Finally, Coca-Cola (KO) is getting serious about fizz without the sugar. Aka, seltzer. Aka sparkling water.
And in doing so, it could bring a much needed jolt to Coke’s overall water business.
Coca-Cola said Thursday it will launch a new seltzer brand dubbed “AHA” in March 2020, which the beverage giant claims is its biggest new product release in a decade. AHA will come in eight flavors, including two (Citrus Green Tea and Black Cherry + Coffee) with 30 mg of caffeine that take early aim at popular caffeinated seltzer Hi-Ball from Anheuser Busch. The line will also look to gain market share from PepsiCo’s surging Bubly line — a brand it too started from scratch back in 2018.
AHA will replace Coke’s Dasani sparkling water.
“As the largest and fastest growing part of the category, mainstream flavored sparkling water is a segment we know we must double-down on,” said Celina Li, vice president of water category at Coca-Cola North America. “AHA is our big-bet brand in this big-bet category.”
Coke added it will introduce new still water flavors to its Smartwater line in 2020, too.
The water overhaul is welcome news for investors.
Unit case volume — a key performance measure for beverage companies — in Coke’s North America water, enhanced water and sports drink business only rose 1% in the third quarter. The overall business, which Coke refers to as “hydration” and also includes VitaminWater and Powerade, has seen volume relatively flat for the nine months ended September 27.
For perspective, unit volume for trademark Coke products rose a solid 2% in the third quarter. Over at Coke rival PepsiCo (PEP), sales of bottled waters such as LIFEWTR and Propel surged by double-digits in the third quarter.
Sales of Coke’s water business have been flat this year, according to data from Nielsen. The total bottled water business in the U.S. (still and sparkling) is up about 5% to $12.8 billion, per Nielsen.
Nielsen data estimates Coke has about a 14% market share of the U.S. water business. Coke’s water business sports the second highest gross profit margin in its beverage portfolio, behind sparkling beverages and ahead of coffee and tea, according to data from Coke. The business in North America is its third largest as a percentage of revenue behind sparkling beverages and juice, dairy and plant-based drinks.
Coke gets high marks on finally pulling the trigger on a water business overhaul — it’s very likely to add a new layer of growth in 2020. AHA’s cans look cool as well, they should stick out on crowded seltzer shelves. I’m not 100% sold on the name, but hey — it’s what is in the can that counts the most.