Amazon is no stranger to private-label products. Amazon Basics, its private-label brand, sells everything from yoga mats to iPhone chargers to bed sheets. But now the Everything Store--through Whole Foods' brand 365 Everyday Value--is going after the fast-growing sparkling water market.
According to Quartz, Amazon is selling 12 packs of 365 Everyday Value flavored sparkling water at a deep discount for Amazon Prime members. If Prime members download the Whole Foods app and sign in, they can get two 12 packs for $3.99. "It's also a clear shot at LaCroix," Quartz writer Alison Griswold notes, pointing out that a 12 pack of the Millennial favorite goes for $5.99 at Whole Foods stores in San Francisco.
"The deal highlights how Amazon is using Whole Foods ... to go after some of the hottest brands in consumer-packaged goods," Griswold writes. "Whole Foods introduced 365-branded canned sparkling water in September 2017, a month after Amazon closed the acquisition."
A Whole Foods spokesperson told Quartz that the drink is available nationally. The spokesperson also said that Whole Foods' 365 seltzer was in the works before Amazon acquired the grocer.
If Amazon plans to expand its private-label business into other consumer packaged goods, seltzer is a good place to start. According to Mintel, soda sales hit a 30-year low, and sparkling water sales have gone up 15 percent each year for the past three years, reaching $2.7 billion. "Seltzer is on fire. It is exploding right now and extremely competitive," says Chris Hunter, who co-founded the hit alcoholic drink Four Loko, and is now running plant-based protein drink company Koia.
It's taken 30 years for LaCroix to become an overnight success. In the 1980s, the Midwestern sparkling water was marketed as the anti-Perrier. But in recent years--after being purchased by National Beverage Corp. in 1992--it's become a cult favorite among Millennials, with its Instagram-friendly colorful cans. According to Alex Beckett, associate director of market intelligence firm Mintel Food & Drink, the brand enjoyed 50 percent growth in 2017, becoming the fastest-growing brand in the sparkling water market.
Now industry giants, from PepsiCo to Coca-Cola to Nestle, are all releasing their own sparkling water brands. Bubly, by PepsiCo, echoes LaCroix's playful branding style.
Meanwhile, private-label sales continue to soar. According to another Mintel report, private-label sales, which reached $78.9 billion in 2017, will grow at a faster pace in the next five years and could reach $90 billion by 2022.
Which means seltzer is likely the first hot product Amazon is eyeing with its Whole Foods private-label line. Who could be next? Any trendy, high-frequency, commoditized product, says Mintel. The likelihood that customers will buy store brands is only going up--about 61 percent of consumers say store-brand drinks and food are as good as name brands and only 43 percent say name-brand products use better ingredients.
Koia's Hunter, who sells his plant-based protein drink in Whole Foods, says he's noticed how all retailers have "aggressively" expanded their private-label lines. "A lot is changing in the retail landscape. Retailers are always looking for ways to increase their margins, so private labels are real threats [to brands]," he says.
When asked what a brand can do to fight private-label competition, he says the best defense is making sure your product is more than the sum of its ingredients. "If it's just about the liquid that is in the can or bottle, then [private label] could be a real threat," says Hunter. "If you haven't solidified what your brand stands for and the experience for consumers, [a private-label product] could hurt you. You need to establish your brand and give it meaning."