Bottled water market has potential to surpass CSDs
Sparkling and enhanced waters drive category growth
Bottled water has come a long way in its lifetime, and today, consumers are choosing this natural, healthy beverage more than ever. Industry experts even speculate that the category could grow larger than the carbonated soft drink (CSD) category by the end of the decade.
A recent report from Beverage Marketing Corporation (BMC), New York, indicates that bottled water consumption reached a record high last year. According to the market research firm, consumption increased 7.3 percent to almost 10.9 billion gallons, and per capita consumption reached a high of 34 gallons last year.
This consumption increase is reflected in the sales figures. According to Chicago-based Information Resources Inc. (IRI), the bottled water category accumulated approximately $12.9 billion for the 52 weeks ending July 12 in U.S. supermarkets, drug stores, mass merchandisers, gas and convenience stores, military commissaries, and select club and dollar retail chains. This is an increase of approximately 7.3 percent year-to-date.
Dominating the category, convenience/PET still bottled water experienced an increase of 6.2 percent, bringing in $10.1 billion in sales year-to-date for the 52 weeks ending July 12, according to IRI data.
Although convenience/PET still water continues to dominate market share, the sparkling and mineral bottled water segment is showing the most growth. This segment experienced a 16.2 percent sales increase year-to-date, for sales of approximately $1.5 billion — surpassing jug and bulk still water in sales, according to IRI data.
Preston, Wash.-based Talking Rain Beverage Co. Inc.’s Sparkling Ice line stands on top of the sparkling segment with $393.2 million in sales, an increase of approximately 14.9 percent year-to-date for the 52 weeks ending July 12, according to IRI data. The segment also is seeing several brands grow at significantly high rates. For example, Ft. Lauderdale, Fla.-based National Beverage Corp.’s La Croix sparkling water experienced an increase of 39.7 percent, totaling $117.4 million for the same time period, according to IRI data.
The jug/bulk still water segment has been experiencing the least amount of growth, but growth nonetheless. According to IRI data, the segment experienced a sales increase of approximately 5.7 percent, bringing sales to $1.3 billion for the 52 weeks ending July 12.
Icing the competition
As bottled water sales grow, analysts note that this could be at the expense of the CSD category. Industry experts say health-and-wellness trends are one factor that has driven many consumers toward bottled water, specifically sparkling bottled water, as an alternative to CSDs.
“Continued consumer concern over the high sugar content of regular carbonates has consumers seeking healthier alternatives, oft presented by the bottled water categories. In the case of low-calorie carbonates, where artificial sweeteners are present, consumers are drawn to unsweetened or very lightly, naturally sweetened waters,” explains Eric Penicka, research analyst for Chicago-based Euromonitor International. “This aversion to artificial sweeteners is also fueling innovation in flavored waters, prompting manufacturers to create entirely unsweetened waters with light flavorings to appeal to the increasingly health-conscious U.S. consumer.”
For example, Tacoma, Wash.-based Reliant Hydration recently released its Recovery Water line, which is offered in three light, unsweetened flavors: Original, Essence of Cucumber & Mint, and Essence of Peach.
According to the company, Recovery Water enables cells to process at a higher level through electrolytes and a balanced pH, essentially accelerating recovery from injury and muscle-related stress. Additionally, the properties of the water reduce pain, inflammation and fatigue, it says.
The company adds that the water provides consumers with more energy during physical activity, reduced recovery post activity and better hydration.
Although flavored waters offer one bridge for consumers moving away from CSDs, carbonated waters offer another, which experts say also is thriving.
“The aforementioned aversion to high sugar content and artificial sweeteners in soft drinks of all types is benefiting all waters nicely; however, carbonated waters continued to fare particularly well, as consumers find sparkling water a compelling, value-added trait over bottled water,” Penicka notes.
In line with this, Chicago-based Mintel’s March “Bottled Water” report by the company’s U.S. Category Manager of Food and Drink and Foodservice Amy Kraushaar notes that although hydration and overall health are the main drivers of bottled water consumption, nearly one-third drink it as an alternative to less healthful beverages, which reflects the trend away from sugar and its alternatives. “Sparkling water in particular, offers a carbonated mouth feel similar to soda, which may attract those looking for the familiar fizzy sensation without the calories,” the report states.
Euromonitor’s Penicka notes that the still bottled water segment’s strength resides in value. However, like sparkling waters, enhanced waters are experiencing growth as a result of the additional traits and functions they offer.
According to the Mintel report, unflavored, enhanced still bottled waters accounted for approximately 30 percent of bottled water purchases, according to the company’s survey of 2,000 internet users ages 18 and older. The report also indicates that this segment accounted for more sales than flavored sparkling bottled and canned waters, which accounted for approximately 29 percent of bottled water sales, based on the same survey data.
“[N]atural is the core of consumer demand. This means no artificial sweeteners, flavors and coloring, and as brief and clear an ingredients list as possible,” Penicka says. “Added complexity is no longer viewed as value-added — consumers want to understand what they are putting in their bodies. When it comes to something like water, this is key. Water is, by most consumers’ definitions, as natural as something can get, but the addition of coloring and sweeteners can destroy this perception for many. As such, brands that have no coloring or sweeteners, yet include added flavors and/or nutrients, have done very well.”
More beverage manufacturers are noting this trend and innovating to accommodate. One example that caters to the natural, simple demands of consumers is Jeju 16 Water. A brand of Korea-based ON Corp. Inc., Jeju 16 is marketed as a “natural, volcanic mineral water.”
According to the company, Jeju 16 has passed through 16 layers of volcanic bedrock making it naturally purified without stripping essential minerals. The water is marketed by highlighting its unique volcanic filtration and fortification system.
The company explains that the water contains vanadium, which it claims helps fights disease, and silica, which it says has anti-aging benefits. Additionally, the water has a natural pH of 7.7, which the company notes matches the body’s natural pH balance of 7.7–7.8.
Some brands are incorporating flavors into their enhanced waters. For example, Los Angeles-based WANU Water Inc.’s self-titled water offers four natural flavors, vitamins, fiber and antioxidants.
WANU, which is short for water and nutrition, is low-calorie, sugar-free, non-GMO and contains 12 vitamins and nutrients, the company says. The enhanced water is available in four flavors: Dark Cherry, Watermelon Raspberry, Peach Passion and Kiwi Cucumber.
“Enhanced brands should also help grow sales, as consumers increasingly expect their beverage selections to provide some type of extra hydration or nutritional benefit such as added electrolytes, vitamins, minerals, protein, energy and so on,” Kruashaar noted in Mintel’s Bottled Water report.
Although sales growth is strong, the bottled water category faces only a few obstacles. The concern over the environmental impact of bottled waters’ bottles is one obstacle that continues to loom overhead. Bottled water has encountered bans in some cities, schools and other public places because of its PET packaging.
Yet the category is moving to innovate past this obstacle in several ways, including a move toward aluminum cans. According to a July Product Innovation report by Mintel’s Global Food and Drink Analyst Alex Beckett, titled “Cans can take added value bottled water to the next level,” aluminum cans are growing as a packaging alternative for bottled waters. “Despite recent gains made with plant-based plastics, negative opinion continues to surround plastic bottled water formats as bans come into force, potentially encouraging manufactures to explore ideas beyond PET,” Beckett noted in the report.
This report highlights Modesto, Calif.-based Varni Brothers Corp.’s July launch of Noah’s Spring Water packaged in re-sealable aluminum cans.
Noah's chose the Rexam Cap Can because it provides an environmentally friendly option for bottled water consumers as it is 100 percent recyclable, the company says. It also gives municipalities, educational and corporate campuses that have banned plastic containers another option. The can features a re-sealable cap that makes it reusable, and the aluminum keeps the water cold longer, it adds.
The package is made by combining Rexam's 24-ounce can body with Miamisburg, Ohio-based Dayton Systems Group’s (DSG) Cap Can closure technology. The aluminum can body is produced and printed on one of Rexam's high-speed can manufacturing lines and then transformed into a re-sealable container by seaming on a Cap Can end and closure.
“Noah’s Spring Water shows how canned formats can be a recyclable and reusable alternative to the increasingly criticized plastic bottle formats,” Beckett noted.
Another alternative packaging option hitting the market is water in carton packaging. Icebox Water is just one example; the Canadian spring water is packaged in a cardboard box carton that is 100 percent recyclable and BPA free. Additionally, it boasts a 76 percent smaller carbon footprint, the company says.
In addition to being a plastic alternative, the cardboard carton insulates the spring water inside, the company says. Icebox Water is available in 500-ml and new, kid-friendly 250-ml cartons.
According to Alexandria, Va.-based International Bottled Water Association (IBWA), the bottled water industry is utilizing a variety of measures to continue reducing its environmental impact. All bottled water containers are 100 percent recyclable and many bottled water companies already are using recycled plastic in their bottles, it says.
In July, Stamford, Conn.-based Nestlé Waters North America (NWNA) debuted its resource Natural Spring Water in its remodeled bottle made with 100 percent recycled PET (rPET), excluding the cap and labeling materials.
The remodeled resource bottle is available in 700-ml and 1-liter sizes. With its move to a 100 percent rPET bottle, resource hopes to focus attention on the uses of rPET, while reinforcing the importance of bottle-to-bottle recycling and increasing awareness and demand for recycled plastic, the company says.
The company is committed to increasing PET beverage bottle recycling rates to 60 percent by 2018, it says. NWNA has been closely working with policy stakeholders nationally and locally to help reach this goal, it adds.
Regardless of these concerns, Mintel noted in its report that this concern is not reflected in the sales. “Bottled water drinkers are very apt to say environmental and health issues surrounding bottled water are important to them, but these issues can be conflicting and may cause some users to have objections to bottled water even as they report buying it,” the report explains. “While significant percentages say they try to get adequate daily hydration and would feel strange not having water with them throughout the day, many also agree that bottled water negatively impacts the environment and many may opt for alternatives such as refillable containers or water filters. Brands that provide alternative, less environmentally impactful packaging may help users reconcile these often opposing attitudes and behaviors.”
A clear future
Despite the obstacles, experts agree that the market will continue to grow. “If current trends persist, bottled water could emerge as the largest beverage category by volume in the country by the end of 2017,” said Michael Bellas, BMC chairman and chief executive officer, in a statement.
Bellas’ statement is supported by the company’s “Bottled Water through 2019” report. “In 2019, per capita consumption of bottled water is expected to swell to 41.2 gallons,” the report states. “A major milestone should occur in 2017 when bottled water surpasses CSDs.”
Mintel’s Kraushaar also notes that volume and sales increases will continue to grow, citing hydration and health trends. “Beyond benefiting from the need for everyday hydration and its positive impact on overall health, bottled water sales will also gain significantly from the trend away from sugary drinks and toward healthful alternatives,” she stated in the report.
“Brands that can satisfy nutritional and flavor demands while minimizing their negative environmental impact are likely to draw an increasing number of buyers,” she concluded.