PEP PepsiCo Inc

By Jennifer Maloney 

PepsiCo Inc. plans to use this year's Super Bowl to go on the offensive in the beverage industry's intensifying water war.

The Purchase, N.Y., company bought a 30-second spot to introduce LIFEWTR, its first pricier "premium" water brand, which is positioned to compete with Coca-Cola Co.'s smartwater.

The Super Bowl -- which this year is to be played on Feb. 5 -- has long been a battleground for the cola wars. In a 1995 Pepsi ad, a truce between truck drivers for the two companies devolves into a fistfight when the Coke driver sips his rival's can of Pepsi and refuses to hand it back.

PepsiCo's opening salvo in the battle for a piece of the premium-water market comes amid estimates that, by volume, annual U.S. sales of bottled water exceeded soda sales for the first time in 2016.

Sales of bottled water have surged more than 50% over the last decade, while U.S. soda volumes have fallen over the same period as Americans switch to water and other health and wellness drinks.

In response, Coke and Pepsi are turning more attention -- and marketing dollars -- to water.

PepsiCo this month is beginning national distribution of LIFEWTR, priced at around $2.70 for a 1-liter bottle. Pepsi already has a lower-priced Aquafina brand, which is No. 2 by retail sales in the $21 billion U.S. bottled-water market, according to Euromonitor International, a market-research firm.

Confronted with rising obesity and diabetes concerns, the soft-drink industry in 2014 pledged to cut beverage calories in the American diet by 20% over a decade by promoting bottled water, low-calorie drinks and smaller package sizes. In addition to the LIFEWTR spot, PepsiCo will feature Pepsi Zero Sugar, a zero-calorie soda, on screen during the Super Bowl's half-time show.

Coke hasn't announced its Super Bowl plans but a company spokesman said it isn't planning ads for either Dasani or smartwater, its two bottled-water brands. They occupy the No. 1 and No. 5 spots, respectively, in the U.S. bottled-water market by sales, according to Euromonitor. Coke said it would launch new campaigns for both brands in a few months.

Coke's smartwater holds the top spot in the fast-growing premium-water segment, with 44% of the market share in that category by volume, according to Beverage Marketing Corp., a New York consulting firm.

With more than $1 billion in retail sales in 2016, smartwater has been a surprise hit for Coke, which acquired the brand when it purchased Glacéau for $4.1 billion in 2007. Coke has positioned smartwater as a premium product by adding electrolytes, likening its vapor-distilled purification to the formation of clouds, sponsoring fitness and fashion events and partnering with actress Jennifer Aniston, an early smartwater investor, to promote it.

LIFEWTR is purified by reverse osmosis, and PepsiCo describes it as "pH-balanced with electrolytes added for taste." The new brand's most distinctive feature is its packaging: The clear plastic bottles will feature textured labels by emerging artists, including the street artist known as Momo, with new designs introduced every few months.

"They're a little late, but it's a beautiful package," said Michael Bellas, chairman of Beverage Marketing, which wasn't involved in the product's development or launch.

PepsiCo hopes the revolving designs will prompt young people to share images of the bottles on social media. There is demand for "water that says something about the consumer as they're walking around with it," said Seth Kaufman, PepsiCo's marketing chief.

The LIFEWTR ad, called "Inspiration Drops," shows art appearing on buildings and sidewalks as raindrops fall, while an adapted version of John Legend's "Love Me Now" plays. PepsiCo declined to say how much it spent on the ad.

Fox is still selling ad time for the Super Bowl and has been asking advertisers to fork over roughly $5 million for 30 seconds worth of time. More than 100 million people are expected to tune in to the broadcast.

The U.S. market leader for bottled water is Nestlé, maker of the No. 3 and No. 4 brands Nestlé Pure Life and Poland Spring. Nestlé doesn't have a Super Bowl ad planned but this year expects to launch a new national ad campaign for its regional spring waters including Poland Spring, which is distributed in the Northeast.

Antonio Sciuto, chief marketing officer for Nestlé Waters North America, which also sells Perrier and S. Pellegrino, said there are growth opportunities in the U.S. for the company's premium still brand, Acqua Panna. Water, he said, "is the most exciting category to work in right now."

Write to Jennifer Maloney at jennifer.maloney@wsj.com

(END) Dow Jones Newswires

January 24, 2017 05:44 ET (10:44 GMT)

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