Dasani U.K. recall could have ripple effects in U.S.

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Coca-Cola Co.'s total recall of its bottled water in the U.K. appears to threaten Dasani's rollout in Europe and could also have serious implications for the brand in the U.S.

The beverage giant was forced last week to yank 330,000 cases, its entire U.K. supply, off shelves after quality tests revealed illegally high levels of bromate for tap and bottled waters. Bromate, a suspected carcinogen that environmental regulators limit to levels considered to be harmless, is an unwanted byproduct in Dasani's tap-water-purification process.

The move comes as Coca-Cola is still reeling over a consumer uproar begun shortly after the product's launch in February over the discovery that cheap municipal water was the main source for the product labeled as "pure, still water." Dasani costs upwards of $2.35 for a half liter, while the same amount from the tap costs roughly 7¢.

"We believe this could continue to fuel the backlash by consumers of Dasani," said Bonnie Herzog, beverage analyst for Citigroup's Smith Barney. "The introduction of Dasani in the U.K. has not been successful, to say the least. Therefore, we are very concerned about this new development given the product's already very poor perception in the market."

Bill Pecoriello, beverage analyst for Morgan Stanley, said competitors are likely to seize on the opportunity to derail Dasani and raised the specter of implications for the brand in the U.S.

"Nestle and other players will likely take this opportunity to remind consumers that they are selling spring water vs. the purified `tap' water Coke is selling," he wrote in a note to investors.

Coca-Cola acted swiftly in the recall. "Immediately after we identified this issue, we consulted with the Food Standards Agency," the marketer said in a statement. "The FSA has confirmed that there is no immediate health or safety issue. The withdrawal is a precautionary measure." Coca-Cola began the recall March 19 and said it would be 80% to 85% complete within 24 hours.

Coca-Cola spent roughly $7 million in measured media to launch the brand in February in the U.K. Interpublic Group of Cos.' Lowe, London, handled the launch with an out-of-home campaign using the tagline "Prepare to get wet. A new water's coming."

contributing: laurel wentz

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