Is LIFEWTR PepsiCo's (PEP) Answer to Coke's Smart Water?

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In view of the growing demand for bottled water in comparison to soda in the U.S., beverage major PepsiCo, Inc.PEP bought a 30-second Super Bowl ad to present its new premium bottled water brand, "LIFEWTR."

It is important to note that bottled water sales grew over 50% in the last 10 years, while U.S. soda volumes have declined over the same period as consumers have become particularly conscious about the use of artificial sweeteners, high sugar content and related obesity concerns.

LIFEWTR is PepsiCo's first finest bottled water and it will appear in retail aisles across the nation starting Feb 2017. Additionally, PepsiCo will present Pepsi Zero, a zero-calorie soda.

The Super Bowl, which is scheduled to be played on Feb 5, has long been the battlefield for cola companies. This time, PepsiCo has left no stone unturned in its promotions for LIFEWTR.

PepsiCo's chief competitor, Coco-Cola Co. KO , is yet to announce any plans to advertise during the Super Bowl. As per the Wall Street Journal report, Coke has no plans to feature either of its Smart Water or Dasani bottled water brands during the Super Bowl.

Hence, LIFEWTR will compete directly with Coke's Smart Water as PepsiCo's war against Coca-Cola intensifies amid declining consumption of sugary sodas in the beverage industry.

Though Pepsi has increased marketing investments and is driving package and product innovation to boost the carbonated beverage business, no meaningful improvement has been observed yet. Pepsi's CSD volumes declined 2% each in 2014 and 2015 and 3% in the first nine months of 2016.

Apart from this, product innovation also plays a huge role in the company's success. The company regularly creates new flavors of existing products alongside maintaining a robust pipeline of new products. Innovation has accounted for approximately 9% of the company's revenues in the third quarter of 2016. Most of the company's latest line-up of products offer health benefits like reduced calorie beverages, non-carbonated beverages and healthier snacks.

PepsiCo is working hard to broaden its beverage portfolio to include more non-carbonated beverages in order to decrease the dependence on colas. However, it is to be seen whether this new premium bottled water brand will be able to counter the slowing carbonated soft drinks ("CSD") trends.

The challenges in the CSD category have been felt by all major soft drink makers - PepsiCo, Coke, Dr Pepper Snapple Group, Inc. DPS and Monster Beverage Corporation MNST - leading to lower volumes and weaker sales.

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Coca-Cola Company (The) (KO): Free Stock Analysis Report

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Monster Beverage Corporation (MNST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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