Environment, Economy Weigh on Bottled Water Sector
ZURICH - The world's top sellers of bottled water are
trying to stop western consumers turning back to the tap by addressing
environmental issues and trumpeting health benefits, while expanding
aggressively in emerging markets.
Nestle, the world's biggest bottler of water with brands like
Perrier and Poland Spring, said last week the economic slowdown and
environmental concerns were hurting sales in western Europe and North
PepsiCo saw double-digit declines in the third quarter in its water
brands, which include Propel and Aquafina, while Danone, with brands
like Evian and Volvic, said demand had contracted in France, Spain and
Organisations like conservation group WWF have campaigned against
bottled water, saying resources are wasted in bottling and transporting
water which may be no safer or healthier than tap water while selling
for up to a thousand times the price.
"It is a problem area for the whole industry," said Sarasin analyst
Patrick Hasenboehler, citing downtrading risks as well as concerns over
transport, packaging and water sourcing.
"When you have clean water at home it's one of the easiest ways to
save money. For certain people it's become a bit trendy to drink tap
water rather than bottled water."
Nestle controls 19.2 percent of the world's bottled water market
followed by Coca-Cola on 9.4 percent, Danone on 8.0 percent and Pepsi
on 4.8 percent, according to a report by food and drink consultancy
TAP VERSUS BOTTLE?
John Harris, Nestle Waters executive vice president, said last week
the firm had listened to environmental concerns, cutting energy used in
bottling and lobbying for more recycling.
"We fundamentally believe that we can address the sustainability
issues facing the brand and get growth going," he said, adding the
amount of plastic used to bottle water has fallen by 22 percent since
Nestle is also promoting its bottled water as a healthy alternative
to soft drinks and other high-calorie beverages that Harris said make
up 21 percent of Americans' energy intake.
"Bottled water is not tap water. We have minerals and vitamins that
are unique to the local community and we want to sell that," he said.
Coca-Cola said in a sustainability report this week it was working
to make packaging lighter and was investing more than $80 million to
build six plastic bottle recycling plants:
"With our water brands, as with all our beverages, we are committed
to using resources responsibly, reducing our environmental footprint
and protecting natural resources."
Sarasin's Hasenboehler said premium mineral and spring water brands
-- like Nestle's San Pellegrino and Danone's Volvic -- would remain a
growth area, even in developed markets.
But lower-cost brands that purify local water sources like
Coca-Cola's Dasani and Pepsi's Aquafina -- launched to counter falling
soft drink sales due to health concerns -- could have a tougher time as
western consumers tighten their belts.
"It will not be so easy to promote these waters especially in Europe
and the United States," he said. "But it's more a problem for PepsiCo
and Coke compared to Nestle as they're more exposed to the U.S. market."
Zenith said global consumption rose 6 percent to 206 billion litres
in 2007, or 30.8 liters per person, with the United States the biggest
market, followed by China and Mexico.
Gary Roethenbaugh, Zenith head of market intelligence, said he was
still upbeat for bottled water, predicting global consumption will rise
32 percent to 272 billion liters in 2012.
"Consumers want a refreshing, zero-calorie beverage and this
underpins the bottled water industry," he said, adding he saw strong
growth opportunities in "enhanced water," noting Pepsi and Coca-Cola
had recently bought brands with added vitamins.
He said flavoured and "functional" waters should make up a third of
value growth up to 2012, rising to almost 20 percent of market value
from about 14 percent in 2007.
Meanwhile, all the big players are trying to stake a claim to fast-growing markets in developing countries.
Danone said last week that Asia and Latin America still had good
growth in the third quarter, with sales particularly strong in
Indonesia, Mexico and Argentina.
Although developing markets account for only 10 percent of Nestle
water sales, the group said it had organic growth there above 20
percent in the first nine months and wants to further accelerate the
growth of its Pure Life brand, launched in 1998.
Dubbed "Perrier for the Poor" by one Swiss daily, Pure Life has
quickly become the world's top bottled water brand with sales up 16
percent in the first nine months.
"In the western world, we take tap water availability and quality
for granted. In other markets, bottled water is much more of a vital
lifeline," Zenith's Roethenbaugh said.
With additional reporting by Laura MacInnis; Editing by David Cowell