LaCroix is "effectively in a free fall," with sales declining 9.4% over the past 12 weeks, according to the Guggenheim Securities analyst Laurent Grandet.

"The LaCroix brand has gone from bad, to worse, to disastrous in a relatively short period of time," Grandet wrote.

A lawsuit last year alleged that LaCroix beverages contain artificial ingredients, contrary to the company's "all-natural" marketing claims. LaCroix has denied the claims in the suit.

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LaCroix is "effectively in a free fall" amid declining sales and rising competition, according to a new research note from Guggenheim Securities.

"The LaCroix brand has gone from bad, to worse, to disastrous in a relatively short period of time following negative media attention regarding the 'natural' claim of the brand's flavoring ingredients that surfaced in October of last year," the analyst Laurent Grandet wrote.

A lawsuit last year alleged that LaCroix contains artificial ingredients, contrary to the company's "all-natural" marketing claims. LaCroix has denied the claims in the suit.

Read more: 'Please stand with us': LaCroix slams 'misleading' lawsuit that links the sparkling water to insecticides

Following the lawsuit, sales of the seltzer, which had enjoyed years of explosive growth, suddenly dropped off a cliff, according to Nielsen data cited by Grandet.

In the past 12 weeks, LaCroix sales have declined 9.4%, according to the Nielsen data. The data also suggests LaCroix is losing customers to other sparkling-water brands, with its market share dropping to 23% from 28% in October.

LaCroix is "unlikely to rebound" as some customers have discovered that "LaCroix doesn't have much that distinguishes it from the competition in terms of intellectual property or added value," Grandet wrote.

LaCroix's parent company, National Beverage Corp., did not immediately respond to a request for comment.

The company reported in March that profits declined nearly 40%, to $24.8 million, in the most recent quarter, and that revenue fell 2.9%, to $220.9 million.

Read more: CEO of LaCroix maker blames 'injustice' for plummeting sales and promises that customers will remain loyal to the 'LaLa feeling' the drink provides

While the lawsuit appeared to kick off LaCroix's downturn, several other factors are hindering its recovery, Grandet wrote.

"While we think it's true that this event likely catalyzed the brand's deceleration, we also think it's only part of the story — and ultimately not the reason the brand hasn't been able to subsequently recover," Grandet wrote.

LaCroix is facing growing competition from PepsiCo, Nestle, and Coca-Cola, as well as from private-label seltzers that tend to have an edge over LaCroix on pricing, he said.

Other barriers to LaCroix's recovery, he said, include "the lack of meaningful innovation to offset core declines and bring new news to consumers, and inexperience managing a rapidly growing brand, made worse by ongoing missteps in public messaging and crisis resolution."

He continued: "As a result, we think it's unlikely that LaCroix can recover to any meaningful degree while in the hands of National Beverage (or in the absence of a strong distribution partner)."