Coca-Cola dives in to sparkling water craze against Pepsi, La Croix, Spindrift

Sales of Coke North America's sparkling water were up 27% in 2018.

Water is the new soda.

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Coca-Cola is launching a flavored seltzer brand next year to compete with brands like La Croix and Spindrift in the saturated sparkling water category.

AHA, the bubbly new drink, will hit shelves in March with eight flavors such as strawberry with cucumber, apple and ginger. There will also be two caffeinated varieties: black cherry and coffee, and citrus and green tea, that contain 30 grams of caffeine, slightly less than a can of Coke, the company announced Thursday. The pricepoint for AHA will be in line with La Croix and Bubly, which range between $3.69 and $3.99 for a six-pack.

AHA, Coca-Cola's new sparkling water brand. (Courtesy of Coca-Cola).

"We're on a mission at the company to create a total beverage company, and that includes capturing the health and wellness market," Shane Grant, president of the Stills Business Unit at Coca-Cola North America, told FOX Business. "It's one of our biggest launches in over a decade."

"We're on a mission at the company to create a total beverage company, and that includes capturing the health and wellness market," Shane Grant, President of the Stills Business Unit at Cocoa-Cola North America, told FOX Business. "It's one of our biggest launches in over a decade." 

- Shane Grant, president of the Stills Business Unit at Coca-Cola North America

The sparkling water category has attracted a cult-like following of consumers looking for better-for-you beverage options with all-natural ingredients as alternatives to sugary soft drinks like soda. And beverage brands have found ways to break into the exploding $4.2 trillion wellness industry. Coke's sparkling water launches come after PepsiCo. rolled out Bubly, its line of sparkling water with zero-calories and no artificial flavors and sweeteners, last year.

AHA will also have few ingredients, relying mostly on natural flavors, Grant said.

"We found in this segment, a very clean label is important, Grant said. AHA "simply includes sparkling water and a blend of natural flavors derived from fruits and vegetables."

More beverage brands have been following the La Croix model in recent years. The brand is a retro Costco staple from the 1980s that was rebranded as a lifestyle product. La Croix's marketing campaign featured its neon-colored cans on social media platforms like Instagram and through partnerships with music festivals like Coachella. The fizzy water was even featured in pop art exhibits. The company's net sales were $244 million in 2017, up from $203 million the previous year.

Sales of Coke North America's sparkling water portfolio, anchored by brands like Dasani and Smartwater were up 27 percent in 2018, according to Nielsen. AHA will replace Dasani Sparkling, which has been on the market since 2014, Coca-Cola said.

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KOCOCA-COLA COMPANY
$52.67
+0.04 (+0.08%)
PEPPEPSICO INC.
$133.81
+0.48 (+0.36%)
FIZZNATL BEVERAGE
$43.40
+0.49 (+1.14%)

And as soda sales fall flat, beverage brands seem to be increasingly banking on sparkling water. Last year, bottled water, including the sparkling category, trumped soda as the No. 1 drink sold in the United States. Americans drank an average of 39.3 gallons of bottled water in 2016 and 38.5 gallons of carbonated soft drinks, according to research firm Beverage Marketing Corp.

Grant said zero-calorie soft drinks are leading Coca-Cola's soda category, a nod, perhaps, to changing consumer demand for beverages with fewer calories and less sugar.

"When we look across the beverage category, we remain bullish on our core soft drink business led by zero-calorie drinks," Grant said.

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This story has been updated to include comments from Shane Grant, president of Coca-Cola's Stills Business Unit.