Making A Healthier Splash

LIFESTYLE CHANGES: Sports people are some of the key target markets for functional waters. Aquaceuticals not only quench thirst but also help to restore energy and electrolyte balance.

HEALTH TO GO: One American fast-food chain uses Dasani water as part of a combo set to emphasise the healthiness of its products.

QUENCHED: Asian consumers like drinking bottled water. But the value and benefits of functional water isn’t always clear.

Sales of functional water surged by 806% between 1998 and 2003, according to the market information agency, Euromonitor.

In the mid-90s, no-one had heard of aquaceuticals or functional water. The idea of enriching water with vitamins, minerals or electrolytes seemed like a crank idea – fine for a few health nuts but definitely not mainstream.

But functional water is one of success stories of the past few years. The figures are impressive. Sales of functional water surged by 806 per cent between 1998 and 2003, according to the market information agency, Euromonitor. They’ve outstripped the growth of the rest of the neutraceutical and functional beverage sector – itself a pretty respectable 11 per cent a year in the same period.

Aquaceuticals have obviously benefited from the increase in functional foods in general. Several–sometimes contradictory–trends have contributed. People in rich countries are living more sedentary lives. Office work has replaced manual labour. People drive or take trains or buses to work instead of walking. Entertainment too comes from sitting on the sofa watching TV.

But at the same time, more people are exercising and taking up sports. In part that’s because of government health-education campaigns. These also promote more awareness of better eating and nutrition. Consumers are more receptive to the idea of functional drinks, as a result. Sports drinks have led the way in functional beverages. At first they were a way for professional and then amateur athletes to replace energy and quench their thirst after exercise. Now they’ve spread into the mainstream. America has the biggest sales of functional water. The market developed in the early 1990s when the FDA loosened rules on the health claims food producers could make. SPLASH MAKER: PepsiCo’s Aquafina is one of the best-selling water brands in North America. Asia in theory could be big. Japan leads the world in FOSHU—foods for specific health use. In other words, functional food and neutraceuticals But FOSHU water has so far not been such a big market segment.Worldwide, the biggest companies in functional water are big in other drinks, such as PepsiCo, Coca-Cola and Nestlé. This reflects trends in other functional food markets, where big generalists dominate rather than smaller specialists. They tend to understand consumers better—customers want functional drinks to taste good, as well as have the other benefits. They also have better distribution. Pharmaceutical companies were some of the early entrants to the aquaceutical market. They made mistakes in marketing. Their products appeared medicinal and unappetising. Customers weren’t impressed. Big companies too are better at marrying existing brands with functional features. That helps to differentiate their products in a crowded beverage marketplace. For example, Danone is reported to be planning Volvic Revive – a functional extension of its Volvic brand containing vitamins designed to help rehydration after exercise.Not that big companies are immune to problems. Disaster hit Coca-Cola’s water brand Dasani earlier this year in the UK. The authorities found unacceptable levels of cancer-causing bromate in the product. Bottles were recalled. Britain’s tabloid press seized on the brand. They ridiculed the idea that this ‘pure’ water was actually produced from tapwater. Dasani was withdrawn and its roll out in Europe disrupted. The news however didn’t seem to affect sales of Dasani NutriWater in Asia. Coca-Cola handled the storm badly. Which was a pity, as the water industry in general is moving towards the idea of using generic water rather than from water from a particular named source or spring. Taste is imposed by filtering or by enriching with additives. In other words, bottled water becomes much like any other soft-drink. This means production can be spread around the world, and production costs are minimised. That may also please environmentalists. They often accuse the premier bottled-water industry of ‘lunacy’ by wasting energy through shipping bottles of water around the world. (See the box on ‘The problems with traditional mineral water.’) The problem with traditional mineral water Traditional mineral waters, which come from named springs, have drawbacks. Even Perrier, one of the world’s best-known water brands, may be vulnerable to shifts in demand and market changes. Its owners, Nestlé, are keen to sell the brand. Nestlé snapped up Perrier in 1992. The brand had suffered enormous damage in 1990 when traces of the carcinogen benzene were found in the drink. Perrier lost nearly US$200m because it had to recall 280 million bottles from around the world.

HOT SUBJECT: Freshly made Perrier bottles roll off the production line. Reports say it takes three times as many staff to produce water at the Perrier plant as similar plants elsewhere.

Perrier’s problems include productivity and costs. Nestlé wants to increase production but French unions aren’t cooperating. Labour struggles began earlier this year when Nestlé tried to retire more than one thousand employees. The firm reportedly says that it can produce the same amount of water in other countries with one-third of the workforce employed at the Perrier plant. Firms in other sectors might be tempted to move production to a green-field site with new and more co-operative workers. But Perrier is not like Coca-Cola or Heineken, which can be made anywhere. The water only comes from the Bouillens spring near Nîmes in the South of France. (The Perrier name, by the way, comes from the doctor who used to own the spring just over a century ago.) And that makes it expensive. Not just because transport costs are big taking the water from France to the rest of the world. But also because French workers cost more to employ than their counterparts elsewhere in Europe or around the world. Nestle did reportedly flirt with shifting Perrier to Eastern Europe, where labour costs less. But that could be brand-suicide for a product so closely associated with France. As one food expert said: ‘It would be like making Bordeaux [wine] in Czechoslovakia!’