Is LaCroix losing its fizz?
- National Beverage Corporation, maker of LaCroix sparkling water, blamed "injustice" for much of its disappointing third-quarter sales results released last week. Quarterly sales fell for the first time in five years, The Wall Street Journal noted, and the company's share price dropped 14.7% on March 8.
- While National Beverage Chairman and CEO Nick Caporella apologized for the third-quarter results, he didn't explain the source of the alleged "injustice" in the earnings release. But it likely relates to a class-action lawsuit filed last year — and another one filed in January — claiming that "naturally essenced" LaCroix contains non-natural and synthetic compounds.
- "Managing a brand is not so different from caring for someone who becomes handicapped," Caporella said in the release. "Brands do not see or hear, so they are at the mercy of their owners or care providers who must preserve the dignity and special character that the brand exemplifies. It is important that LaCroix’s true character is not devalued intentionally — in any way."
LaCroix has been at the forefront of the flavored sparkling water trend for a long time, but it’s no longer the only kid on the block. A number of competitors have emerged to challenge the brand. These lawsuits may have also tarnished its reputation, and the CEO's blame game doesn't seem to be helping.
According to MarketWatch, a company spokesman clarified the "injustice" Caporella mentioned in the third-quarter earnings report was referring to the class-action complaint. The spokesman also addressed Caporella's much-criticized remark that managing a brand was similar to "caring for someone who becomes handicapped" by saying the CEO meant "it just requires a lot of tender, loving care."
Dominating a popular niche such as sparkling water inspires other beverage companies to try and knock a product off its high perch — and there have recently been a number of these efforts. Some of the larger competitors challenging LaCroix include PepsiCo's bubly and its recently acquired SodaStream; Topo Chico, the Mexican sparkling water brand Coca-Cola acquired in 2017; and Nestlé's regional sparkling spring water line.
LaCroix is still a major player in the space. According to a recent ranking of sparkling water brands from Best Products, LaCroix's Pamplemousse flavor — French for "grapefruit" — made the No. 3 spot on the list, only lagging behind Recess' Sparking Water Infused with Hemp Extract & Adaptogens in the top position and PepsiCo's bubly Sparking Water Variety Pack at No. 2.
LaCroix says its products are "naturally essenced," yet the legal complaints assert they contain synthetic ingredients. The 2018 lawsuit stated these include ethyl butanoate, limonene, linalool and linalool propionate, and that linalool is used as a cockroach insecticide. The company has denied these claims and says the flavors in LaCroix come from natural essence oils derived from fruit. National Beverage recently stated in a court filing reported by Food Navigator that lab tests prove claims made in the more recent lawsuit are false.
Still, the better-for-you trend may be hurting LaCroix since the product only lists two ingredients — carbonated water and natural flavor — and there is no Food and Drug Administration definition of "natural" to help consumers understand what that means. Removing the term from product labels might help manufacturers avoid lawsuits, but then sales could drop because plenty of consumers want to buy natural products.
It will be interesting to see how National Beverage proceeds to get LaCroix back on top. Progress may depend on how the lawsuits turn out. If they're both dismissed, it could help the company regain lost market share. Meanwhile, changes to the ingredient list might be a good move to assure consumers there are no synthetic substances in LaCroix products. Given today's trend toward more transparency, no company wants customers questioning its product's ingredients.
Another next step could be for Caporella to retire, but since he's not only chairman and CEO, but National Beverage's controlling shareholder, it's not clear whether he could be forced out. Yet with the Financial Times calling the earnings release a possible addition to "the pantheon of all-time bizarre public company interactions" — Caporella might have become more of a liability than LaCroix and National Beverage can handle.
- National Beverage Corp. “WE JUST LOVE OUR LACROIX” CONSUMERS CHANT
- MarketWatch LaCroix maker’s CEO compares job to caring for a handicapped person, blames ‘injustice’ for poor sales
- The Wall Street Journal LaCroix’s Sales Bubble Pops; Stock Tumbles