Pepsi: Not Blowing Off Bubbles, But Introducing Premium Water

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PepsiCo Inc. (NYSE:PEP) is ready to quench your thirst and outmaneuver Coca-Cola Co.’s (NYSE:KO) Smartwater with its own premium bottled water drink, called Om.

The decision comes at a time when the world’s second biggest soda company is combatting falling beverage sales by branching into new markets like the hummus and yogurt sectors, the Associated Press reports. With less and less consumers choosing to scoop up carbonated beverages, Pepsi has had to rework its strategy to better cater to an evolving, health conscious consumer base.

But while the company’s customers might not turn to bubbles to quench their thirst, bottled water is now growing in popularity, and that’s why Pepsi is preparing to break into the premium bottled water market with its very own in Om.

Fortunately, the snack food company is familiar with the bottled water industry: it already lines grocery stores’ shelves with its Aquafina offering. But new studies show that consumers are now buying more premium water offerings, so Pepsi is gearing up to take on new rivals like the Evian and Fiji brands, as well as old ones that include Coca-Cola’s Smartwater.

But one major question that Pepsi will have to answer when it rolls out its new line next year is how Om can be differentiated from Aquafina. The two products will be marketed and priced differently, with Om being noticeably more expensive, but many critics are skeptical of how these various bottled waters are distinct.

Coca-Cola has faced similar questions with its Smartwater and Dasani line, but the company asserts that its cylindrically-bottled Smartwater is purified differently than the nonpremium Dasani, though both products are made from municipal sources. So the two soda companies, then, are forced to ascertain a way to market their premium products at a higher price, but doing so without detracting from their Aquafina and Dasani brands.

According to the Associated Press, Coca-Cola has managed to be successful so far, evidenced by its 16 percent sales increase for Smartwater in the first six months of the year — and now, Pepsi once again has a hard act to follow.

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