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Soft-drinks companies are increasing their investment in functional water brands as they strive to breathe life into the bottled water market.

Despite its image as a healthy alternative to carbonated soft drinks, bottled water is suffering a consumer backlash as shoppers opt for tap water on environmental and ethical grounds. According to water company Network Water Solutions, bottled water generates up to 600 times more CO2 than tap water in its production.

Companies with a carbonated drinks heritage moving into the sector, such as Coca-Cola and Pepsi, have also struggled to compete with established brands Danone Waters and Nestle Waters.

Coca-Cola is rolling out enhanced water brand Glaceau, which it acquired last May as part of its £2.1bn purchase of US firm Energy Brands.

Meanwhile, Pepsi is preparing to launch vitamin enhanced V Water, which it bought last month to back its focus on healthy products.

AG Barr is also gearing up for a summer relaunch of functional drink brand Vit-smart, acquired from Chartered Brands in January.

The shift toward functional products serves to highlight the difficulties in the market, and comes as Isklar, the Norwegian premium water brand, launches in the UK this month.

It plans to put 'glacial provenance' at the heart of its advertising as it seeks to differentiate the brand from Danone Waters' products.

Meanwhile, Britvic has this month launched a £5.5m campaign created by CHI & Partners to promote youth water brand Drench, following its admission last year that it was 'growing slowly'.

Some ethically positioned water brands have capitalised on the concerns fuelling the consumer backlash against bottled water.

Sales of Belu, One and Thirsty Planet bottled waters generate funds for communities in developing countries that do not have easy access to drinking water. Belu is also sold in eco-friendly bottles made of glass or biodegradable material.

Last month, Thirsty Planet launched a multi-pack aimed at children. For each one sold, 30p will be donated to partner charity Pump Aid.

DATA FILE - BOTTLED WATER

- The water-plus category (water with flavours or functional benefits) declined 11% to £154m last year.

- The decline was driven by flavoured water, which accounts for 99% of the sub-category.

- Own-label products bore the brunt of sales losses, declining 17% to £55m. Volvic Touch of Fruit also suffered, with sales down 16% to £49m. By contrast, Robinsons' Fruit Shoot H2O was up 54% to £17m.

- Functional water, which accounts for 1% of the water-plus market, increased 94% to £2m.

- The water market declined 3% last year to £463m as a result of the wet and cold summer. Among the top three water brands, only Evian posted growth (up 4%).

Source: Britvic Soft Drinks Report 2008.