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Coca-Cola doubles down on sparkling water with new caffeinated brand

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La Croix was once the king of canned seltzers, but its sales have been slumping because of...

Posted: Nov 7, 2019 11:15 AM

La Croix was once the king of canned seltzers, but its sales have been slumping because of an influx of new competitors. Now it's potentially facing another challenge, this time from Coca-Cola.

The beverage behemoth unveiled Thursday a new flavored seltzer water brand with a splash of caffeine, called AHA. It's Coca-Cola's first new beverage brand in more than a decade, when it debuted Gold Peak tea.

AHA comes in eight mixed flavors, including lime and watermelon, citrus and green tea and apple and ginger. The beverages are calorie-free and sugar-free. They will be sold individually and in multi-packs when they hit shelves in March 2020.

American consumers are gravitating toward drinks that have functional elements, like nutritional value or a jolt of caffeine. They also want healthy, low-sugar or sugar-free offerings. Sparkling water ticks a lot of those boxes, and American consumers are buying more of it. Research company Mintel estimated that retail sales of seltzer in the United States more than doubled from 2013 to 2018.

"As the largest and fastest-growing part of the water business, mainstream flavored sparkling water is a segment we know we must double-down on," Celina Li, VP, Water, Coca-Cola North America said in a press release. "AHA is our big-bet brand in this big-bet category."

AHA joins Coca-Cola's portfolio of sparkling water as the company searches for cola alternatives. It launched a sparkling version of Dasani in 2014, which AHA will replace. It will keep selling Smartwater Sparkling, the company's enhanced premium offering, as well as mineral water brand Topo Chico.

"Sparkling water has had another very big year, and we are well-positioned to increase our presence in the category in a big, bold way," Li said in the release.

Sales of Coke's sparkling water jumped 27% in 2018, according to Nielsen data provided by Coca-Cola. Spiked seltzer, an alcoholic companion, is also experiencing a surge in sales.

The launch of AHA sent La Croix's parent company, National Beverage, stock down more than 7% in early trading.

To regain La Croix's "it" brand status, National Beverage slashed prices, which is shrinking the company's profit margins. Analysts have also slammed the company for not innovating. The company's stock is down more than 40% this year.

Another competitor for Coca-Cola and National Beverage is Bubly from Pepsi. The zero-calorie sparkling water launched last year and is also growing portion of Pepsi's business. A variety of smaller rivals also exist, including Spindrift and Zevia.

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