"We all" and "We" are not the same.
For example, you and your buddy are in a group of ten people. Only you and your buddy are drinking water; everyone else is drinking beer. The waiter comes to your table and says, "More beer?" You would reply, "We're drinking water," (indicating you and your buddy). You would not say, "We are all drinking water," because the other eight people are not drinking water.
In Italian is not necessary to write the subject pronouns because the verb has a particular form with each one (that fact does not happen in English). For example the verb ''parlare'' (to speak). Its conjugation in the present simple tense is as follows: Io parlo (I speak), Tu parli (you speak), Lui / Lei parla (he / she speaks), Noi parliamo (we speak), Voi parlate (you all speak), Loro parlano (they speak). As you can see if I write ''Parlo con la mia mamma'' (I speak with my mom), it involves the Italian subject pronoun ''io'' but I can omit it because the form ''parlo'' is just for that person. I am a native Spanish speaker and my language follows the same rule.
I answered "We buy water" and it wasn't correct, although it says drink / buy in the description of the meaning when you tap on the word.
Do you mean drinking as an adjective (ie "water for drinking"?) - if so, I think it might be "l'acqua da bere" or something like that. If you mean the gerund (eg "we are drinking water"), this can be the same phrase in Italian "Beviamo l'acqua". However, for an action CURRENTLY IN PROGRESS, the Italians would use the present continuous: "Stiamo bevendo l'acqua" = "we are drinking water" (at this moment).