Bottled water ... marketing trends
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What are main trends of the bottled water market? Danone and Nestl have a long tradition in selling natural mineral waters. Nestl is number 1 on the world market of bottled water with a turnover of about US$ 3.5 billion in 1999 representing 15.3% of the world market share and 67 bottling factories employing over 18'000 people in the world.
Perrier-Vittel SA is the world water division of Nestl.
Roche Claire, a subsidiary company of Suez-Lyonnaise des Eaux, is specialised in carboy water. Suez and Vivendi own the techniques, the equipment and the know-how to treat water. They don't want to lose ground on Coca-Cola, PepsiCo, Danone and Nestl on the purified water market, particularly since they provide the water to sodas and soft drinks companies (Belot, 2000).
However, Suez and Vivendi are facing a dilemma: how to sell water in carboy and at the same time distribute water through public municipal distribution networks, without giving more way to the idea that tap water is of bad quality?
Moreover, water in carboy is much more expensive than tap water. Suez-Lyonnaise des Eaux intends to distribute only spring water through carboys in Europe. Vivendi Water concentrates on the market of purified water with Culligan. Vivendi wonders how to apply marketing techniques for carboy water to tap water, in order to sell water filters or water refrigerators.
Even municipalities turn to the bottled water market. In United States, some cities recently have announced that they plan to enter the bottled water market by selling their water untreated in bottles.
Houston, for instance, has announced that it will sell its self-proclaimed Superior Water city water taken straight from the tap and pumped into bottles. Other cities including Kansas City and North Miami Beach are said to be evaluating plans to sell their water in bottles (Olson, 1999).
Bottled water market trends The world bottled water market amounts to an annual volume of 89 billion litres, which represents an average 15 litres of bottled water drunk yearly per person (Danone, 2000). Western Europeans are the major consumers, drinking nearly half of all the world bottled water, with an average of 85 litres/person/year
Within Europe, Italians drink more bottled water than anybody else: 107 litres per year per inhabitant in average (Sollberger, 1994). In United States, 54% of Americans regularly drink bottled water (Olson, 1999). More than half (59%) of the bottled water drunk in the world is purified water, the remaining 41% being spring or mineral water (Belot, 2000).
Bottled water consumption has been growing steadily over the last 30 years e.g. in 1976, an average 5.7 litres of bottled water were drunk per person in United States, as opposed to 17 litres in 1986 and 35 litres in 1999. The world consumption now grows by an average 7% each year.
Although major consumers are located in Europe and North America, the most promising markets are in Asia and the Pacific, with an annual growth of 15% for the period 1999-2001 (see figure 3). In India for instance, the bottled water industry, with more than 100 companies, has a turnover of about US$ 70 million, growing at an average rate of 50% every year. This sector employs 15'000 to 20'000 people in the country (Jose Raphel, 1998). The important increase in this region can be easily explained through the growth of the population and problems of water quality and water supplies (Fabre-Pujol, 1999, see 5.1).
Until 1992, the demand for bottled water in India was mostly limited to foreign tourists, corporate meetings, conferences, etc. The introduction of bulk packaging extended the market to new and numerous consumers (Jose Raphel, 1998).
This increase of bottled water consumption is the major of all the beverage industry.
In United Sates, sales have tripled in the last decade to about $4 billion in 1997. Globally the market was estimated in 1995 to be worth more than $14 billion annually in wholesale sales13.
According to industry stock analysts, the profit margins in the business are really pretty good for some bottlers in the neighbourhood of 25 to 30% (Olson, 1999). The world bottled water market is estimated to be worth US$ 22 billion (Danone, 2000).
Danone is well-positioned on the purified bottled water market, in North America and, above all, in some emerging countries, i.e. China, Indonesia, Mexico and Argentina.
In January 2000, Danone bought McKesson Water Products Company, an American bottler, and became n2 for bottled water in United States with a market share of over 16%. Danone's Wahaha water manufactured by a Chinese bottled water company ranks world n4 for still water, with 836 millions litres sold in 1999 in China and a turnover of 375 million US$ (Danone, 2000).
Nestl also targets emerging countries' markets with Nestl Pure Life, a purified and mineralenriched water developed for them. Its concept consists in associating a local spring, located in the outskirts of a big city, to a bottling facility in order to supply consumption areas within a limited region, thus reducing transportation costs.
Launched in Pakistan in December 1998, Pure Life targets other emerging countries, in particular China and India, where bottled water consumption per inhabitant is still very low due to weak purchasing power (Fabre-Pujol, 1999).
Nestl is present in Brazil, China and Mexico and expects to be in six to eight more countries before the end of 2001.
However, such agreements between local bottlers in emerging countries and international brands do not necessarily imply that strict quality controls are conducted at the bottling plants.
Local brands can pretend the water they bottle is as good as their partner's abroad even though they may not pay maximum attention to the quality of the water or hygiene conditions when bottling, nor to the additional pressure they put on water resources.
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Bottled water marketing trends