Dive Brief:
- The Alkaline Water Company, which makes general wellness-targeted Alkaline88, acquired AQUAHydrate, another company in the alkaline space part owned by Mark Wahlberg, Sean "Diddy" Combs and Jillian Michaels. The company estimated the new entity will have more than $65 million in sales in FY 2020. The deal was all in stock.
- The acquisition is the first for the publicly traded Alkaline Water Company. It consolidates two of the leading companies in the space and brings several synergies in customer base, distribution channels, social media and marketing, and manufacturing, CEO Ricky Wright told Food Dive. "We believe wholeheartedly that the merger is going to be one plus one equals three," he said.
- AQUAHydrate will slowly merge its operations into Alkaline Water, but the celebrity investors and staff will stay on. Wahlberg and Combs are retaining shares, while Michaels is staying on as a brand ambassador. The merged company will work together on developing and marketing both flavored and CBD-infused varieties of alkaline water.
Dive Insight:
Premium water is big business, and this acquisition is further proof. Wright said he believes alkaline water will be a $1 billion category in the near future as more companies and consumers reach for the higher pH beverage. According to Zenith International statistics cited by Beverage Daily, sales for alkaline water rose 18% to $631 million in 2017. In its recent earnings report, Alkaline Water reported $10.2 million in sales during the quarter, up 28.8% from the year before.
Alkaline water goes through a process to increase its pH. Some say this kind of water is better for health, neutralizing acids, improving blood flow, slowing aging and preventing chronic disease. Experts say there isn't much in the way of concrete science to back those claims up, and it's led to consumer litigation.
This acquisition covers the bases of the product's target consumer. Some alkaline water is marketed as beneficial for general wellness, which is the sweet spot of Alkaline88. AQUAHydrate is targeted toward athletes and young active consumers, which is apparent from its celebrity investors. According to information sent to Food Dive, Wahlberg first discovered the brand when training for a role as a boxer and discovered the alkaline water made him recover from workouts more quickly. AQUAHydrate's website is full of endorsements from other athletes, including Olympic gymnasts, soccer players and weightlifters.
The endorsement and involvement of celebrities in AQUAHydrate make the acquisition especially valuable. It shows they have a personal connection to the brand and helps elevate the name-recognition of the product, which generally results in an increase in sales. Wahlberg is known for his physical acting roles, while Combs is a music icon and Michaels is a fitness guru — all of which help build the prominence of the brand and the overall alkaline water product.
While there is little scientific proof that alkaline water is better, the segment is getting larger. Brands like Essentia and Flow fill shelves and promise premium hydration. Alkaline variations have been developed by Keurig Dr Pepper's Bai, and PepsiCo's LIFEWTR also has a slightly higher pH than regular water.
Major beverage players are beginning to enter the alkaline water space, but they appear to be moving cautiously. LIFEWTR is not advertised as alkaline water, and Bai's product in the space is branded as antioxidant water. Keurig Dr Pepper bought Core Nutrition — another premium water brand with a higher pH that doesn't put "alkaline" on the label — for $525 million last year. More than a year ago, Essentia hired Credit Suisse to handle a sale — though sources quickly told BevNet the company was not yet putting itself up for bids. Last summer, preliminary figures put the company's value at about $500 million. To date, the company is still independently owned.
While Alkaline Water's products on the market so far just include unflavored Alkaline88, the company has been developing both flavored and CBD-infused versions. The flavors are currently being tested with some retailers, but the CBD varieties will not go on store shelves until there is more clarity from the Food and Drug Administration on sales.
While some CBD brands are selling themselves in individual states, Wright told Food Dive that because his company is publicly traded, he does not want to jeopardize his listing. However, he said, the company is ready to sell their products as soon as there is FDA clearance, and they have worked on CBD products to add to the AQUAHydrate line as well.
Wright told Food Dive that with this acquisition, he's hoping to build Alkaline Water into a category leader. By continuing this growth, he thinks that maybe his company could eventually be the one that Big Food — or a cannabis company — decides to acquire.
"There's a ton of stories still to be told. And, you know, at some point in time, someone may want to take that story," he said.