Bottled water consumption rises
Sparkling water continues to lead category growth
For decades, consumers have strived to live by the unofficial rule of drinking eight glasses of water a day. Although this mantra is well-known throughout the United States, many consumers don’t drink as much water as they should. However, that has begun to change in recent months.
Research conducted by the Natural Marketing Institute (NMI), Harleysville, Pa., shows that Americans’ consumption of water has increased by more than 68 million 8-ounce servings in less than a year. The study evaluated 60,000 U.S. adults and their average daily intake of unflavored water — including bottled, tap and filtered water — between the fourth quarter of 2013 and the second quarter of 2014.
This increase is partially attributed to a general con-sumer trend toward healthier beverages, the NMI notes.
In a Mintel survey, approximately three-fourths of respondents said that they drink water because it is good for them and keeps them hydrated throughout the day, the Chicago-based market research firm states in its March 2014 “Bottled Water and Cold Beverages Mixes – US” report.
The NMI also attributes the increasing water consumption rate to efforts such as the Partnership for a Healthier America’s (PHA) Drink Up initiative. In fact, the Drink Up advertising campaign resulted in a 3 percent increase in incremental bottled water sales among consumers who had been exposed to the campaign, according to a study by Nielsen Catalina Solutions, Cincinnati. This equates to nearly $1 million in incremental retail sales of bottled water.
In addition to health factors, consumers’ desire for customization is positively impacting bottled water sales. In particular, the growth of liquid concentrates is boosting the unflavored bottled water segment’s performance, analysts say.
According to Mintel’s report, 41 percent of respondents said that they consume drink mixes because it helps them drink more water. More than 60 percent of respondents reported consuming drink mixes in recent months, it notes.
Furthermore, as the economy picks up, consumers continue to increase their purchases of bottled water, states “Bottled Water in the US,” a May 2014 report by Euromonitor International, Chicago. Despite flat to declining sales last year, the convenience still bottled water segment increased 2 percent in dollar sales and 1.2 percent in unit sales in U.S. multi-outlets during the 52 weeks ending Aug. 10, compared with the prior-year period, according to Information Resources Inc. (IRI), Chicago. This marks slow but steady growth compared with the 2008-2009 post-recession period, Euromonitor notes.
“As the U.S. experiences a steady but slow economic recovery, higher-income consumers feel more comfortable spending money on discretionary items including bottled water,” Euromonitor’s report states. “The rise of still bottled water is a reflection of the rebound in the U.S. economy.”
Through 2018, the still bottled water segment is projected to grow 1.8 percent each year in U.S. retail stores, notes Packaged Facts, a Rockville, Md.-based division of Market Research Group LLC, in its April 2014 “Bottled Water in the U.S.” report.
Despite multiple factors bringing growth to the convenience still bottled water segment, it currently lags behind the overall bottled water category — made up of convenience still water, sparkling water and jug/bulk water. The total category grew 4.5 percent in dollar sales during the 52 weeks ending Aug. 10, compared with the prior-year period, according to IRI data. In particular, the jug/bulk water segment increased 4.6 percent in dollar sales, and the sparkling water segment rose 26.6 percent in dollar sales during the timeframe, compared with the prior-year period, IRI reports.
Analysts note that product pricing is challenging many still bottled water manufacturers. According to Mintel’s report, 65 percent of its survey respondents said that low price is an important factor when choosing a bottled water type. For this reason, tap water and private-label bottled water consumption continues to grow, Mintel notes.
Last year, Stamford, Conn.-based Nestlé Waters North America (NWNA) controlled nearly one-third of the convenience still bottled water category, Mintel reports, citing IRI data of measured sales in U.S. multi-outlets during the 52 weeks ending Aug. 10. The Coca-Cola Co., Atlanta, and PepsiCo Inc., Purchase, N.Y., also are top contenders within the segment. Although NWNA remains the category leader in terms of market share, all three major manufacturers lost market share last year, while private-label bottled waters gained market share, Mintel reports.
In contrast with the demand for low pricing, consumers have shown a willingness to pay a premium for bottled waters that are perceived as having greater health benefits, according to a February 2014 report titled “Bottled Water Production in the US” by IBISWorld Inc., Los Angeles. As still bottled waters expand into various types of water classifications, such as spring, purified, mineral, artesian, alkaline and more, they have the ability to appeal to a broad range of consumer preferences, it notes.
To outperform lower-cost bottled waters and at-home formats, Mintel suggests that brand owners add value to their waters in the form of packaging, ingredients and flavors in order to continue growth and justify higher prices.
“Brands could take packaging to a new level by offering new packaging forms and sizes and even redesign secondary packaging to better fit in consumers’ refrigerators and pantries,” the report states.
Last summer, Paris-based Danone Group redesigned its Evian Natural Spring Water for the first time in a decade. The new design leans on transparency with sleeker, cleaner lines to celebrate its pure, natural contents, the company says. Most recently, the company added a 1-liter bottle featuring the new design.
This trend also applies to sparkling bottled waters. Last month, Everett, Wash.-based Unique Beverage Co. LLC introduced a proprietary 7-ounce slim bottle design for a select few of its Cascade Ice zero-calorie sparkling flavored waters. With the same height as an average soda can, the new bottles will provide the sparkling water brand a chance to enter new channels, the company says.
Other brands are leveraging the success of the sparkling water segment by extending their established still bottled water brands with new flavored and carbonated offerings.
For instance, NWNA recently expanded its Nestlé Pure Life bottled water brand with a new line of Nestlé Pure Life Exotics Sparkling Waters. The unsweetened, zero-calorie waters feature all-natural, exotic fruit flavors such as Strawberry Dragon Fruit, Mango Peach Pineapple, Tangerine and Key Lime. Earlier this year, The Coca-Cola Co. introduced Dasani Sparkling waters in Lime, Lemon, Berry and Apple flavors nationwide. Additionally, in October 2013, PepsiCo extended its Aquafina brand with Aquafina FlavorSplash sparkling waters and liquid concentrates. Available in Color Me Kiwi, Peelin’ Good and Berry Loco varieties, Aquafina FlavorSplash sparkling waters contain B vitamins and come packaged in 16.9-ounce bottles.
Existing sparkling water brands also have expanded their flavor variety to entice consumers. Most recently, Cincinnati-based Sunny Delight Beverages Co. expanded its Sparkling Fruit2O lineup with Orange Mango, Black Raspberry, Peach and White Grapefruit flavors. The rest of the lineup launched in January 2014 and includes Raspberry Lemon, Grape, Mixed Berry and Strawberry flavors. Additionally, Sundance Beverage Co., a Warren, Mich.-based subsidiary of the National Beverage Corp., debuted its first LaCroix line extension in March. LaCroix Cúrate features all-natural ingredients and comes in Cerise Limón (Cherry Lime) and Pomme Bayá (Apple Berry) flavors. The sparkling waters offer a stronger flavor profile than original LaCroix and are available in 12-ounce tall cans, the company says.
Although convenience still bottled waters account for the majority of the bottled water category, sparkling water remains the fastest-growing segment and will continue to be through 2018, according to Mintel’s report. Between 2011 and 2013, the sparkling water segment stole market share from the convenience still bottled water segment, it states. Last year, the sparkling water segment almost reached 12 percent market share, an increase of approximately 4.8 percent from 2011, it notes.
Packaged Facts adds that sparkling water retail sales more than doubled between 2008 and 2013. Between 2013 and 2018, it expects retail sales for the segment to more than triple, its report states.
Within the sparkling water segment, TalkingRain Beverage Co.’s Sparkling Ice brand overtook private label as the No. 1 best-selling brand, according to IRI data for the 52 weeks ending Aug. 10. This year, Sparkling Ice completed its U.S. direct-store-delivery (DSD) distribution network, which comprises more than 250 distributors, bringing Sparkling Ice beverages to grocery stores, drug stores, convenience stores, and other retail and non-traditional outlets in all 50 states.
In general, sparkling bottled waters have an advantage over unflavored still bottled waters, because consumers perceive them to have additional value compared with still water, notes Euromonitor in its report. They also are an easier conversion for consumers seeking a healthier, zero-calorie alternative to carbonated soft drinks, it adds.
As consumers continue to turn to the bottled water category for healthier alternatives, analysts expect the category to grow.
“Growing concerns surrounding sugar intake levels and the consequences of excessive soft drink consumption will continue to benefit the bottled water production industry in the coming years,” says Nick Petrillo, industry analyst for IBISWorld.
This year, IBISWorld expects total category revenue to increase 1.7 percent. Next year, it forecasts the category to increase 2.4 percent, it adds.
“Bottled water production will experience slow but consistent growth in the five years to 2019, as substitute products such as water filters and reusable bottles continue to inhibit demand for industry bottled water products,” Petrillo says. “Nonetheless, increasing per capita disposable income levels and a steady decline in the unemployment rate will drive consumers to make more bottled water purchases.”