Navigating the flooded bottled-water market

In his element: Sikes' custom H2O niche is drawing a crowd.

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(FORTUNE Small Business) -- When FSB last met up with Mark Sikes ("Water, Your Way," February 2007) his company, Personalized Bottle Water, thirsted for more sales. Sikes was buying prebottled water and applying custom-made labels for clients from schools to funeral homes.

But he yearned to install his own filtration and bottling equipment, figuring he would save his Little Rock firm about $2 per $16 case of water. One expert nixed that idea and urged Sikes to instead focus on the wedding-planning market, where margins can be huge. Sikes took his advice on both counts.

The bad news is that plenty of firms have tapped the profitable market for custom-labeled water.

"Competition is way up," says Sikes, who won't detail his assault on the wedding sector for fear of inspiring more copycats.

Despite its new rivals, PBW remains buoyant. Revenue, which was $350,000 in 2006, hit about $425,000 in 2007. But PBW's growth rate has slowed, from 35% in 2006 to 20% last year. Sikes blames that on his new foes, plus fewer orders from clients such as hotels amid environmental concerns about water bottled in plastic.

Another sore spot? Sikes' rivals have taken business from him online, liberally using words such as "personalized" on their web pages. The result? PBW rarely appears in the first 50 Google (GOOG, Fortune 500) hits.

Sikes admits that he let things slide, despite the advice of our Web design expert, but vows to soon improve the site - enabling customers to design labels online.

"I'm hiring people to work on it," he says. "In six months we'll show up everywhere."