The Business of Water: How to Get Your Feet Wet

Today’s bustling market features so many unique ideas that investors can choose from. We’ve seen the most innovative products and start-up companies — from edible food coating that help fresh produce last longer, to ghost radar apps that show if there’s a paranormal activity happening.

But when it comes down to tried and trusted investment options, it is best to stick with something that’s not just simple but necessary — like water. When you stop and consider something that we otherwise won’t give much thought, water plays an essential role not only to our health but to other businesses as well.

The Street points out that water is necessary for hot commercial products like chocolate or wine, using about 872 gallons of water for one gallon of wine or 2,061 gallons of water for one pound of chocolate.

And when it comes to drinking water, sources are actually very limited, so investing in clean, drinking water would show that it’s a viable option for those looking for a lucrative investment.

But where do you start?

Consider the numbers

If you’re still on the edge whether or not you should start investing in water, know that bottled water has significantly beat soda as the drink of choice among consumers in the U.S. According to IFT, the volume of bottled water significantly grew from 11.8 billion gallons in 2015 to 12.8 billion gallons in 2016, a 9 percent increase which is seen to be carried out in the coming years.

In fact, for more than a decade now, analysts have been seeing a decrease in soda sale for over a decade now, and Big Soda companies are said to be struggling in securing market loyalty compared to water. And it’s not just soda — even alcohol sales are going down by as much as 15 percent as more people now prefer a healthier alternative.

Big soda companies like Coca-Cola or PepsiCo are more likely to purchase or acquire smaller water companies than actually come up with a new product line in-house. These companies are acutely aware of the potential of premium bottled water brands. A key example of this is Coca-Cola’s S4.1 billion acquisition of Vitaminwater in 2007. Since then, the soda giant has some 400+ brands over the last 15 years.

Where to start

Now if you’re an investor and you’re convinced about the healing properties and exciting possibilities of the water business, where do you begin? Well the business of water is not only diverse but a little complicated, so let's break it down:

Water technology

According to Market Watch, it’s a good idea to start investing in companies that most water companies use such as vendors of pipes and pumps, but it’s best to support companies that bring a better premium service such as environmental services that help clean, purify and distribute water, especially to areas that really need it.

According to Hubert Aarts, Impax Asset Management Ltd, Portfolio Manager of Pax Global Environmental Markets Fund PGINX, “technological advances are changing the ways in which water is managed and used, giving rise to a range of investment opportunities.” He pointed out that the U.S. loses approximately six billion gallons of treated water annually because of poor infrastructure, so there is a strong need for it.

Low-cost exchange-traded funds

Exchange-traded funds, or ETFs, are also another investment vehicle an investor can ride on. This opportunity gives access to water-related stocks for a minimal fee.

Water rights investment

Water rights is an investment option that gives investors access to water from sources such as lakes, groundwater, and rivers. This works by getting the rights to use water from these clean sources which can then be charged to companies that aim to use it. Most of the time these could be farmlands and cities with no clear source of water. There are websites that show where you can get access to companies to invest on such as waterrightexchange.com or waterbank.com.

Investing in farmlands

This is a bit complicated and unconventional but investing in farmlands that have good access to a water source is a roundabout way of investing in water. Offering these spaces might just be what organic producers are looking for and you can earn some delicious profit from owning or investing in these lands.

Consumer trends in bottled water industry

Global market revenues and volume consumption will be driven by the consumers' increasing health consciousness, hygiene awareness and the shortage of well-developed public water infrastructure in some places.

The consumer preference for convenient bottled water that tastes better have also prompted manufacturers to introduce fresh products in the market — ones with new flavors and various health benefits. According to a market overview, “Increasing disposable income and consumer preferences for bottled water over aerated drinks and rising demand for functional and flavored water are expected to further fuel demand for bottled water across the world.”

The case study: Alkaline88

Let’s put all of these into practice. One of the hottest beverage sectors is premium bottled water and the Alkaline Water Co. (NASDAQ:WTER) (CSE:WTER) stands out as a hyper-potential investment target in this sector. This Arizona-based company is behind the wildly popular Alkaline88 brand which can be found in more than 47,500 points of retail worldwide.

The company has experienced phenomenal growth of over 425% over the last four years and still has plenty of room for organic growth. In November 2018 the company experienced the highest monthly sales in its history and the Alkaline Water Co., recently got approval to have its stocks listed in the NASDAQ Market.

Despite this success, the company is not resting on its laurels. WTER is also testing the waters of CBD-infused beverage through the A88 Infused Beverage Division, Inc. (A88 infused) with the aim of creating innovative, health-focused, infused water products, most notably CBD-infused water. The company has partnered with American national Products Inc. (ANP) to kickstart the development and distribution of its own CBD-infused water line.

These features make WTER a prime acquisition target for the likes of Coke or PepsiCo. The first thought on any investor’s mind should be the exit strategy. In the beverage industry, this is generally acquisition by an industry giant, any investor who can figure out what Coke wants before Coke knows it is set to succeed.