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How McTrendy.

Seeking to tap into the fast-growing market for bottled water, burger giant McDonald's Corp. has quietly rolled its own brand into some 1,500 restaurants.

The move positions the nation's largest restaurant chain as a potential rival to the convenience and grocery stores now dominating the $2.6 billion business for bottled water.

McDonald's water was introduced to franchisees at the chain's global convention last spring, and has been available as an optional item to the 13,000-unit U.S. system since May. The fact that more than 10% of the system has already picked up the item indicates demand is strong, a spokeswoman said.


The water -- from Aquapenn Spring Water Co., which specializes in private-label brands -- is supported with point-of-purchase materials touting it as "natural and refreshing." The bottle has a low-key label with the McDonald's logo. There is no media support.

A 20-ounce sports bottle, with a suggested retail price of 99 cents, is proving far more popular than an 8-ounce version for a suggested 69 cents, the spokeswoman said. She said the water was launched with little market research.

"There was such an overwhelming interest from consumers," she said. "Part of it is the phenomenon of people eating and drinking on the go. People really enjoy having a convenient plastic bottled water with them."

It is unclear how the water, should it expand further, will co-exist with the chain's fountain beverages from longtime supplier Coca-Cola Co., or how the bottle might be incorporated into the chain's combination meals, which now feature fountain beverages.

A Coca-Cola spokesman said its sales in McDonald's stores aren't being impacted by the water.


Growth in bottled water far outpaced that of the far larger and more mature $54 billion carbonated soft-drink business last year. In the so-called premium retail water segment to which the McDonald's water belongs, volume was up 30%, while carbonated soft-drink volume gained about 3.3%, according to consultancy Beverage Marketing Corp.

"Bottled water has gone way beyond a niche product," said Gary Hemphill, VP-information services, Beverage Marketing Corp. "Long gone are the days when bottled water was seen as a substitute for tap water. It makes sense for McDonald's to do it."

Mr. Hemphill said Coca-Cola has not yet entered the bottled water category, but is expected to do so.

David Trossman, a restaurant analyst with B.T. Alex. Brown, said the water illustrates McDonald's new approach to cautious product introductions at the local level rather than the big-splash national launches the company favored until a year ago.

"From a product perspective, I don't think it's a big deal," he said. "What's interesting is it's just one more example of things happening in the system that aren't the big high-profile edicts from [headquarters]. That's what I like to see."

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