Brand Mix

Photo: Multnomah Falls, Oregon (me)

My very first post on this blog was about how bottled water was coming under attack on issues ranging from environmental to health concerns. At the time, those attacks had not had much impact on sales but I wondered if: "perhaps the thin end of the edge has been successfully applied."

Now, two years later, and helped along by the recession, U.S. sales of bottled water have indeed started to fall. It's a small decline (just over 1% according to Beverage Marketing) but, considering the fact that sales had increased by over 50% in the last five years, it's significant.

Inevitably, the falling demand has triggered a price war. The Wall Street Journal reports that a 24-pack of Pepsi's Aquafina was being sold on promotion at $2.99, about half its normal price. Coca-Cola has been trying to avoid discounting Dasani and has paid the price--its sales are down 26%.

As the price war intensifies, and marketing resources get diverted to support the fight, the risks of commoditization go up. And the more commoditized the category becomes, the less chance there is that sales will pick up again when the economy recovers. The tide may have irrevocably turned.