What s up guys! It s Jason here and welcome to my YouTube channel, Sparkling Water Insight.
When you think of sparkling water, you may conjure images of the well-to-do sipping San
Pellegrino or Perrier in their signature emerald green bottles, possibly by the beach, on a
yacht, or at a trendy eatery. That s largely been accurate until the emergence of another
sparkling water option that not only signals that you re likely affluent, but also hip
- and that option is none other than the flavored sparkling water brand, La Croix. The subject
of many debates about how to pronounce its name (it s La-Croy and if it s really good
for you, and what naturally essenced sparkling water actually means, LaCroix is not French,
but from La Crosse, Wisconsin. It s been around since the 1980s, but we re going to take a
deep dive into how a Midwestern brand conquered the wallets of many hipsters and wannabe hipsters
alike, when did LaCroix become popular and what is so special about La Croix? By the
end of this video, you ll know exactly what problems the drink is encountering now.
Before we begin If you wouldn t mind just tapping that LIKE button for the YouTube algorithm,
I would really appreciate it. The more engagement a video like this gets, the more likely the
YouTube algorithm is to push it out to more people to enjoy. And as this is a brand-new
channel I started this year, it helps me out and it s free to do. I also respond to all
comments. If you enjoy drinking sparkling water to be healthy and stay away from soda,
be sure to subscribe and hit that notification bell for new videos each week. Thanks for
doing that and now let us continue on with is LaCroix good for you.
History & Branding
From 2015-2016, LaCroix s revenue increased by 72.7% with its owner, Florida-based National
Beverage Corp., having net sales of $826.9 million in 2017 in comparison to just $662
million in 2013. LaCroix really cemented its place as the it millennial, non-alcohol drink
around that time, but LaCroix first hit shelves in 1981. Prior to being acquired in 2002 by
National Beverage Corporation, it was founded by Midwestern brewing company G. Heileman
Brewing Company. In stark contrast to its current brand positioning, LaCroix was initially
marketed as the Anti-Perrier brand for customers who were put off by the perceived snobbiness
of Perrier customers. At the time, the can s packaging looked a bit different with a
zig zagged line through Croix and color blocking. Nonetheless, as one reporter from the Midwest
notes, in the 1990s, LaCroix was not cool or trendy, unless you were a teenage camper
who was legally unable to drink alcohol and so settled for LaCroix, or a mom trying to
be healthy with her friends. It was a staple at the local WalMart and it was produced in
factories domestically in the United States, not from a natural water source in southern
France as for instance, Perrier claims.
In 2002, once National Beverage Corp. acquired LaCroix, the company recognized that it needed
to rebrand LaCroix to help it grow beyond its midwestern roots. Surprisingly for National
Beverage Corp., once they enlisted the help of branding firm Alchemy Brand Group, they
didn t get the response they were looking for. Alchemy Brand Group came up with several
options for the company s executives to choose from, ranging from stoic and simple to the
web of color that LaCroix is today. While the company s executives preferred the clean
and plain designs on offer, surveyed consumers overwhelmingly preferred the bright hodgepodge
of colors and paint-like font that makes LaCroix instantly recognizable today. Ironically,
despite the branding sometimes attracting criticism from your pseudo-sophisticated designers,
in 2003, the newly revamped 12 oz can actually won the Gold Global Design Award for packaging.
It showed that not unusually, consumers do know what s best for them and what they like
and dislike. When surveyed, what they liked about the packaging were the waves that some
consumers described as Picasso-esque. That aspect, along with the use of often bright
or pastel color combos made it stand-out among the very simple, minimalistic branding of
San Pellegrino and Perrier. It was also the perfect way to distinguish it visually from
what it was marketed in contrast to: sugary, unhealthy sodas. LaCroix s rebranding came
at the perfect time for it to ride the wave of burgeoning interest in drinking alternatives
to soda among adults and the children who come under their care. Indeed, a Harvard study
even confirmed that from 2003-2016, the percentage of adults who drank in excess of 500 calories
of soda actually dropped from 13 to 9%. The increased risk of diabetes, obesity, and heart
disease usually correlated to excessive soda consumption finally hit home in the United
States among adults, but it s a chicken-and-egg dilemma if we try to figure out if LaCroix
merely rode a preexisting wave of health consciousness, or if it inspired it. Or perhaps a bit of
both.
Steady Growth & Expansion Whatever the case may be, LaCroix has been
on a roll since soda consumption has declined and sparkling water, especially flavored sparkling
water, has become the healthy carbonated alternative. This is in the bigger picture of a general
shift towards bottled water, rather than water straight from the tap as well. More specifically,
in 1988, the average American drank less than four gallons of bottled water, whether sparkling
or still, for the entire year. Fast forward to 2015 and the average American now consumed
37 gallons of bottled water. The International Bottled Water Association even outlines that
from 2003-2014 (except 2009), American consumption of sparkling water has increased with consumption
at 153 million gallons in 2003 and almost doubling to 338 million gallons in 2014.
The National Beverage Corp. were taking notes and in addition to their advantage of having
flavored water that was conveniently manufactured in 12 domestic plants that they owned, they
were able to quickly ship LaCroix to as many stores that wanted them, including more upscale
chains like Whole Foods. It was a crucial distinction that allowed LaCroix to gain attention
beyond the cost-conscious crowd at Target and Walmart. National Beverage Corp. owning
its own production facilities helped LaCroix scale rapidly because it didn t have the pains
of having to negotiate and just terms according to a third-party manufacturers terms and schedules.
As it expanded its number of retailers, it also tried to stay innovative by expanding
its range of flavors. In 2004, LaCroix had only six flavors: pure, lemon, lime, berry,
orange, and cran-raspberry. Those six flavors were not by accident. They targeted the flavors
that diet soda drinkers were already familiar with because they would be one of the demographics
most receptive to healthy sparkling water drinks that had the pop of, well...pop. By
2015, LaCroix had twenty flavors, including more exotic offerings such as melon pomelo,
kiwi sandia, and mure pepino. Luckily for most consumers, the cans also have photos
of the fruits that contribute to the natural essence that makes LaCroix LaCroix.
Unlike competitors such as Coke and Pepsi, who typically advertised in more traditional
formats such as the Super Bowl and TV ads generally, LaCroix mostly avoided going the
easy but expensive route. With smart marketing, LaCroix has managed to bamboozle hipsters,
the fitness-obsessed, and the general upper-middle class into believing its authenticity as the
best kept secret only you and your friends were hip enough to know about. That authenticity
led to their core millennial audience becoming organic advocates for them on social media,
as LaCroix focused its efforts on Instagram and partnerships with influencers in particular.
LaCroix s former brand digital strategist specified that the brand targeted millennials
who were highly engaged on Instagram and responding to every Instagram user who tagged the brand,
regardless of their number of followers. No user was too unimportant to interact with.
However, users who had larger followers sometimes received perks for showcasing their LaCroix
lifestyle on Instagram, with some fans receiving vouchers for cases of LaCroix. That strategy
obviously worked because within eight months of it joining in 2015, it grew from 4,000
to 30,000 followers. As of 2021, LaCroix has 184,000 followers. Other sparkling waters,
such as Perrier has 46,800 followers, while even San Pellegrino still trails LaCroix at
104,000. In addition to partnering with micro-influencers
on Instagram, LaCroix officially partnered or otherwise associated with social media
trends such as Whole30, a nutritional program that is advertised as a holistic path towards
losing weight and better health. The name Whole30 alludes to the program s intention
for followers to see significant improvements in their eating habits, weight loss, and self-confidence
in 30 days. It made perfect sense for LaCroix to become Whole30 s partner in health, as
described in their press release. It s another validation point for LaCroix s health-conscious
consumers. Though there are still naysayers out there
who doubt the impact of social media on sales, encouraging user-generated content on Instagram
only added to their advantages---and sales. So much so that at its peak in 2015, LaCroix
became a category leader in 41 of all 52 metro areas in the US. Absolutely not a small achievement
for a midwestern brand, and its competitors soon took notice. PepsiCo Inc. came up with
bubly, a flavored sparkling water that is fashionably all lowercase and takes plays
right from the LaCroix book of marketing: floral, bright colors and encouraging user-generated
content with a GIF creator on its site. Coca-Cola Co. followed soon in 2017 with Topo Chico,
a Mexican mineral water that already had an established band of diehard fans. Having giants
join the flavored sparkling water field only increased competition for LaCroix and unfortunately
for the brand, in 2017 it began to get a bit stagnant. For the first time in a long time,
in July of that year, sales fell by more than 15% compared to 2016, while Bubly s sales
increased by about 96%. Some Kinks to Work Out & Future Plans
Since 2017, LaCroix s explosive growth slowed down and it ceded a bit of market share to
its many rivals --- mostly those backed by veteran players in the industry. It didn t
help that National Beverage Corp. s chairman and CEO, Nick Caporella, has ruffled some
feathers with employees who complain he is hard-driving and idiosyncratic. His unwillingness
to compromise with retailers who wanted to discount LaCroix to continue selling them
well in the face of stiff, much cheaper competition, were rebuffed. Instead, LaCroix seemed to
take delight in being contradictory and raised their prices while also reducing their marketing
spend. In a case of tit-for-tat, in 2018 Whole Foods
made LaCroix sweat. In response to the company refusing to provide discount and promotion
concessions, Whole Foods gradually reduced prominent in-store space that previously featured
LaCroix exclusively, and began to replace them with competitors like Bubly. Interestingly,
what had made LaCroix and National Beverage Corp. successful---their disinterest in cutting
a deal or playing favorites with any retailer, came back to sting them in the case of Whole
Foods; especially since their higher-income, millennial customers are also Whole Foods
main customers. It didn t help that in October of the same
year, National Beverage Corp. faced a lawsuit from a consumer who targeted the alleged healthiness
of LaCroix. The claim was clickbait worthy and scary, if true --- that LaCroix marketing
itself as all-natural was false because it had synthetic chemical compounds that included
an ingredient used in cockroach insecticide. Though the lawsuit was actually retracted,
it still harmed LaCroix s reputation. To add insult to injury, in June of 2018, one of
LaCroix s former executives alleged that the company prematurely announced that LaCroix
fans would be devoid of BPA, even though LaCroix was at least months away from transitioning
away from harmful BPA liners. When the concerned executive voiced his opposition to the announcement
while the company still planned to use up all of their remaining, BPA-lined LaCroix
cans. The consecutive accusations of LaCroix being literally toxic forced the company to
go on the defense. It also put the credibility of National Beverage Corp. s leadership on
the line. Caporella has managed to stage off a total
coup d'etat by putting his money where his mouth is: stronger sales. In its first quarter
earnings for 2019, LaCroix s revenue increased by 12.6% and gross profit increased by 10.7%.
The stiff competition for consumers wallets led LaCroix s leadership to invest in its
logistics system to compete with Pepsi and Coca-Cola s mammoth distribution centers.
LaCroix s success in Canada also led to the leadership doublin-down on the need to explore
packaging and distribution options to expedite the introduction of our sparkling waters into
additional channels and markets. And that brings us to today. Along with that physical
expansion, LaCroix is working on continued innovation with a focus on flavors inspired
by Latin America and Mexico. It makes logistical sense as it would be easy for the company
to do consumer research given that it s headquartered in heavily Hispanic Fort Lauderdale in Florida.
Whether LaCroix continues to dominate the flavored sparkling water industry remains
to be seen, but given that the company was able to transform from a little known, midwestern
no-name brand to a profitable and fashionable millennial brand, let s not write off LaCroix
just yet. So with that said, thank you so much for watching
my video. There was a significant amount of research, production and sparkling water drinking
that went into making this video possible. As this is a brand-new YouTube channel I just
started this year - if you enjoy videos like this, please click the subscribe button and
hit that notification bell! Do leave a comment as I respond to all of them. If you haven
t seen already, check out my video on the Rise and Fall of Orbitz Soda or the Rise of
White Claw hard seltzer. As always, stay happy and healthy and stay tuned for another episode
of Company Insight next week.