With an increasing number of consumers hitting the bottle in
favor of drinking from the tap, bottled water brands are bubbling to the
surface by, well, by the truckload. For retailers, the challenge lies in finding
the shelf space for it all.
Part of the problem is that not all of the $11 billion in bottled water
sold in the U.S. last year is made – or marketed – equally. But that confusion
also provides retailers with the opportunity to stock value, mid-range
and premium brands. Especially when it comes to value-priced purified
water, consumers – especially those who are in the habit of buying cases of
the stuff, and who have driven the massive growth of the category – aren’t
so much brand-loyal as price-loyal. When you get into the higher-end
spring and artesian waters, as well as imports, the stocking equation becomes
even more complicated – but it can also be an advantage.
Eric Skae, managing director of Iceland Spring in Orangeburg, New
York, observes that an increasingly health-conscious America is interested
in what, exactly, goes into its water. “More and more people are interested
in premium water; water from a source that they know is pristine, pure,
untouched,” he said, adding that his company receives regular calls inquiring
about mineral content and pH levels.
Skae believes that it’s up to the water brands to convey this information
to the consumer. “We have put together brochures about our water
that can be laid out next to the water so that people can read about
pH, mineral content, and so on,” he explained. “I think it’s the brand
owner’s responsibility to do that. If the brand owner does a good job
of that, it will help the retailer.”
Jackie Fox, director of sales at the Clearly Canadian Beverage Corporation
in Vancouver, British Columbia, emphasizes that retailers must
really know their customers in order to determine how much of each subcategory
to stock. “The biggest challenge by far would be interpreting
what role each different offering plays,” she said, noting that while some
consumers may purchase based on price, others buy for flavor, mineral
content, or how the water is distilled. The key, she says, is identifying the
current consumer need that is not currently being met.
Charlie Moro, president and founder of CFS Consulting, LLC in
White Plains, New York, observes that the biggest issue facing retailers is
building a sound variety around the private label brand that many stores
offer, rather than looking to one of the big brands like Dasani, Aquafina
or the Nestle Waters of North America labels. Some opt to complement their private labels with waters from around the world, for example,
while others stock premium products. “Most of them have tried to make
a brand statement in terms of their private label, but there is this whole
other plethora of brands, waters from different countries and flavored waters
that they need to incorporate,” he said. “The struggle has been how to
pick those particular players.”
The problem, Moro says, is when retailers stock too much of the same
thing. “It’s one thing to have flavored waters for the sake of argument, but
what you wind up seeing sometimes is four or five lines of the same thing,”
he said. “Everyone has a lemon-flavored water; but you could use the space
for a sparkling water, a European brand, or a premium brand.”
Like Moro, Fox cautions against stocking too many similar SKU’s, since
in doing this, retailers run the risk of like-entries cannibalizing current
sales. “New ‘options’ will hopefully convert
other beverage consumers as well as increase
the bottles purchased by current water users,”
she said. However, this variety can trip
up retailers: there are a number of unproven
brands out there that have yet to build trust
with the consumer base. “Retailers must be
confident that there will be a strong launch
plan to support these new brands.”
Too many SKU’s can also result in items
becoming quickly out of stock. “Some retailers
have a problem keeping things in stock
because they have too many SKU’s,” said Tom
Hipwell, at Nestle Waters North America
in Greenwich, Connecticut. “They haven’t
managed their assortment down so that
they have proper shelf space on the products
they are carrying, or the products that are selling
with high velocity.”
Nor should the retailer attempt to be everything
to everyone; because space is limited,
stores must first determine how much real estate the category deserves,
and then revert to its banner strategy to decide what brands to feature.
“You need to evaluate the turn-rate of each product, growth potential
of each sub-category and potential adjacencies that may not be experiencing
strong growth,” Fox advised.
So, is there a magic number of brands that retailers should stock?
Not really, since it all depends on your strategy, and what type of clientele
you are targeting.
Fox believes that each brand should be regarded as a separate entity.
“A large company with multiple brands may be able to provide flashy programs,
free coolers and various display vehicles, but that doesn’t necessarily
mean that all of their SKU’s deserve real estate in store,” she said. At
the same time, one large company may, in fact, be able to satisfy many
consumer requirements. “Once the retailer develops a strategy and puts
benchmarks in place for what is on their shelves, the consumer will quickly
decide whether a certain offering will have longevity in store.”
Smaller brands that fall under the same large umbrella should also be
treated separately, Moro says, likening the water category to the cereal
section. “If Kellogg’s comes out with five more line extensions of Rice
Krispies, they all need to stand on their own and bring some additional
value,” he said. Similarly, if a bottled water manufacturer that releases four
different sizes of the same bottle – a sport bottle, for example – retailers
should choose one size, and call it a day. “At some point in time, you’ve got
to say, ‘stop. I understand you have this, and I understand it’s good, but I
can’t have six more varieties of the same thing.’”
Grace Jeon, vice president of marketing at artesian water manufacturer
Fiji Water in Los Angeles, California, suggests that value brands be kept
to a minimum – an idea which would certainly benefit her own fastcharging
brand, which has sworn to be the top-selling premium water
before the end of the year.
“You would certainly provide more space for those brands, but you don’t
need 10 different brands within each of those [value] segments, because at
the end of the day, consumers are compelled
to purchase based on price,” she said. Featuring
several premium brands – including the
consumer education material that many of
these companies supply – offers the retailer
the chance to trade up those consumers who
don’t necessarily look at price first.
Retailers employ a number of merchandising
strategies for water – again, depending
on store layout and how their customers
make their purchasing decisions. Fox suggests
positioning enhanced water on one side of
the display, and unflavored on the other,
separating the products further based on
brand, size and price. Seasonality, too, plays a
significant role: water sales increase, obviously,
during warmer months. Fox says that
retailers can cash in on this by making water
more available in racks, cooler barrels,
case displays and pallets.
Deep-well sets or case packs – the packages
of 24 half-liter bottles – have also proved successful when retailers
stock them on pallets on their bottom shelf, Hipwell notes, because it
enables stores to stock large quantities. “It’s easy to manage off the pallet,
and retailers are profitable,” he said. “You don’t need to sell it at cost,
the way you would with carbonated soft drinks. They can sell this with a
mid-teens margin and be quite successful.”
Hipwell observes that retailers face the additional challenge of stocking
items that fall under the water category, but aren’t technically water. “This
isn’t necessary a bad thing, but if a retailer wants to bring it in, he’s got
to make space for it,” he said. “It’s important that retailers take advantage
of the trends and move quickly. The ones that move quickly into taking
the new items on, finding space for them and deleting space on things
that are not growing, will win.”
In acknowledging that it is impossible to please everyone, those retailers
that focus on what their consumers’ needs are, and which brands are focusing
on building the category, will reap the most success, Fox maintains.
“This is what will create pull from the stores – an offering that meets the
consumer demand, turns quickly and drives growth for the supplier, and
makes great profit for the retailer.”