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With demand for CSDs tumbling worldwide, Coke appears to be back in acquisition mode. Rumors are circulating that the Atlanta giant is about to purchase Glaceau, the makers of the very succesful Vitamin Water brand. This is a great move for Coke because Vitamin Water seems to be delivering the right experience for today's generation of soft drink consumers; it's water based, but not as boring as water and has a "natural" profile (the product has quite a high sugar content, but it's perceived as being more natural than a CSD).

Vitamin Water is first and foremost a success story built around a smart product formulation, great packaging and smart distribution.The product was launched in 2000, but only started advertising and using celebrity endorsers in the last three years.

Recently, Outlaw Consulting conducted a survey to discover the most trusted brands amongst Generation Y "trendsetters", Vitamin Water ranked 14th, just behind Converse and ahead of Red Stripe.

The Energy Brands company built it's business on Glaceau Water, packaged in a 20oz bottle designed by Phillipe Starck. Looking to expand the distribution base from health food stores and independent delis and grocery stores, Energy created Vitamin Water.

According to the WSJ, Glaceau's founder J. Darius Bikoff created Vitamin Water in a "Eureka like" moment.

"...standing in his kitchen sipping bottled water. Feeling run down, he slipped a vitamin C wafer into his mouth, and the citrus flavor combined with the clean water registered on his taste buds, and in his entrepreneurial mind."

His next step was to bring together a food scientist, a dietician, a flavor expert and a microbiologist to help create the formula. Armed with the formula, the company set about distributing the product to independent stores and those with more of a health focus. The company couldn't afford to pay the slotting fees charged by the large grocery chains, so it built momentum from the ground up. One of its smartest decisions was sell it together with the other bottled waters, in this environment Vitamin Water's packaging stood out and was the perfect place to convert water drinkers to a new experience.

It will be interesting to see how Coke can help Vitamin Water, obviously there will be some immediate advantages generated by economies of scale and perhaps with marketing. The brand has recently stepped up its efforts to compete against the giants, even being bold enough to sign on atheltes (Iverson, Allen, Ortiz..) as "investors". One interesting element of Vitamin Water's advertising is that it has been pretty light hearted, especially with its on-pack copy.

On the Raspberry Fruit Water, the copy opens with

"Chinese food, diet drinks. Usually and hour after finishing both you want more again.Hmm..we smell conspiracy."

Coke shouldn’t mess with this, but its biggest challenge will be to grow Vitamin Water, while trying to protect its own water and sports drink franchises. While it will feel it needs to develop a clear positioning for the brand, which is important, it will also be essential to understand how this positioning fits with the other brands in it’s massive portfolio.