Sector Insight: Bottled water

Increasing environmental concerns and the recession have combined to hit the bottled-water sector hard.

Over the past few years there has been a growing backlash against bottled water. Questions have been raised about the environment-al impact of bottling and transporting a resource that is al-ready pumped to homes and restaurants and a powerful 'drink tap water' lobby has emerged.

As a result, where clutching a bottle of Evian was once a fashion statement in itself, suddenly it has begun to imply a lack of ecological awareness.

Bottled-water manufacturers have also been hit hard by the recession, as cash-strapped consumers looking to cut back could easily substitute a bottle of water for a quick refill at the tap. This is especially true in the UK, where the quality of mains water is good.

The value of the sector has therefore been declining since 2007, after many years of strong growth. Between 2006 and 2008, volume sales fell by 11%, and, in 2009, the market will be worth about £1.86bn, according to Mintel.

While the green agenda has gained ground, it is not necessarily the main driving force for decline in this sector. Where bottled water really falls down is its value-for-money credentials, which is a particularly pertinent issue during difficult economic times. Only one in 10 consumers believes that it offers good value for money, while a third view it as a 'bit of a con' and only 35% think it tastes better than tap water, according to a survey carried out by pollsters Toluna.

However, there are still some advantages that bottled water can exploit: a fifth of consumers view it as a healthier alternative to sugary soft drinks and a similar proportion credit the products with helping them drink enough water throughout the day. Therefore, the health proposition is a strong one for those buying into the sector, despite the lack of any research to show it is healthier than tap water.

Plain bottled water accounts for the vast majority (87%) of this market, but it is predicted that sales of enhanced water - to which flavours, vitamins or supplements have been added - will grow strongly over the next five years.

In 2009 enhanced water sales were worth £450m. However, manufacturers in this category must ensure the energy content of their drinks is not raised significantly by the additives, as this would undermine its healthier positioning.

Coca-Cola's Glaceau vitamin water has boosted this segment, but the brand ran into trouble this year when the Advertising Standards Authority banned its ads because of their use of misleading health claims.

UK brands, such as Highland Spring and Buxton, have outperformed the market as a whole in recent years as shoppers look to support British brands in times of economic strife. They may also be benefiting from the increased awareness of food miles.

Some manufacturers have responded to the environmental complexities surrounding their products. For example, Danone plans to recycle as many bottles as it uses in the UK and will make its packaging from 50% recycled plastic in the future.

Others have explored the broader, ethical associations around drinking water and hooked up with water charities in the developing world. Volvic has launched its '1 for 10' campaign, where for every one litre bottle sold, it will generate 10 litres of drinking water for people in Africa through its well-building partnership with World Vision.

Several ethical brands have hit the market in recent years such as One Water, Thirsty Planet and the Co-op's own-brand Fairbourne Springs, where all or a proportion of the profits from sales go directly to water projects.

The leading brands in the UK have also come together to create the Natural Hydration Council, which launched a marketing campaign in April focused on promoting the health benefits of drinking more water.

When looking at future growth, the one factor that cannot be predicted with any certainty is the weather, and this has a major impact on sales. How-ever, the market's performance is also tied to consumer confidence and Mintel fore-casts that this will lag behind increased levels of disposable income in the coming years, so value and volume sales will not improve until 2011.

The 16- to 34-year-old group is the most likely to buy bottled water, while the over-55s are least interested.

Mintel estimates that, by 2014, the sector will be worth £2bn, but this is equivalent to a 7% decline over the next five years when inflation is taken into account.

Bottled Water Brands by Value and Share
Company2009 est2009 est2008200820072007% change
£m%£m%£m%
Volvic (Danone)  115201232113722-16
Evian (Danone)  9517991710217-7
Highland Spring   621158105799
Buxton (Nestle)  42735634624
Robinsons Fruit Shoot H2O (Britvic)  19317317314
Perfectly Clear (Silver Spring)  15314213218
San Pellegrino (Nestle)  1121021028
Vittel (Nestle)  71102213-67
Aqua Pura (Princes)  717181-11
Drench (Britvic)  71513144
Own-label  142251542717629-19
Others  5394883765
Total  575100580100615100-9

 

Non-alcoholic Drinks - Trends in Consumption
RankDrink Type2008%2006%2004%% change
1Tea (herbal or standard)  828585-3
2Instant coffee  737475-2
3Fizzy carbonates  737577-4
4Bottled mineral water  515654-3
5Fruit juice/juice drinks (inc. smoothies)  515759-8
6Energy/sports drinks  3230311
7Alcohol mixables  343535-1

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