Two years ago, Doug MacLean decided the future was flavor. The president of Talking Rain, a Preston water bottler, knew consumers wanted more than plain spring water when his sales...

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Two years ago, Doug MacLean decided the future was flavor.

The president of Talking Rain, a Preston water bottler, knew consumers wanted more than plain spring water when his sales stalled at $30 million. He switched from bottling mostly plain water to low-calorie water with juice, vitamins and herbal extracts.

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“The next niche is what we’re all about,” said MacLean, who tracks worldwide beverages for new ideas. “We’re constantly looking for new trends.”

Talking Rain tapped into the fastest growing type of bottled water: enhanced water.

Health-conscious consumers, eager for tasty, low-calorie beverages, sucked down flavored water and turned water into the second-most-popular beverage in the country last year — right behind soft drinks. But with thin profit margins, bottlers have to make their water stand out in grocery aisles. They do that by bottling water from springs and aquifers and adding caffeine, vitamins, minerals, oxygen and juice, among other items.

Sales of flavored water jumped nearly 1,600 percent in the past three years to $338.8 million in 2003. Enhanced water now makes up 4.1 percent of the $8.3 billion water market, according to Beverage Marketing, a New York consulting company.

“It’s extremely difficult for a company to jump in the market on a price basis and be successful,” said Gary Hemphill, senior vice president at Beverage Marketing. “To compete, they have to offer consumers a point of difference, and enhanced waters is one.”

Two years ago, Talking Rain faced sluggish demand and stagnant sales. Prices were falling; competition was heating up, and noncarbonated water was being turned into a low-priced commodity.

MacLean met with company executives about how to kick-start sales. Instead of resorting to price cuts, the board decided to focus on overlooked markets, like flavored, vitamin-rich waters. Since then, the company has introduced Sparkling ICE, a three-calorie blend of spring water and juice, and Sparkling Spring Water with Juice. Now the bulk of its sales come from enhanced water.

“We decided being just a water company wouldn’t be the key to the growth of this company,” said MacLean. “We saw the majors coming into this market, and we knew we had to act.”

Over the past few years, Coca-Cola and PepsiCo have bought regional water bottlers around the world and introduced lines of bottled water nationally under the Dasani and Aquafina labels. Nestlé’s Poland Spring, which bottles spring water in Maine, plans to expand and build a $150 million bottling plant.

The three companies, the biggest water bottlers in the country, are eager to shore up sagging soda sales and improve their bottled-water sales. They plan to introduce citrus- and berry-flavored waters early next year and threaten to take over the flavored-water market.

Talking Rain’s sales have risen “in the double digits” since it moved the bulk of its production from nonsparkling to flavored water.

This year, MacLean doubled the size of the company’s bottling plant, installed a new packaging line, hired 20 more employees and signed deals with national retailers to carry his spring water.

By next spring, the company’s new line of flavored spring water, Twist, will be for sale.

The company’s sales also are tied to customer loyalty in the Pacific Northwest. Every year the Preston bottler donates money and water to more than 450 events, charities and community groups, like the Seattle Marathon and Children’s Hospital & Regional Medical Center.

“Community events have built our brand name in this market,” said MacLean, who runs company-sponsored road races with employees. “Our goal is to make the brand as obvious as possible, and events do that.

“For us, we have to fight [competitors] in the aisles and beat them with customer loyalty.”

Even in the local market, Talking Rain is facing new competition. All American Bottled Water, a private Nevada company, hunted all over the West for places to build a bottling plant. It found one along the banks of the Deschutes River in Tumwater, Thurston County, and bought the shuttered Olympia Brewery in April for $14 million. All American hopes to start production by the end of next year, said John Hohenadel, an Elizabethtown, Pa., lawyer who represents the company.

“People don’t have the water source that they do, and that will make [All American] more attractive to customers,” Hohenadel said.

Still, MacLean remains optimistic that his company will thrive because consumers will always need to drink water.

“People know they have to drink eight glasses of water a day, but they get tired of it,” said MacLean. “They don’t want to give up on flavor even though they’re watching calories and carbs. And that’s where we come in.”

Kristina Shevory: 206-464-2039 or kshevory@seattletimes.com