:WTER, OTCQB:WTER, Forum). This American Company has been around for the past five years and developed its own electrolysis process that produces alkaline water for the beverage retail market. Its premier product is Alkaline88 - drinking water with an 8.8+ pH that is enhanced through a proprietary state-of-the art system with Himalayan Salts and electrolytes, but not given any chemicals.
Within the growing bottled water industry lives the enhanced water category, made distinct by its desired traits and additives, like alkalinity or vitamins. Alkaline water is less acidic than tap water and enhanced by compounds including: calcium, silica, potassium, magnesium, and bicarbonate. The Alkaline Water Co. is a leader in this space, nearly doubling its business year-over-year for four years straight.
2018 has seenrecord sales for the Company, out pacing the growth of the greater bottled water sector. The Company is forecasting sales of $40 million (USD) in 2018-19, adding a value that would double the $19.8 million in revenues it turned in in 2017-18. Since logging $3.7 million in 2015, Alkaline has been trending upward every year with growth averaging 435% over that time.
Alkaline’s growth comes as the S&P 500 trades at all-time highs, this sector trend is still under the radar of many investors, but for how long, remains to be seen.
18 years of declining soda sales, combined with government taxes on sugar drinks, are just some of the deciding factors that led the two leading soda giants to enter into the bottled water business. Coke has Dasani in its portfolio and Aquafina is owned by Pepsi.
WTER has placed Alkaline88 in 60% of the top 75 U.S retailers and distributors, as ranked by Supermarket News. Those retailers include such household names as Kroger, Albertsons, Publix, Whole Foods, and 7-Eleven.
It was through an efficient distribution system that Alkaline Water made these massive connections, leading to rapid growth. Six key co-packing facilities were established across the U.S. to bolster its national expansion campaign thanks to a combined $72 million in production capabilities as well as being located within 600 miles of 95% of the U.S. population.
These co-packers use the Company’s electrolysis process as they bottle Alkaline’s water and ship it across the U.S.
Even famous martial artist and actor Chuck Norris recently got into the bottled water business and teamed up with Alkaline through a co-packing agreement through his CForce Bottling business in Texas.
The Company stated in a news release at the time that this Texas facility opens up an ideal opportunity to distribute Alkaline88 across the region.
“This access to increased capacity comes at the perfect time as we gain more shelf space locally and continue to build our loyal and health conscious consumer base across the nation. It has been extremely gratifying to work with such consummate professionals as Gena and Chuck Norris along with their topnotch team of professionals as we look forward to a mutually beneficial future ahead.”
Another reason the Company has been achieving growth is its unique strategy to move to the larger 3L size format. While many retailers are selling smaller bottles that consumers can carry around easily, Alkaline’s larger bottles have become a popular choice on store shelves of Whole Foods and Safeway. This massive network has the potential to hit 40,000 retail outlets in all 50 states yet hasn’t even reached its zenith.
In fact, niche products were one of the drivers of this boost in bottled water’s business. A report from the Beverage Marketing Corporation found that the entire liquid refreshment beverage market exceeded $180 billion in 2017 and value-added water also saw double-digit growth rates in both volume (+11.7%) and retail dollars (+10%) last year.
Meanwhile, major soda companies have been adjusting to this by shifting toward a healthier portfolio making a wide number of acquisitions in the past decade.
Infographic images via Visual Capitalist. To see it in its entirety, click here.
Coke has tried to stem this blood flow of falling sales through a massive acquisition spree, acquiring hundreds of brands for its portfolio. Its most valuable acquisition was $4.1 billion for Glaceau’s vitamin water, taking the junior water company’s annual sales of $350 million to more than $1 billion through the power of its marketing team. Alkaline executed a similar tactic as Coke’s trademark on the word “vitamin” to maximize brand awareness in the sector, by trademarking the word “alkaline” to add value to its name by making it the only bottled water company with reference to alkaline water in its name, an huge advantage in a competitive consumer beverage market. This brand identity strategy looks to be paying off for the Company,
Since August 2017; Aaron Keay has served as the Company’s Chairman of the Board. He comes to the role with a robust resume, including ABcann Global Corporation, where as CEO, he positioned that company within capital markets, raising more than $130 million. Now he is doing the same for Alkaline to take the Company to new heights in the U.S and Canada.
“The bottled water sector is growing at an unprecedented rate, and the Alkaline Water Company growth has proven its ability to outpace even this sector. We are focused on continuing our rapid growth by maximizing our national retail footprint through continued product innovation and our focus on operational excellence.”
In a Q&A recently published on Stockhouse, Aaron Keay noted that unlike the state-by-state regulations that cannabis companies must navigate, the Alkaline Water Co. can launch its products nationally.
“With our co-packing network, national production footprint and broker network, it’s definitely something we are analyzing carefully because we would be so far ahead due to our years of experience creating a national brand already. We are not there yet, but we are evaluating the space.”
Aaron Keary also touched on the possibility of Alkaline Water partnering with an industry giant for strategic growth, to which he stated:
“Ultimately, we want our brand to be global at some stage, and we have a great dialogue with some of the biggest beverage companies in the world. The synergies need to make sense and we need to return value to our shareholders. If it’s meant to happen, we will focus on shareholder value to provide that return. Until then we are dedicated to driving the existing Alkaline88 product line forward and remain the innovative company our consumers and shareholders have come to expect.”
The Company is continuing to build momentum through its recently-completed non-brokered private placement to raise $3.8 million (USD) through 5.1 million units of the Company.
Alkaline President and CEO Richard Wright explained to investors through a statement that the proceeds of this financing are expected to be used to expand its production capacity and general working capital to increase its production footprint across the United States.
“With the two new national-retailers already online, a full pipeline of additional new grocery chains coming on later this summer, and the 50% organic growth continuing, we expect to see our fiscal 2019 sales double to nearly $40,000,000. This increase in capital will also allow us to bring on a number of new co-packers, suppliers, and personnel to ensure we can support our rapid growth throughout FY19.”
Source: Business Research Company.
Global demand for bottled water hasn’t even plateaued yet, as projections of $350 billion by 2021 still loom on the horizon, followed by 9% yearly growth. The Alkaline Water Company is ideally positioned in the right place at the right time to be a distinct name in this space. Investors will want to follow the wave set out by the Company as it flows into the future.
www.thealkalinewaterco.com
FULL DISCLOSURE: The Alkaline Water Company Inc. is a paid client of Stockhouse Publishing.