Essentia, a functional water company based in Bothell, Washington, has tapped Credit Suisse to handle a sale of itself, according to CNBC, which quoted unnamed sources in its report.
The company has an estimated $100 million in revenue and could attract bids in the range of $500 million or more, CNBC reported.
The sources told CNBC that some of the largest U.S. food and beverage companies might be interested in buying Essentia, including Nestlé, Danone North America, PepsiCo and AB InBev.
It's hard to tell at this point which larger firms might want to bid for the Essentia brand. Its competitors — such as Core Hydration, which Dr Pepper Snapple distributes and partially owns, Coca-Cola's Smartwater and PepsiCo's LIFEWTR — are part of the trendy functional premium water category. This is a $2.1-billion market, according to Campaign, so there is likely to be considerable interest.
Big beverage firms might relish the chance to increase their presence in a space where sales continue to climb and grew by 6% between 2016 and 2017, according to Euromonitor statistics cited by CNBC. Technavio analysts projected the global functional water market will show a compound annual growth rate of nearly 9% between 2018 and 2022.
Large beverage companies looking for innovation and diversification have recently acquired functional and enhanced water startups. These include Bai Brands, which sold to Dr Pepper Snapple in 2016, and KeVita sparkling probiotics, now part of PepsiCo. Essentia may be looking for a similar deal while values remain high, CNBC noted. Functional health claims also have a built-in attraction for consumers interested in better-for-you foods and beverages — and who are willing to pay more for them.
Essentia seems to be doing well — the company says it sold $124 million worth of product last year, doubling its revenue — so selling to a larger firm may be more of a strategic move to align with a major company that could help it acquire scale and sufficient investment to push it to the top of the premium water pack. According to Campaign, sales in January and February exceeded expectations, and Essentia expects to hit triple-digit growth in 2018. Major ad campaigns in subway stations, including the Washington, D.C., Metro, also demonstrate Essentia's previous success — and display its potential.
Should a larger beverage company buy Essentia, it could further consolidate the premium functional water market and disrupt smaller startups looking to gain a foothold in the category. It may also encourage other functional water brands to sell themselves or potentially inspire big beverage companies to snap up other competitors.
Founded in 1998, Essentia made functional claims early on through its proprietary ionization system. The process takes water sourced at public water systems across the country, filters it and comes out with ionized alkaline water with a pH of 9.5. The company markets the higher alkaline content as better for rehydration, although the Center for Science in the Public Interest said that the evidence for that and other health-related product claims is skimpy and that alkaline water is a waste of money.