Soft Drink Companies Make Splash in Bottled Water
Steve Martinez
U.S. consumers now drink more bottled water
than any other beverage, except carbonated soft
drinks. Since 1998, per capita consumption of carbonated
soft drinks has fallen slightly, while bottled water
consumption continues to set new records. From 1997
to 2005, per capita consumption of bottled water
increased by 90 percent to 25.4 gallons—17
percent of nonalcoholic beverage consumption.
The four largest suppliers’
share of bottled water sales rose from 52 percent
in 1997 to 63 percent in 2002, a 21-percent increase.
Such a large increase in sales concentration occurred
despite rapid demand growth, which can attract new
suppliers and slow increases in concentration. In
the poultry industry, for example, the four-firm
concentration ratio rose by 17 percent from 1987
to 1992, while the hog slaughter concentration ratio
increased by 43 percent. Over the same period, ERS’s
food availability data, a proxy for consumption,
show a 19-percent increase for poultry, compared
with a 7-percent gain for pork.
Leveraged by their extensive bottling
and distribution networks, Pepsi-Cola and Coca-Cola
entered the bottled water industry in the mid- to
late-1990s and quickly ranked among the top four
suppliers of bottled water in the U.S. Both companies
distribute their bottled water brands through the
same channels that carry their soft drinks. The
companies have also relied on their own brand-building
capabilities. Pepsi introduced Aquafina in the mid-1990s
and, by 1999, had become the fourth-largest supplier
of bottled water with a 5.5-percent market share.
In 1999, Coke introduced the Dasani brand, supported
by the largest advertising budget in the bottled
water industry. In 2004, shares of Pepsi and Coke
reached 11.3 percent and 10 percent of the bottled
water market, respectively. The other two leading
suppliers of bottled water, European-based Nestlé
and Groupe Danone, also continued to increase their
U.S. market share by acquiring North American companies
and constructing new plants in the United States.
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