As the sales of traditional diet colas, including Diet Coke and Diet Pepsi, fall, the sales of another diet cola are surging. But the comparison might be a little less obvious than that, because the product that is gaining ground doesn’t call itself a cola. Rather, it takes the designation “sparking water” and highlights the presence of fruit extracts in its recipe. Even though all these beverages promise something similar—low or no calorie options, carbonated drinks, infused with artificial flavors and sweeteners—consumers regard them as different product categories. And that perception is making all the difference.

The Sparkling Ice brand of carbonated water is officially a diet soda. However, its packaging in clear bottles sets it apart from the conventional 12-ounce cans used to package traditional colas. The pictures on the bottles heavily emphasize the fruit flavors and include marketing promises such as “naturally flavored” (which is allowed because the beverages contain 3 percent fruit juice). The mixes of these juices in turn create a variety of unusual flavor profiles (at least in the cola market), such as pomegranate raspberry, black cherry, and orange mango. The company also has worked to ensure that in grocery stores, it appears on shelves next to bottled water options, not in the cola section. This placement effort will continue as it implements its plans to expand into convenience stores and school cafeterias as well.

Such marketing tactics appeal effectively to today’s consumers for several reasons. A key one is the desire for healthier options. People are generally aware that colas, including diet versions, are not particularly healthy options, whereas the marketing for Sparking Ice suggests that the beverages are providing the benefits of fresh fruits. Furthermore, some observers suggest a sense of “cola fatigue,” such that consumers are tired of the same old flavors and brands and looking for something new and different. In this pursuit, they also are exhibiting a growing distrust of big corporate brands, whereas Sparkling Ice can present itself as a smaller, more authentic upstart.

At least, it can present itself that way for now. But its growth has been remarkable, including an 18 percent increase in U.S. sales last year. It thus earned $636 million, even as the big name players in the cola market were suffering sales declines.

Discussion Questions:

1. What tactics does Sparkling Ice leverage to set itself apart in the carbonated beverage market?

Source: Mike Esterl, “Sparkling Ice Floats Higher as Other Diet Sodas Go Flat,” The Wall Street Journal, July 21, 2016.