Liquidity
It’s our most basic necessity, yet it has become an unexpected status symbol. Water is getting a glow-up, and the money is also flowing into adjacent industries.
Gold, silver, diamonds… natural resources typically have to be scarce to turn into investment options or bragging rights. But recently, a very abundant commodity has joined that rank: water. While some drink from the humble tap, others sip fancy, glacier-originated H2O from branded bottles, or even create coloured and flavoured concoctions, to bring hydration to another level – while also chasing likes online.
Take WaterTok, the social media wave where influencers film themselves chugging fruit- and syrup-infused liquids, encouraging others to stay hydrated with their recipes. With more than 85,000 different videos on the topic and a hashtag with over 94 million likes, the trend initially erupted to make water more palatable for people who have undergone bariatric surgery, as many struggle to meet their daily intake due to water nausea.
The recent buzz is not limited to the water you drink, but what you drink it from. Stanley quenchers have grabbed most of the spotlight, turning a company once known for its utilitarian camping thermos into a lifestyle brand making more than US$750m annually. The variety of colours, designs and limited editions of its 1.2 litre cup won the hearts and minds of customers worldwide. This momentum has been dampened since it became public that lead is used in the sealing of Stanley products. Though experts say there’s no need to worry, the backlash is likely to hurt sales.
Another vessel is also a cause of concern: the plastic water bottle. According to a report by the United Nations University, over 600 billion are made annually across the globe. And though the plastic can usually be recycled, most of it never makes it to a proper waste management facility. Nonetheless, the bottled water industry is expected to grow. It generated US$342b in revenues in 2023; sales should reach US$420b by 2028.
One company fighting this trend is Liquid Death, which sells its water products in aluminium cans. Other than the eco-friendly ‘death to plastic’ stance, what’s really caught the eye of consumers is the ironic name, the motto ‘murder your thirst’ and the visual identity with gothic skulls that look like rockstar tattoos – the cans might as well be mistaken for hard seltzers. The company is getting more than US$100m in annual revenue and reached a US$700m valuation in its last funding round.
Big sums for a nascent company, but still small compared to the established players. For instance, in Q1 to Q3 2023, Danone ($DANOY) – owner of water brands Aqua and Evian – had revenues of over US$3.86b just from water. Nestlé ($NSRGY) made US$2.97b thanks to the sale of almost a billion bottles of its luxury brand Perrier and the improved performance of its Sanpellegrino subsidiary.
The impact of luxury labels on these companies’ earnings shows how much of a status symbol water can be. But some are more concerned with its more basic roles. Legendary investor Michael Burry has been investing in water since the turn of the century. Among many financial instruments related to the water market, Burry’s major interest has been in foods that require a lot of water to be produced – especially when taken from water-rich sites to water-depleted ones. Does that make Walmart ($WMT) and Costco ($COST) water-related investments? Probably not, but it goes to show that water makes a big splash in our economy, be it in plastic bottles, aluminium cans or even trapped inside produce.
