NetworkNewsWire Editorial Coverage: With sales of carbonated drinks steadily declining for more than a decade, major players in the space are eager to find ways to expand their portfolios into the booming craft beverages and bottled water sectors. One way to accomplish that may be the M&A route, with companies such as The Alkaline Water Company (NASDAQ: WTER)(CSE: WTER) (WTER Profile), one of the fastest-growing enhanced water companies in the industry, looking like an attractive option. In the meantime, Coca-Cola Company (NYSE: KO) is making strides on its previously announced Beverages for Life strategic transformation. New Age Beverages Corporation (NASDAQ: NBEV) has entered into a definitive agreement to acquire ARIIX, together with four additional companies in the e-commerce and direct-selling channels. Nestle (OTC: NSRGY) is sharpening its water focus on international, premium mineral and functional brands while exploring strategic options for parts of its North American business. And Monster Beverage Corporation (NASDAQ: MNST) is reporting sequential improvement in sales during the latter-half of the quarter after seeing a dip in sales earlier in the quarter.

  • Sales in the carbonated soft drink category have been sliding for 15 years.
  • New market share may be available through specialty and niche market beverage makers.
  • Major players may see The Alkaline Water Company as an attractive M&A candidate.
  • Reporting record growth over the past quarter, WTER is eyeing continued success moving forward.

Click here to view the custom infographic of The Alkaline Water Company (NASDAQ: WTER) (CSE: WTER) editorial.

Trends Impacting Soft Drink Sales

Recently, a “Beverage Industry” article reported that volume sales in the carbonated soft drink category have declined 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 worldwide are rising. Pre-pandemic, Americans spent $18.5 billion on bottled water annually; that number was projected to rise to $22 billion by the end of 2024. According to 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 end up even higher as health-conscious consumers opt for water over soda.

An Enhanced Appeal

Major beverage makers can’t ignore what looks like the future of beverages. As these large companies evaluate the forecast numbers, savvy soda companies are looking for strategic ways to get in on the action. One path that many of the larger companies are pursuing is mergers and acquisitions. 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) could be a prime target for any company considering this type of strategic consolidation. One of the fastest-growing enhanced water companies in the country, WTER has reported an astonishing 62% compound annual sales growth rate over the last five years. The company posted record annual revenue of $41.1 million as health-conscious consumers have turned away from sugary soft drinks to bottled water, particularly water that’s been enhanced.

The pandemic has only boosted the company’s appeal. While other beverage companies struggled to put their drinks 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.

WTER 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 quenching their thirst with 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.

A Strong Track Record

The Alkaline Water Company’s upward trajectory appears likely to continue.

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 identifying and meeting consumers’ needs is well documented. 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 consideration is WTER’s strong commitment to the environment. The company began 2020 by unveiling its flagship brand, Alkaline88, 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.

Strong Indicators for Continued Growth

The Alkaline Water Company has other strong indicators for its continued growth moving forward, including its entrance into the hospitality space and expansion of its e-commerce presence to meet new consumer buying habits.

The company recently reported that its products will be available in more than 15,000 new retail locations; with those new numbers, WTER products can now be found in an estimated 70,000 retail stores in all 50 states across the country. In addition, the company has identified an additional 40,000 retail locations it is eyeing 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

Health and wellness trends have certainly made a dent in the beverage industry. The downward trend appears to be further fueled by the global pandemic. Large companies in the space are looking for ways to maintain and even expand market share.

Coca Cola Company (NYSE: KO) recently announced that plans to streamline its beverage lineup and modernize its marketing have been escalated by the COVID-19 pandemic. The company’s Beverages for Life strategic transformation was well underway before the pandemic, but the global crisis is speeding the changes. The company outlined plans to drive this strategy through a more networked global organization led by nine operating units, five marketing category leadership teams and a new Platform Services organization.

Health and wellness is the focus of the new global firm created by NewAge Inc (NASDAQ: NBEV). The omni-channel Colorado-based healthy and organic products company and ARIIX have agreed to create a leading health and wellness firm with a unique route to market, depth in the e-commerce and direct-selling channels, a team of more than 400,000 independent representatives, and a portfolio of healthy products unrivaled in the industry. Other companies involved in the endeavor include Zennoa, LIMU, MaVie and Shannen; the combined companies are creating a global firm with estimated pro forma revenues in excess of $500 million across more than 75 countries worldwide.

Nestle SA’s (OTC: NSRGY) Board of Directors approved a new strategic direction for its waters business. The company will sharpen its focus on its iconic international brands, its leading premium mineral water brands, and invest in differentiated healthy hydration, such as functional water products. The board also confirmed its intent to explore strategic acquisitions to grow in this category, while pledging to make its entire global water portfolio carbon neutral and replenish associated watersheds by 2025.

Despite COVID-19, Monster Beverage Corporation (NASDAQ: MNST) has announced that all of the company’s flavor manufacturing facilities, co-packers, warehouses and shipment facilities are operating. Safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. While Monster’s second-quarter net and gross sales were adversely impacted by pandemic, the company is seeing an improvement in sales as certain countries and states begin to gradually re-open.

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.

For more information about The Alkaline Water Company, please visit The Alkaline Water Company (NASDAQ: WTER) (CSE: WTER).

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