After decades of steady growth as consumers increasingly seek out healthy options for quenching their thirst, bottled water sales finally surpassed carbonated soft drinks in 2016 to become the largest beverage category in the US. The global bottled water market is forecast to surpass $217 billion by 2027 with an annual compounded growth rate of 13.5%, and Alkaline Water Company Inc. (NASDAQ: WTER) (TSXV: WTER) is building on its past success in the bulk water market by moving into the convenience store market with its single serve Alkaline88 sizes and new flavor infused product line in order to win an even greater share of this red-hot market.
New Flavors, Sizes and a Larger Market
Alkaline88®, the company’s flagship brand, is most popular in bulk sizes, offered in 1-gallon and 3-liter bottles and sold through retail chains like Walmart, Albertsons/Safeway, CVS Pharmacies, and Kroger, with US distribution to more than 50,000 stores. Utilizing strategically located co-packing facilities throughout the country to meet demand efficiently and without the added cost of permanent, wholly-owned infrastructure, the company recently embarked on a national convenience store roll-out, expanding its Alkaline88® offering to include all natural flavor infused alkaline waters, available in raspberry, watermelon, lemon and blood orange to further expand its market footprint. The Alkaline88 flavor infused line features four all-natural alkaline waters, infused with a hint of flavor. The products will be sold in 500ml single serving sizes, packaged in a PET 1 BPA free bottle. These new products are a natural extension of the existing product line which is focused on creating healthy, all natural beverages without the use of any added chemicals.
“We are thrilled to officially launch our new A88 Infused Beverage products and make them available to retailers and consumers. We are confident that people will love the new flavors. Introducing the new product line at these events will enable leading retailers in a variety of distribution channels to sample these exciting new products first-hand,” noted Richard A. Wright, President and CEO of The Alkaline Water Company Inc. “The debut of our A88 Infused Beverage Division Inc., is just another example of our commitment to delivering strong growth that we expect will yield continued value for our shareholders.”
The company announced in March that during the first month working with EA Berg to expand its retail presence, it added more than 1,100 new convenience stores to its distribution network throughout Texas and California, augmenting its network of distributors with additions such as PITCO Foods, which sells Alkaline88® to over 12,000 retail stores in Northern California and Reno, Nevada. EA Berg’s sales agents use customized vans prominently displaying the Alkaline88® logo to raise brand awareness and cover more than 16,500 convenience stores throughout its territories.
Buoyed by the expansion, Alkaline Water’s quarterly report for Q2 of its Fiscal Year 2019 showed a 78% increase over the same quarter last year, with sales totaling $8.6 million, and recently reported record sales of over $3.8 million for the month of May alone. The company expects revenue for the year to significantly increase, with estimates in the range of $32 million. These numbers are based solely on Alkaline88 sales, and do not include the company’s upcoming roll-out of its new flavor infused alkaline water and hemp/cbd infused water.
Move into the Cannabis Space
Alkaline recently unveiled A88 Infused Beverage Division, which is currently gearing up to begin distribution of its Hemp and CBD-infused Soothe-branded water, beginning with flavored and Hemp/CBD-infused versions of Alkaline88, as state and federal regulations allow. The timing couldn’t be better, as the 2018 US Farm Bill became law in December, finally enabling the production and processing of industrial hemp in the US. Prior to the Bill, the US was the only industrialized nation with a ban on hemp, putting US companies working in or wishing to enter the steadily expanding hemp and hemp-derived markets at a distinct disadvantage.
Alkaline’s existing infrastructure, brand recognition, considerable retail footprint, not to mention its vast experience within the beverage market, lend it a distinct advantage over competitors, most of which are cannabis companies looking to move into the functional beverage market.
The company has partnered with Infusion Biosciences to provide a solution to the problem of the insolubility of hemp-derived cannabinoids, whereby the efficacy of most hemp-extracted products is restricted by the insoluble nature of their molecules, which prevents most of the product from entering the body. Infusion Biosciences’ scientists have developed a proprietary Aqueous Phytorecovery Process for directly recovering water soluble forms of lipids, or oils, including cannabinoids and terpenes, which naturally exist in cannabis and hemp plants. This technology enables a uniform distribution of CBD, and the partnership means that Alkaline will be one of the first to introduce beverages containing water-soluble, full-spectrum bioactive natural hemp extract molecules to the US market.
Commenting on the partnership, Wright added in a press release “These proprietary formulations will allow us to infuse water-soluble cannabinoids without the use of any chemicals or additives. Being truly water soluble, they will absorb through the stomach and the small intestines, therefore allowing for rapid absorption within minutes. Combining this science and technology with the power and integrity of the Alkaline88® brand is expected to create a market-leading approach to the fast-growing hemp-infused beverage category.”
Extract-based products are dominating the cannabis market, as consumers look for healthy options that allow them to enjoy cannabis without smoking, and offer increasingly specific experiences, consistency, and accurate dosing. Functional beverages are predicted to capture a sizable share of this market as companies introduce infused products.
Alkaline Water Company is predicted to fare especially well as it joins the ranks of the nascent cannabis industry, and with a number of advantages over cannabis companies making the move into the beverage market, investors would be wise to consider adding them to their existing cannabis portfolios.
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