Soda in Free Fall!
Water Is Now World’s Highest-Profit, Highest-Demand Retail Beverage
America’s 130-year love affair with soda is over.
i
In 2016, Americans bought more bottled water than Coke, Pepsi, Fanta, Sprite, Mountain Dew, Dr. Pepper and all other sweet, carbonated soft drinks combined. Diet drinks included
ii.
The whole beverage industry is restructuring around this change in tastes—and it has created the most investible trend in the consumer discretionary sector.
For investors looking for a wave of demand to ride, bottled water is better than candy, cars, or even booze. Bottled water is growing sales faster than iPhones
iii and gluten-free cookies
iv.
And there are a lot of ways for smart investors to play it.
And it’s creating huge paydays for investors who jump in to big growth opportunities early.
For example, PepsiCo recently announced it was going to
acquire SodaStream for $3.2 billion.
Shares of the hare at-home carbonated water maker were trading for less than $13 as early as 2016.
PepsiCo’s aggressive takeover values those shares more than
1000% higher at $144 a share.
That’s a huge win.
But it’s hardly alone in the booming alternative beverage industry.
Kobe Bryant saw changes in consumer tastes coming and got in on it all by investing in BodyArmor, an alternative sports drink with less sugar than the most popular sports drinks.
Coke just announced it was buying into BodyArmor.
Today, based on the valuation by Coke’s investment, Bryant’s initial $6 million investment is now worth
$200 million.
Fortunes are literally being made here…over and over again.
Of course, those are just two stories which broke in the last few days. There are many, many more like those. And you’ll see them in a bit.
The thing I want you to understand right now is there are a lot of ways for smart investors to play all this.
Coca-Cola (KO) is making a big move. Nestle (NSRGY) is leveraging its lead. But upstarts like
Alkaline Water Co (TSX.V: WTER | OTC: WTER) are finding their way to the top, too.
Nestle Leads In Size, Lags in Innovation
Nestle can righteously claim to rule the water industry. Its 54 brands include international giants like Aqua Panna, Perrier, and Pellegrino in the premium category. It also owns dozens of everyday brands like Poland Springs and Deer Park that dominate grocery shelves
v.
But for investors, Nestle doesn’t actually give anyone a front-row seat on the switch from carbonated soft drinks (CSD’s) to water.
Nestle is so huge that its $7.5 billion water division is the smallest unit in the company—only 8% of its sales
vi. Nestle is growing its water sales about the same as the rest of the industry, but it fails to leverage its position with interesting new ideas.
Coke Fights Smart, Attacks Early
Coke saw that soda was a declining business and went to work years ago. That’s why it spent $4.1 billion to buy a major share of Vitamin Water in 2007. Wall Street said that was crazy—17X annual sales! The going rate for acquisitions was 4X sales or less
vii.
Coke got it right. Vitamin Water is still one of Coke’s biggest winners.
Since then, Coke has added FUZE, Honest Tea, a stake in Monster Beverages, and Hansen’s Natural Beverages, among other brands
viii.
Coke is always on the prowl for successful new beverages to offset declining soda sales.
Today, Coke says it’s an “all-beverage” company.” But it’s a water warrior, too. It owns Dasani, the top-selling water brand in the US, Glaceau Smart Water (#4) and Vitamin Water (#6)
ix.
You have to love Coke for its intelligent and balanced response to the demise of soda.
But much of Coke’s business is still in soda, tea, juice, and syrup sales. There’s another pure-play way to approach the boom in bottled water and capture the strongest growth.
WTER —All the Trends Meet Here
Alkaline Water Co (TSX.V: WTER | OTC: WTER) ticks all the right boxes for investors looking for a dedicated play on the bottled water boom. Everything comes together here—WTER will give you concentration, high growth, huge margins, powerful branding, trendiness, and brilliant marketing.
Though it’s a young company, WTER’s Alkaline88 brand is a national brand, sold in all 50 states.
As of today, 45 of the top 75 retail chains and distributors in the US stock Alkaline88. It sells in more than 50,000
x stores coast to coast. And all the major grocers carry it—Costco, Walmart, Albertsons, Kroger, Safeway, Publix, Harris-Teeter, and SuperValu
xi.
Very High Double-Digit Growth Yesterday, Today, and Tomorrow
We don’t know of any other company already so well established that can offer growth potential anywhere close to WTER…
WTER’s sales rose 902% in 2016 and 80% in 2017
xii.
Consumers love small brands like WTER. Even giant companies like Frito-Lay are trying to imitate them to win back market share. When Frito-Lay created a “kettle cooked” chip to fight off Cape Cod—it was the biggest grower in the company
xiii.
This is why Coca-Cola buys brands like FUZE, Odwalla, and Zico. And maybe Alkaline88 some day, too.
Small brands that capture consumer attention are proven winners. WTER is on track for another 88% growth this year
xiv. And it expects high double-digit growth for years to come.
Coke and Nestle won’t come close to WTER’s numbers.
High Fashion and High Value Helped WTER Win Space on The Shelves
WTER’s Alkaline88 water is adjusted to pH 8.8 to offset the high acidity levels of the typical American diet. That makes Alkaline88 a functional water with health benefits— a very strong growth niche in the beverage market.
An alkaline diet is believed to relieve acid reflux, combat metabolic syndrome, encourage antioxidants, and enhance weight loss.
Celebrity fans of the alkaline food and beverages like Alkaline88 include Bill Gates, Jillian Michaels, Tiger Woods, Kate Moss, Donna Karan, Kirstan Dunst, Jennifer Anniston, and Gwyneth Paltrow.
Mark Wahlburg and Sean (Diddy) Combs even launched their own alkaline beverage a few years ago.
Strategy Goes with Branding
Health benefits might have put Alkaline88 in health stores, but cracking the grocery market is uphill work for small brands.
Fortunately, WTER’s management had the industry experience to know that if it could offer retailers something unique they could find a way in.
So they introduced their premium Alakaline88 brand in value-priced gallon and 3-liter jugs. That gave grocers a high-margin product they could put next to the bulk water jugs.
There it was—a value-priced premium water with a health benefit sitting alongside the cheap jug water. That was a spot no other product tried to claim. Aptly named, Alkaline88 was perfectly positioned for takeoff.
Once Alakaline88 had won grocers’ loyalty, it introduced even higher-margin personal serving sizes.
WTER Is Naturally Positioned for High Growth, High Profits
There’s another reason investors should love WTER right now—startup days are ending.
WTER should see its breakthrough to positive earnings this year. This is the moment every investor hopes to catch.
And the potential for profits at WTER is huge. The gross margins on bottled water are tops in the industry— 56% for bottled water versus 35% for soda
xv. They could be even bigger for premium-branded Alkaline88.
Final Word—Buyout Potential Here
You can see the buyout potential here.
Coke, Nestle, and PepsiCo no longer try to invent all-new products to grab market share. They buy success.
Nestle could make a play for WTER. But Coca-Cola (or PepsiCo) is more likely to want this innovative product in its portfolio.
And even if a buyout isn’t in the card immediately,
Alkaline Water Co (TSX.V: WTER | OTC: WTER) is the one pure-play bottled water company to watch.
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[i] Counting from invention of Coca-Cola in 1886 to date bottled water sales surpassed CSD/s in 2016.
[ii] https://www.cbsnews.com/news/bottled-water-sales-outpace-soda-for-the-first-time/ These are all in the soda class<bottled water. Examples of sodas to reify the idea.
[iii] https://www.bloomberg.com/news/articles/2018-05-01/apple-tops-sales-estimates-on-services-growth-iphone-stability Apple sold 52.2 million iPhones in the fiscal second quarter, up 2.9 percent from a year earlier.
The global bottled water market to grow at a CAGR of 7.95% during the period 2017-2021. (8% rounded) https://www.prnewswire.com/news-releases/global-bottled-water-market-2017-2021---increasing-premiumization-in-bottled-water-300566806.html
[iv] The largest sector was gluten-free bakery products, with 55% of the total market volume in 2014. The gluten-free bakery sector is set to see more than 7% growth through 2023. https://www.celiac.com/articles.html/miscellaneous-information-on-celiac-disease/conferences-publicity-pregnancy-church-bread-machines-distillation-beer/report-charts-global-gluten-free-market-growth-through-2023-r4049/ bottled water 8% , see footnote 2.
[v] https://www.nestle-waters.com/brands. Actual count from Nestle Waters website, all brands.
[vi] https://www.nestle.com/asset-library/documents/library/documents/annual_reports/2017-annual-review-en.pdf 2017 annual report, p 2
[vii] https://www.nytimes.com/2007/05/26/business/26drink-web.html
[viii] https://learn.stashinvest.com/brands-companies-owned-coca-cola and https://www.coca-colacompany.com/press-center/press-releases/the-coca-cola-company-and-monster-beverage-corporation-close-on-previously-announced-strategic-partnership
[ix] https://www.statista.com/statistics/188312/top-bottled-still-water-brands-in-the-united-states/
[x] https://ir.thealkalinewaterco.com/press-releases/detail/183/alkaline-water-co-adds-another-top-75-retailer
[xi] https://content.equisolve.net/_6b91f3b30a6ef83f6f91f315d857cdf3/thealkalinewaterco/db/258/500/pdf/August+2017+Corporate+Update+Final.pdf
and https://ir.thealkalinewaterco.com/press-releases/detail/183/alkaline-water-co-adds-another-top-75-retailer
[xii] https://finance.yahoo.com/quote/WTER/financials?p=WTER
[xiii] https://www.strategyand.pwc.com/trend/2017-Consumer-Packaged-Goods-Trends
[xiv] https://content.equisolve.net/_6b91f3b30a6ef83f6f91f315d857cdf3/thealkalinewaterco/db/258/500/pdf/August+2017+Corporate+Update+Final.pdf p. 14
[xv] http://www.cspdailynews.com/print/missing/article/store-soi-data-2016-packaged-beverages