BOTTLED WATER MARKETApril 1st, 2010
BY PACIFICA GODDARD
The most important markets for bottled water have traditionally been developed economies like Western Europe and the United States. However, growth in these markets has recently flattened out, exacerbated by the global economic crisis and growing environmental concerns over the product. The world’s top bottled water vendors now are looking to emerging economies to pick up the slack in the market; France’s Danone, one of the top four bottled water companies, has completely restructured its bottled water business plan to focus on these regions.
Bottled water as a segment is predicted to grow most quickly in Asia and Latin America, according to market analysts such as Zenith International. Latin America is positioned for a lot of growth in this sector for a combination of factors, including rising disposable income and limited access to clean tap water. In addition, in recent years many parts of Latin America including Argentina, Chile, Venezuela, Ecuador, and Colombia have been increasingly affected by droughts and other unstable weather patterns, making the availability of reliable supplies of drinking water that much more important.
According to Nestlé’s annual report, in 2009 the average consumption of bottled water in Latin America was 59 litres per capita compared to 100 in north America, 116 in western Europe, and 40, 14 and 14 in eastern Europe, the Middle East/Africa, and Asia respectively.
Mexico was the top consumer of bottled water per capita in 2008, according to the Beverage Marketing Corporation, at 223.7 litres per capita, compared to 133.24 in 2002. Mexico accounted for 12.3 % of the global volume in 2008, only beaten in shares by the US. Mexico’s growth in this segment has been impressive; in 2002, 14.76 billion litres were consumed, compared to 22.28 billion in 2007. Even in 2008, with the economic crisis in full swing, sales rose to 24.61 billion, up 10%.
Brazil is not only the second largest bottled water market in Latin America, but is currently the fourth largest bottled water market in the world. According to the Beverage Marketing Corporation, between 2002 and 2007 Brazil’s sales shifted from 9.62 billion litres to 13.71 billion litres, a 7.3% CAGR. Growth slowed a little in 2008, when sales reached 14.29 billion litres, a 4.1% increase from 2007.
According to Euromonitor International’s research team, the newest niche of bottled water in Latin America is coming from flavored or functional waters, such as Pepsi’s H2OH, Danone’s Villa del Sur (flavored waters) and Pepsi’s Propel functional water. "Flavoured and functional waters are considered to be low calorie alternatives to juices and carbonated beverages, but it should be noted that these products are quite expensive for the majority of the population in Latin America," said a spokesperson.
A decade or two ago, almost all of Latin America’s water market was highly fragmented. But the world’s largest bottled water producing companies, including Nestlé, Danone, PepsiCo and Coca-Cola, have begun to consolidate a lot of the market through regional acquisitions.
According to the Brazilian Association of Non-Alcoholic Beverages (ABIR), Brazil currently has over 500 bottled water producers, creating a very dynamic market, ripe for acquisitions. The big players are ready to take this market on. For example, in 2008 Danone acquired Brazilian Icoara Indústria e Comércio de Águas S.A. (NOTE – SPELLING IS CORRECT), through which it began marketing its Bonafont brand. In 2008 Nestlé purchased Brazilian bottled water company Santa Bárbara, along with its water source and production facility. Nestlé has said it plans to invest one billion Brazilian reals (Euro 434 million) into its Brazilian operations in 2010, 35% of which would go towards new factories and the expansion of existing facilities. The remainder would be used to fund acquisitions, in particular bottled water.