NEW YORK, Sept. 23, 2020 /PRNewswire/ -- Soda sales over the past 15 years have fallen significantly, leaving major beverage brands looking for alternative ways to expand their portfolios to capture a portion of the various new craft beverages that consumers drink each day. Many of these large companies are opting to go the M&A route, recognizing the significant impact that smaller specialty brands in the space might have on their existing offerings. Companies such as The Alkaline Water Company (NASDAQ: WTER) (CSE: WTER) (Profile), one of the fastest-growing enhanced water companies in the industry, could be an attractive option. In the meantime, Keurig Dr. Pepper Inc. (NYSE: KDP) recently announced the launch of Brew the Love(R) Collaborations, an offering from Keurig, one of its premier brands, while Celsius Holdings Inc. (NASDAQ: CELH), maker of the leading global fitness drink, Celsuis(R), has unveiled Jackfruit, its latest addition to a diverse lineup of flavors. Another new beverage offering comes from Anheuser-Busch InBev (NYSE: BUD), which has unveiled its first zero alcohol brew, Budweiser Zero. And PepsiCo Inc. (NASDAQ: PEP) is being creative with its approach to new offerings — the company has teamed up with Red Lobster to create new ways to enjoy seafood alongside the taste and variety of PepsiCo products.
- Volume sales in the carbonated soft drink have declined for 15 consecutive years.
- Specialty and niche market beverage makers offer fast entry to capture new market share.
- The Alkaline Water Company has the earmarks of a prime candidate for a strategic M&A move by one of the big brands.
- WTER has delivered record growth over the past quarter with all indications pointing to continued growth moving forward.
Desire for Health, Variety, Lead to Soda's Decline
A recent "Beverage Industry" article noted that volume sales in the carbonated soft drink category have seen sales decline for 15 consecutive years. "Today's consumers want both variety and healthier refreshment, trends which have negatively impacted carbonated soft drinks," said Gary Hemphill, managing director of research for New York-based Beverage Marketing Corporation.
In the same article, Jacqueline Hiner, industry analyst for Los Angeles-based IBISWorld, noted that "the most prominent driver of this trend is the higher number of health-conscious individuals in conjunction with rising per capita disposable income. Rising disposable income levels enable consumers who enjoy the taste of carbonated beverages to splurge on craft beverages that are made with natural ingredients. However, growth in this market is expected to be tempered by the continued increase in health consciousness driving consumers to drink water."
As Hiner noted, while soda sales are down, sales of bottled water globally are soaring. Pre-pandemic, Americans spent $18.5 billion on bottled water each year, and that was projected to rise to $22 billion by the end of 2024. According to a report from industry expert Grand View Research, the global bottled water market is expected to reach $215.12 billion by 2025 — posting a compound annual growth rate of 7.4% over the next six years. These numbers could go even higher as health-conscious consumers around the world choose water over soda. Large soda makers may want a piece of that action.
A Prime Candidate
With those numbers staring them in the face, savvy soda companies are looking for strategic ways to strengthen the bottom line. One path that many of the larger companies are taking is mergers and acquisitions. Just a few examples include Coca Cola's acquisition of Vitamin Water for $4.2 billion and Reignwood's $105-million acquisition of Voss. Dr. Pepper has taken the M&A route too, acquiring Core for $525 million and Bai for $1.2 billion.
The Alkaline Water Company (NASDAQ: WTER) (CSE: WTER) appears to be a prime target for this type of strategic consolidation. One of the fastest-growing enhanced water companies in the country, WTER has posted an astonishing 62% compound annual sales growth rate over the last five years. The company reported record annual revenue of $41.1 million as a health-conscious world has turned away from sugary soft drinks to bottled water, particularly water that's been enhanced in some way.
The pandemic has only enhanced the company's appeal. While other beverage companies struggled to put product on the shelf, The Alkaline Water Company delivered record growth over the past quarter. The company reported record sales in March ($6.2 million) and April ($7.1 million), representing year over year growth of 114% and 171% respectively.
Alkaline88 was one of the few water brands able to deliver during the peak "pantry-stuffing" period, resulting in an estimated 30–40% of new households trying Alkaline88 for the first time—the largest sampling program in the company's history. In fact, a recent Nielsen report ranked Alkaline88(R) as the 10th best-selling value-added water and the third fastest-growing, top-ten, value-added water in the country during the 13 weeks ending May 16, 2020.
Top Brand in Value-Added Water Category
The Alkaline Water Company looks likely to continue its upward trajectory.
Alkaline88 remains one of the top-selling brands in the value-added water category. According to recent trade data, Alkaline88 reported double-digit growth despite the value added water category contracting 8.2% for the four-week period ending April 18, 2020.
In addition, the company's track record of recognizing and meeting consumers' needs looks strong. Last year, the company launched A88 Infused(TM) to meet consumer demand for flavor-infused products. A88 Infused flavored water is available in seven all-natural flavors, with new flavors on their way.
Another point worth noting is the company's strong commitment to the environment. The company kicked off 2020 with the announcement that its flagship brand, Alkaline88, was available in 500ml, single-serving aluminum bottles. "Consumers are demanding more eco-friendly choices, and we are excited to now offer a refillable, resealable, and 100% recyclable option," said company president and CEO Richard A, Wright. "This is yet another step that the company is taking toward a more renewable future, and we remain committed to providing smarter and innovative packaging solutions for the environmentally conscious consumer." The company has proven incredibly adept at identifying and delivering on consumer demands.
Other Catalysts for Growth
Not waiting on the majors, The Alkaline Water Company is eyeing multiple other catalysts for continued explosive growth this year, including its entrance into the hospitality space and expansion of its e-commerce presence to meet new consumer buying habits.
The company recently announced that its products will be available in more than 15,000 new retail locations, bringing total availability to an estimated 70,000 retail stores in all 50 states. In addition, the company has identified an additional 40,000 retail locations for further expansion in fiscal 2021.
With a solid sales pipeline in new and existing markets, Alkaline's robust lineup of innovative products, and growing momentum in its lifestyle brands, The Alkaline Water Company may be a tremendous opportunity for investors interested in a high-growth company that has a strong track record of delivering on its promises. Of course, becoming a target for the majors would be an added bonus.
Opportunities for Growth, Success
The beverage industry has certainly taken a hit from wellness and health trends as well as the global pandemic, forcing large companies in the space to make significant moves to hold and expand market share.
Through Keurig(R), one of its premier brands, Keurig Dr. Pepper Inc. (NYSE: KDP) unveiled a new platform: Brew the Love® Collaborations, designed to highlight some of the brand's biggest fans through partnerships to design their own collection. For its first-ever collaboration, Keurig partnered with renowned potter and designer Jonathan Adler on a limited-edition, beautifully designed K-Mini(R) Brewer with matching mug, which is available at Target and online. In addition, a K-Cup(R) Pod Canister will be available later this year.
Celsius Holdings Inc. (NASDAQ: CELH) has a new beverage choice on the market.Jackfruit, a new flavor available in the company's Celsius Heat(TM) line, has a tropical flavor with a burst of sweetness and a tangy twist. A carbonated performance energy drink, Celcius Heat is packed with 2,000 mg of L-citrulline and 300 mg of caffeine, as well as the Celsius(R) proprietary blend. "Jackfruit is another great-tasting option that further expands our line of flavors, and we expect it will entice fans and new consumers alike," said Celsius Holdings CEO John Fieldly. "It is the perfect way to launch our new 16 oz. Heat can packaging, which will appeal to a broader audience in the rapidly expanding performance energy category."
Anheuser-Busch InBev (NYSE: BUD) is also adding an option to its product line. Earlier this year, the company unveiled its first zero-alcohol brew, Budweiser Zero. Developed and co-founded in partnership with NBA legend, entrepreneur and advocate Dwyane Wade, this zero-sugar, 50-calorie beverage offers a refreshing, full-flavored taste. The alcohol-free beer category is a rapidly evolving space with exciting growth opportunities. Budweiser has more than a century of brewing heritage and a legacy of category-setting innovation, making it a perfect brew to provide drinkers with the freedom of choice.
PepsiCo Inc. (NASDAQ: PEP) is also making the most of prestigious partnerships. PepsiCo is working with Red Lobster to leverage their well-known food and beverage brands in the creation of a variety of craveable new menu items, starting with the DEW(R) Garita, the first official MTN DEW(R) cocktail. The DEW Garita pairs perfectly with Red Lobster's Cheddar Bay Biscuits(R). Made using a top-secret recipe, the new cocktail will be available at select Red Lobster restaurants in September and will be available nationwide by the end of 2020.
The news isn't all bad for those involved in the beverage world. Smart companies are making strategic decisions to move in directions that make the most of opportunities for growth and success.
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