This is marketing research on the bottled water market and can include information on the background, market structure, definitions, competitors, trends and developments of bottled water and is related to other topics such as beverages, colas, energy drinks and sports drinks.

Table of Contents

Table of Contents

1 Background 
2 Market Structure 
3 Industry Definitions 
4 Market Metrics 
5 Industry Players 
6 Trends and Recent Developments 
7 Sources

Background

Bottled water is a sub-category of the soft-drinks or beverages market. Colas, soda, pop, hot chocolate, teas, coffee etc are excluded from this classification.

Market Structure

This industry has seen very high growth relative to other industries in the past 10 to 15 years. With the rise of awareness of environmental issues and the trend towards "green living", this industry has risen very rapidly. at this point in 2009, bottled water is a large global business, and many countries are participating in bottled water production. The business is generally fairly concentrated in each country, although there are many smaller niche players such as Fiji Waters which often market brands from a particular source. Large players, however, dominate the business in developed countries. Many major beverage companies found this a natural brand extension of already successful beverage lines and they extended their brand into bottled water labels. Large players such as Nestle, Pepsi and Coca-Cola have all been highly successful in their marketing efforts.

U.S. consumers now drink more bottled water than any other beverage, except carbonated soft drinks. Since 1998, per capita consumption of carbonated soft drinks has fallen slightly, while bottled water consumption continues to set new records. From 1997 to 2005, per capita consumption of bottled water increased by 90 percent to 25.4 gallons—17 percent of nonalcoholic beverage consumption.

The four largest suppliers’ share of bottled water sales rose from 52 percent in 1997 to 63 percent in 2002, a 21-percent increase. Such a large increase in sales concentration occurred despite rapid demand growth, which can attract new suppliers and slow increases in concentration. In the poultry industry, for example, the four-firm concentration ratio rose by 17 percent from 1987 to 1992, while the hog slaughter concentration ratio increased by 43 percent. Over the same period, ERS’s food availability data, a proxy for consumption, show a 19-percent increase for poultry, compared with a 7-percent gain for pork.

Leveraged by their extensive bottling and distribution networks, Pepsi-Cola and Coca-Cola entered the bottled water industry in the mid- to late-1990s and quickly ranked among the top four suppliers of bottled water in the U.S. Both companies distribute their bottled water brands through the same channels that carry their soft drinks. The companies have also relied on their own brand-building capabilities. Pepsi introduced Aquafina in the mid-1990s and, by 1999, had become the fourth-largest supplier of bottled water with a 5.5-percent market share. In 1999, Coke introduced the Dasani brand, supported by the largest advertising budget in the bottled water industry. In 2004, shares of Pepsi and Coke reached 11.3 percent and 10 percent of the bottled water market, respectively. The other two leading suppliers of bottled water, European-based Nestlé and Groupe Danone, also continued to increase their U.S. market share by acquiring North American companies and constructing new plants in the United States.

Industry Definitions

Bottled water industry terms:

• Artesian - water from a confined aquifer that has been tapped, with purification based on gravity

• Fluoridated - water containing fluorine for health reasons

• Ground - water from underground sources obtained by pressurized pumping, can be well water

• Mineral - water with at least 250 parts per million total dissolved solids, obtained from underground springs

• Purified - water deerived from deionization, distillation, deionization, and reverse osmosis processes

• Sparkling - water in which carbon dioxide is added to create a carbonated effect

• Spring - water obtained from underground formations in which the water flows to the surface

Market Metrics

U.S. Market

The U.S. is the world’s largest market for bottled water, estimated with annual consumption of more then 26 billion liters and average per person consumption of approximately 190 liters annually. The growth rate in bottled water sales in the U.S. has slowed somewhat from a rate of over 12% annually earlier in the decade, but may be still growing about 10% annually.

A significant driver of bottles water sales has been the "green" or environmental effect which has underscored the potential health benefits, as opposed to sugared soft drinks or other drinks. Artificially carbonated bottled water has also become trendy and popular in the U.S.

As indicated above, the industry has seen very high growth. In the chart below, data from the U.S. Department of Commerce indicates that in the latest period measured, 1997 to 2002, the number of firms in the U.S. bottled water industry had grown 84% in 5 years to 201 companies and the number of employees by 49%. Again, this is a relatively concentrated industry.

Revenues have jumped in line with the industry numbers seen in the chart above. As estimated by the U.S. Department of Commerce, the value if shipments rose 114% in the same five year period (see chart below).

World Market

Total bottled water sales may be as high as 160 billion liters annually. In many cases, bottled water is viewed as a necessity due to unsafe locally produced water alternatives and this is a key driver in developing countries. The global bottled water market may be over US $50 billion annually and may be increasing at up to 10 percent annually.

In 2010, the market is potentially forecast to be US $75 billion, an increase of 30% over 2005 and reflects an estimate of 159.2 billion liters, an increase of 32.4% since 2005.

Europe is the leading consumer of bottles water, with an over 50% market share. Nestle in Switzerland was recently the world's leading seller of bottled water brands. Supermarkets and hypermarkets have approximately 40% share of bottled water distribution.

Estimate of the largest consumers of bottled water in 2004

Country 			                 Consumption
				(In billions of liters)

United States			         25.8
China					11.9
Brazil					11.6
Italy					10.7
Germany				         10.3
France				          8.5
Mexico				          7.7
India					 7.4
Spain					 5.5
India					 5.1

Rest of the World                             39.9

Industry Players

• Nestle Waters of America

The largest food company in world, Nestle, with annual sales in the U.S. alone of US $2.7 billion. Popular brands include Poland Spring, Perrier, and Arrowhead.

• Pepsi

Pepsi Co. sells Aquafina, and Pepsi's total bottled water sales were estimated at US $1.1 billion.

• Coca Cola

Coca Cola sells Dasani, and had annual bottled water sales in 2006 of US $1 billion.

• Danone

Group Danone offers brands such as Evian, Danone, and Sparkletts with estimated sales of at US $800 million.

• Fiji

This bottled water is imported from Fiji, and sales were estimated at US $48 million for 2006.

Trends and Recent Developments

More and more health alternatives of bottled water are expected to come into the market which may be a threat to its continued growth. The biggest threat to bottled water sales is likely the increased focus on environmental issues. This has become a major news item in 2007 with criticism directed at the environmental impact of landfill problems created by the bottles themselves. It is argued that the positive benefits of better quality water are mitigated by the need to either recycle of dispose of all the plastic or glass used in the bottles. The manufacture, storage and transport of the bottles is estimated to consume 17 million barrels of oil per year. The argument is that tap water is essentially acceptable and that the costs related to energy could have been diverted to better use elsewhere. The costs of pollution and landfill costs from all the bottles may be even higher than the energy consumed.

Sources

U.S. Department of Commerce

U.S. Department of Agriculture

US Economic Research Service, USDA