Cut the cabbage into quarters. Remove any wilted and discolored outer leaves and cut out the core from the cabbage pieces. Cut the cabbage into a large 1-inch dice.
Cook the bacon in a 4-qt pot over medium heat until crisp. Remove the bacon to a paper towel to drain. There should be about 1/2 cup of bacon drippings in the pan. Add the cabbage to these drippings and cook without stirring until it begins to brown, about 3 minutes. Add the water, sugar, salt, and pepper and cook covered until the cabbage is tender, about 20 minutes. Crumble the cooked bacon into the cabbage. Serve hot.