While sodas were dispelled for a while due to their unhealthy nature like high sugar content and potential links to cancer, these bubbly drinks have recently made a comeback. Healthy soda brands including Poppi and Olipop have been particularly popular with Gen Z crowds, since the pops promise a dose of probiotics and other natural ingredients that certainly don’t show up in other sodas.
What we weren’t expecting, however, is for water to be categorized as soda. But a Pennsylvania court in late April ruled that Perrier, a popular fizzy mineral water, is actually a soda and is now taxable. The whole debate over the beverage’s classification started back in 2019 when a patron was charged a sales tax on her Perrier purchase in a Pennsylvania Sheetz location.
The sales tax on the 16-ounce Perrier bottle was just $0.24, but the patron, Jennifer Montgomery, filed two petitions with the Pennsylvania Department of Revenue Board of Appeals seeking a refund for the sales tax since mineral water was not supposed to be taxable in the commonwealth. She also initiated a class action complaint against Sheetz in the Court of Common Pleas of Allegheny County alleging the same issue, according to court documents.
However, in October 2019, Pennsylvania’s Department of Revenue Board of Appeals ruled that Perrier is carbonated water and falls within the definition of “soft drink,” and is therefore subject to sales taxes. Montgomery appealed the decision, arguing that Perrier is “natural mineral water,” but the court didn’t change its decision. Under the court’s definition, a soft drink is any “nonalcoholic beverage, in either powder or liquid form, whether or not carbonated, such as soda water, ginger ale, colas, root beer, flavored water, artificially carbonated water, orangeade, lemonade, juice drinks containing less than 25% by volume.”
Perrier classifies itself as a sugar-free, calorie-free “carbonated mineral water” that comes from the South of France. The brand says its product is a natural mineral water “sourced underground and bottled at the site where it emerges.” Unlike other sodas and carbonated drinks, Perrier is naturally carbonated, according to a quality report from the company. Montgomery also used this to stand up her argument that Perrier isn’t a soft drink because “it is not artificially carbonated,” but the court didn’t buy that either.
Perrier is owned by Nestlé, and a company spokesperson responded to a request from Fortune about the Pennsylvania case, saying: “We are not involved in the lawsuit and have not provided any information related to it. All Perrier products are labeled in accordance with applicable laws and regulations.”
So what exactly is Perrier, then?
The Nestlé brand has been under other pressure this year about its processing methods. Nestlé Waters is facing legal action in France over allegations that it used unauthorized treatment methods for products marketed as natural mineral water, according to a Food Navigator Europe report. This includes brands such as Perrier and San Pellegrino, another beloved seltzer water brand.
Considering those allegations, Jonathan Kleeman, a group beverage manager and executive head sommelier at Story Group, isn’t surprised that there was a debate over Perrier’s classification.
“You can slap the words ‘natural’ and ‘artesian’ on water all you like, but water is water,” Kleeman tells Fortune. “This whole line between what is naturally carbonated water and what is natural sparkling water is very murky and ill-defined. This notion that they or any of these giant water companies have some sudden special source is beyond ridiculous. They’re all up to these practices. No one is doing it properly.”
A Nestlé spokesperson did not comment on the legal action in France in response to Fortune‘s request.
What will happen to Perrier’s branding?
Since its inception, Perrier has been branded as carbonated mineral water. But now that a Pennsylvania court has labeled it as a soft drink, will that force the company to change its branding? Experts say it’s likely, but not to expect big changes from the brand.
Because the choice between a healthy water and a not-so-healthy soda can influence consumer decisions, this ruling has the power to “hurt the brand badly” if the company doesn’t reframe its product correctly, brand strategist Reilly Newman tells Fortune.
If the customer is “feeling healthy and aspirational, they may opt for mineral water,” he says. “However, now the brand is out in the same category as the sugary sodas. This eliminates a lot of the benefits that Perrier had as a brand as well as their uniqueness in the market.”
Braden Douglas, founding partner at Crew Marketing Partners, tells Fortune he expects Perrier’s brand changes to be as subtle as possible.
“They’ll change the descriptor on their labels, but I would not recommend a rebrand or bring attention to this change,” Douglas says. However, it does provide an opportunity for true mineral waters to shout about the benefits of mineral water. This would drive me crazy as the Perrier CMO, but it’s a smart move for a bold competitor.”
Either way, experts agree that this ruling shouldn’t majorly affect Perrier’s bottom line. Some of that has to do with the rise in “healthy” sodas recently, meaning they’ll still have a place—albeit a new one—in the carbonated beverage market.
“Luckily for [Perrier], we have had a massive rise of healthy sodas in the last three years, so that should help ease the blow,” Newman says. However, “this will definitely impact the purchase decisions because when it comes to beverages it’s not a matter of Coke versus Pepsi, but a battle for thirst. This means a consumer is much more willing to hop categories to satisfy their need.”
