Water Wars

May 12, 2003
George Anderson

By George Anderson

The competition for share of the bottled water market is intense and may become even more so over the summer as beverage giants such as Coca-Cola, Pepsi and Nestle try to buy share with price cuts.

A report in The New York Times says Coca-Cola gained share at the expense of Nestle and Pepsi when it lowered prices 25 percent on Dannon water.

William Pecoriello, a beverage analyst at Morgan Stanley told the Times, “If you look at the economics of the water business, rational players would stop reducing their prices from here because if they don’t, they will not be making money in the supermarket channel.”

Mr. Pecoriello cited the cola and fast food price wars where the companies involved failed to act in a rational business manner.

Moderator’s Comment: Are the bottlers on a slippery
slope with value-priced water? What is the potential impact on retailers?

The real danger here is when consumers taste-test bottled
waters that are premium and value-priced.

We are aware of one family where the kids did not taste
any noticeable difference between Poland Spring and Dannon. Their parents noticing
this are now saving money in the bottled water category.

We would venture the penny profits must be higher on a
premium branded water than a value-priced one, so how does that benefit the
retailer? It seems to us that the biggest opportunity a bottled water price
war could open-up is for retailers’ private label. [George
Anderson – Moderator

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