Dasani Tapped Out of Europe

Coca-Cola's (NYSE: KO  ) Dasani purified tap water would have been a hard sell in Europe, where spring waters like Nestle's Perrier or Groupe Danone's (NYSE: DA  ) Evian are preferred. Now that a cancer scare forced Coca-Cola to recall water from store shelves in the United Kingdom, its future looks dim throughout Europe. Coca-Cola's failed launch in the U.K. led to a decision by the company to delay introducing the Dasani brand in France, which was planned for April, and Germany, which was planned for May.

Even though Coca-Cola intended to switch to spring water for the Dasani introductions in France and Germany, the negative publicity in the U.K. sent shock waves throughout Europe and killed any chance of success for the brand anytime soon. Many analysts are speculating that Coca-Cola will now have to come up with a new brand name to successfully make inroads in the ever-flowing water market in Europe.

Americans are satisfied with purified tap water, as shown by which brands sell the most: PepsiCo's (NYSE: PEP  ) Aquafina is No. 1, followed by Dasani. But most Europeans will only buy spring water. Nestle's Perrier and San Pellegrino and Groupe Danone's Evian capture almost 70% of the European market.

Why should this failure matter to investors? Coca-Cola was hoping to build an international brand name for its bottled water using Dasani. Even though its bottling methods would have been different in each country, which is true for many of Coca-Cola's soft drinks, marketing is more cost-effective with one international brand name.

Sales of bottled water are expected to grow at a compounded rate of 15% per year, according to Beverage Marketing Corporation, a New York-based research and consulting firm. Other bottled beverages have much lower growth rates -- 1.4% for fruit beverages, 0.8% for beer, and 0.5% for carbonated soft drinks. Missing out on the European market, then, will be painful for Coke.

Add these water woes to Coca-Cola's search for a new chairman and CEO to replace Douglas Daft, who plans to retire at the end of the year, and Coca-Cola looks like it will be working out some kinks in many aspects of its business for some time.

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Fool contributor Lita Epstein ponders money and politics under the palm trees in Florida. She doesn't own any of the companies mentioned in this article.