Pepsi picks water fight with surging Glaceau

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PepsiCo, learning not to underestimate an upstart, is sending its SoBe brand to do battle with Glaceau's fast-growing Vitamin Water.

SoBe has until now ignored Glaceau despite its strength in markets such as New York, because of its relatively tiny size and lack of a powerful distribution system.

But despite being available in only about 57% of the country, sales of Glaceau's enhanced waters have more than tripled in sales in food, drug and mass merchandisers since 2002 to $54 million for the first nine months of this year. The surge was propelled by Vitamin Water, with $42 million in sales, up more than 162% from the same period a year ago, according to Information Resources Inc.

"Glaceau is kicking ass," said Darrell Jursa, president of consultant Liquid Intelligence. "The beverage aisle is basically tired. People are seeking this stuff out, and the big companies aren't responding."

Pepsi executives revealed the plan to go after Glaceau during a recent bottlers meeting, though product specifics and launch dates were not discussed. The marketer has trademarked the names SoBe Life Water and Life Water by SoBe. The plan was first reported by Beverage Digest.

"SoBe has always been about innovation, and we're always looking at new products and platforms," a Pepsi spokeswoman said.

Glaceau disagrees. "They are responding to our success rather than bringing something new to market," said a spokeswoman. "They should be trying to come up with a new innovation. SoBe itself doesn't have the credentials to be in the bottled water business. It's like Budweiser coming out with a premium beer."

Fallon, New York, has handled Sobe advertising but SoBe's spokeswoman said "no decision has been made about agencies for 2006 yet."

Flavored waters are a growing category, and analysts see room for more. "Enhanced water is catching on among consumers of all ages, genders and income levels," said William Pecoriello, beverage analyst for Morgan Stanley in a report.


There has long been speculation that Glaceau marketer Energy Brands, founded in 1996, will be acquired by one of the leading soft-drink makers. Analysts say the company could be holding out for a higher price, or potential buyers could be skeptical of its long-term prospects.

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