Flooding the Market.

Coke, Pepsi and others tap into Mexico's most effervescent beverage, water.

PLAIN OLD WATER IS BECOMING the sexiest drink for companies in Mexico looking for double-digit growth in beverage sales. At a time when the soft-drink business is losing its fizz, it's firing up a segment that five years ago barely existed. "The bottled-water market is just as big as the soft-drink market, and it's growing faster," says Mauricio Vergara, who handles the Ciel brand for Coca-Cola de Mexico. "We want to be there."

So do Pepsi, Nestle and Danone. All four multinationals are vying for the top spot in a business worth an estimated $11 billion annually. The market is divided into two major segments, the small, high-margin business of bottles holding less than two liters and the large, low-margin, 20-liter jug market that accounts for 90% of sales. So far, Danone and Pepsi-Gemex, Mexico's largest Pepsi bottler, are the front-runners in the small and large markets, respectively, in a battle that promises to be bigger than the famed Cola Wars.

Bottled-water consumption grew 12% last year, and now accounts for 18% of "stomach share," a measure of everything Mexicans drink, says Vergara. And tap-water consumption is falling fast in the country that gave the world the expression, 'Don't drink the water.'

About two years ago, Coke launched its Ciel brand into the hotly contested small-size segment. Using its strong advertising and distribution base, Coca-Cola has won 12% share in a fierce fight with Danone's market-leading brand Bonafont, and Santa Maria (Nestle), which have 15% and 13%, respectively. And Ciel is now looking for a larger piece of the jug market, where the dominant player is Pepsi-Gemex.

"I wouldn't want to overstate our competition with Gemex, because we've been focused on different segments of the water market," says Vergara. "But now we both want more, so you never know."

At the same time, Pepsi-Gemex is making a play for a larger share of the market for small-size bottles. betting on help from its Electropura brand in the 20-liter jug category. "We think we have a lot to offer customers in the small-size segment; they know our quality and our prices are competitive," says Irma Montemayor, who handles the Electropura brand at Pepsi-Gemex. "And if Ciel moves into the jug market, well, nothing is stopping us from winning more of the small-size market."

To be sure, nobody is ignoring carbonated soft drinks and the segment continues to grow. Consumption of Coca-Cola products rose 6% last year, and a bit more for Pepsi. Mexico is still Coca-Cola's second largest market in the world after the U.S. and a key market for Pepsi as well, so the epic Cola Wars are hardly a thing of the past.

But bottled water is catching on big time and Ciel's growth is fueling heated competition. Danone advertisements feature athletic types running through forests, then pausing to chug its Bonafont or Evian brands. Agua Santa Maria (Nestle) sports a priest telling hip teenagers that the water he drinks is pure like ... well, the Mother of God.

Both campaigns are aimed at stressing the spring-water origins of Bonafont and Santa Maria. which Danone and Nestle are trying to position as a higher-brow beverage than the purified water on tap at Ciel and Electropura.

"Ciel has the marketing and distribution strength of Coca-Cola behind it. and they have grown." says Hilda Paredes, a spokeswoman at Agua Santa Maria, which draws its water from a mountain well in the state of Puebla. "But our product is different, it's from a natural well, and people are starting to realize that."

Besides getting away from Mexico's often dirty tap water, another force is also pushing bottled-water consumption--a cultural shift that has transformed water from a boring drink into a status symbol for increasingly health-conscious twenty-and thirty somethings. "Drinking bottled water is part of the new culture that a lot of people are adopting," says Israel Garces Crespo, a physical trainer at a Mexico City gym.

With four multinationals pushing different brands of water, that new culture appears to be here to stay.