THE WATER STORY

“Water, taken in moderation, cannot hurt anybody.”  Mark Twain

Water; it literally falls from the sky, covers 70% of the planet’s surface, and if you’re very fortunate bubbles up out of the ground. It is also the single-most important factor in sustaining animal, plant and insect life. It’s much more than a mere slogan, it’s reality “no water, no life”.

The rapid industrialisation of the nineteenth and twentieth centuries has given rise to a global crisis in water both in terms of diminishing water quality and availability of drinking sources, particularly in the developing world. Increasing aridity as a consequence of climate change has left huge expanses of Africa, Australia and Asia bereft of it where there were once huge land-locked lakes and oceans.

Even here in New Zealand, water availability and water quality is something no longer taken for granted despite our sub-tropical climate with the South Island in particular experiencing extreme weather conditions and prolonged droughts down through the eastern coast and Otago. It’s not so long ago that Auckland, one of the wettest regions in the country faced water-rationing in response to declining dam levels.

The outlook for the future is dominated by climate change dynamics and its effects of increased rain and flooding in some regions and accelerating aridity in others. Our neighbours across the ditch are facing the most difficult conditions on record and this is a nation very familiar with the challenges of sustaining life and industry in the face of unpredictable rainfall patterns.

The word describing good fortune and health literally derives from the source of water, “well”. And it is this increasing association with well-ness and dissatisfaction with water drawn from the tap that is contributing to the explosive global phenomenon of increasing bottled water consumption.

It is estimated that bottled water consumption globally is growing at 8% per annum and recent figures report:

• Australia 44L per person
• U.K.60L per person
• U.S. 125 L per person
• France 142L per person
• Italy 176L per person! 

According to Beverage Marketing Corporation in its 2007 report, "Bottled Water in the United States," U.S. bottled water sales exceeded 8.25 billion gallons (37.6 billion litres), a 9.5% increase.

Bottled water per capita consumption level of 27.6 gallons (125.5 litres) increased by over two gallons, from 25.4 gallons per capita the previous year.

Additionally, the wholesale dollar sales for bottled water exceeded $10.8 billion, an 8.5% increase over the prior year.

Bottled water in 2003 emerged as the second largest U.S. consumer beverage category by volume behind carbonated soft drinks (CSDs); a position the industry still retains.

The New Zealand Picture

Per capita consumption in NZ is still fairly low at 14L per person. Most of that has been achieved in the last 10 years. If you are able to cast your mind back to the mid 1990’s you will recall that bottled water was a relatively small and specialist niche dominated by imported brands in the restaurant sector. The ‘popular’ brands were Perrier, San Pellegrino and Evian and volumes were small. In fact the idea of paying for water in a bottle seemed abhorrent to most of us who were very satisfied with the water directly from the tap. Even as a beverage marketer in the 1990’s I was sceptical of the commercial benefits of bottled water and that there was potential for it in NZ given our extremely high water quality and availability. I recall visiting outlets to review the performance of our own brands in the route and liquor markets and being appalled by the appearance of bottled water which often had a thick film of dust on it and was not in any immediate danger of being sold. Full credit to the NZ brands who persevered in those dim, dark days.

So what changed?

A number of factors came together to activate and facilitate the growth of bottled water in NZ. It is difficult to apportion contribution directly to each factor but I will take a punt on ranking the factors.

1. The launch of the sipper bottle. Both Frucor and Coca-Cola launched sipper bottles onto the market with their easy-drink spout and soft, squeezable packaging. Those brands still lead the market today in H2GO and PUMP. The advent of the sipper bottle made the whole experience of chilled water from a bottle much more convenient and interesting. A great example of packaging innovation as a marketing break-through
2. Increasing concerns around Chlorination and Fluoridation. You will recall that the 90’s saw a lot of water authorities facing extreme pressure from both sides of the water debate and what constituted quality when it came to drinking water as opposed to water for other purposes. One consequence of this debate was much confusion among ordinary New Zealanders as to whether our water was as good as we had always been led to believe. Especially interesting when you consider a significant percentage of New Zealanders did, and still do, drink rain water collected from house and bach roofs.
3. Increasing globalisation and tourism. The nineties really saw NZ begin to become much more a member of the global village. The boom in media channels, the internet, tourism and foreign investment gave us much greater exposure to what was going on across the water and immigrants and tourists brought with them their preference for bottled water and distrust of tap water. Through popular television programmes we also came to see our favourite characters drinking branded water and this opened our minds to the possibility.
4. Waikato Water. Following on the back of the water shortages of the 1990’s Auckland began to draw water from the Waikato River. Whether it was true or not, Aucklanders perceived a major change in the taste of the water with the common complaint being one of a chemical taint to the water. Almost overnight Aucklanders began to invest in in-home water filtration systems, water filtering jugs, routinely boiling water and / or leaving it to stand. We also began to chill our water down in the fridge. This represented a major change in behaviour from simply drawing water from a tap and drinking it there and then as we had done all our lives.
5. Jogging, Gyms and Fitness generally. The nineties gave rise to a major boom in the fitness industry. With it came the requisite hydration routine which started with electrolytic drinks like Powerade, Lucozade and Gatorade but in time shifted to waters as people came to realise that energy drinks were throwing back in the very same calories we were burning off. We wanted the hydration and convenience of the bottled beverages but not the calories. Gyms and sports clubs pioneered much of the branding of the drinks which today are consumed in the mainstream.
6. Healthier Lifestyles Generally. As we’ve become aware of the impact of excessive sugar, fat and food additives on our health, many of us have elected to cut back on certain beverages and increase others. The winners of this change have been waters, low fat milks, diet drinks and some other specialist niche products designed to aid weight loss and / or improve the metabolism.

NZ Market Overview

It is estimated that New Zealanders are consuming around 55 million litres of bottled water. That is in addition to the 530 + litres each one of us is drinking from the tap each year. Our low per capita of bottled water, at 14 litres, is attributed to our unwillingness to pay for water. The fact of the matter is bottled water does account for 10% of our beverage purchases from supermarkets and volumes are growing in excess of 10% per annum while value is growing around 20% per annum in the recent quarter. Last year we spent $44 million on 30 million litres of bottled water in supermarkets and $12 million on nearly 4 million litres in service stations. We purchased another 23 million litres from other un-audited sources eg restaurants, clubs, pubs, workplaces etc bringing our estimated spend somewhere into the vicinity of $80 to $90 million based on conservative estimates. Bottled water growth rates are achieving around 10% which is strongly outpacing the total beverage category at less than 6%.

Segments and Brands

From the above table we can see that the market is dominated by still waters and flavoured still waters with Supermarkets enjoying some action with carbonated waters. Flavored waters in total contribute less than 30% of the category reflecting the markets preference for pure and unsweetened. The fastest growing segment is pure sparkling at 20% vs last year but off a small base and almost entirely in supermarkets.

The leading brands in the market are H2GO and PUMP with a very clear ‘on the go’ positioning dominating the single serve market. The other important brand in this segment, with a clear sporting position is MIZONE. The take-home segment is dominated by Kiwi Blue and NZ Natural.

Supermarkets Specifically

I was in a supermarket last week and observed that 26 bays of the drinks aisle were occupied by water brands. Now I understand why with 30 million litres at $44 million dollars passing through the checkouts in the last 12 months. In supermarkets, still water dominates at $35 million and sparkling is a distant second at nearly $9 million. Both are growing well with rates exceeding 10% and achieving nearly 20% in the recent quarter. Supermarket sales reflect a greater portion of take-home larger bottles and multi-packs. Water is returning around $1.45 per litre in supermarkets reflecting the bias towards large pack sizes.

Service Stations Specifically

Service stations moved nearly 3.7 million litres of bottled water in the last 12 months at a total value around $12 million. Volumes have been static in the last 12 months but value has grown by 5% with Still non-flavoured water driving that growth at nearly 12%. Still Flavoured water is a significant player at 27% of the category but is not growing. Water is returning around $3.23 per litre in service stations reflecting higher prices generally and the importance of single-serve ‘on the go’ consumption.

Who is Drinking Bottled Water?

Thanks to AC Nielsen’s Panorama team for sending me the following profile of bottled water drinkers.

“Bottled water drinkers tend to be under 40. They are more likely to be female, living north of Taupo and less likely to be living in the South Island than the total population. Their attitudes reflect a youthful, social group - they like to dine out, they like music, and shopping. They are more likely to play sport and exercise than the total population, with fitness activities such as walking, cycling, going to the gym and swimming popular. They visit the cinema and use the Internet more than the average kiwi and read a lot of magazines.”

Further exploration of the Panorama database (New Zealanders aged 10+) revealed the following:

• 33% of us have bought bottled water in the last month
• Pak ‘n’ Save, Foodtown and the whole servo channel punch above their weight in bottled water sales
• Bottled water drinkers are light readers of the daily newspaper but heavy readers of women’s weekly magazines
• They see themselves as more social, extrovert, adventurous and ambitious than the general population

Breakaway section US Study Confirms Consumer Belief in Health Benefits of Bottled Water

In a recent survey conducted by Harris Interactive, bottled water was the number one choice of consumers when asked to identify the bottled beverage they most associate with living a healthy lifestyle.
In the survey, respondents were asked:

"Please think about living a healthy lifestyle. Which one bottled beverage do you associate most with living a healthy lifestyle?"

The results were as follow (in descending order):

Bottled water (58%)
Milk (22%)
Bottled fruit beverages (5%)
Sports or energy drinks (3%)
Bottled tea (2%)
Carbonated soft drinks (2%)
Bottled coffee (less than 1%)

Of the 3,238 consumers surveyed, 58% selected bottled water as the bottled beverage most associated with a healthy lifestyle. More than twice as many people selected bottled water as a healthy-lifestyle beverage than the next most popular choice: milk, which received 22% of the votes.

Why? Because of what’s not in it.

What we can know is that the majority of consumers make bottled water their healthy-lifestyle bottled beverage-of-choice because it does not contain calories, caffeine, sugar, artificial colours, alcohol, or other ingredients. Consumers typically believe: 

• that there is nothing better than water to refresh and hydrate
• and bottled water provides a smart beverage choice.
• The consistent safety, quality, good taste, and convenience make bottled water a natural choice that can contribute to a healthy lifestyle

The Health Angle
Why is water consumption so important?

Keeping blood thin and free flowing can protect you from heart disease, and drinking enough water makes a big difference to this according to researchers in the US. Their six year study into the drinking habits of Seventh-day Adventists revealed that those who drink the most water (more than 5 glasses a day) were much less likely to die of a heart attack or stroke than those who drank a small amount (2 or less glasses a day.)

Current fluid guidelines encourage us to drink a variety of healthy fluids such as tea, coffee, fruit juices and soup, as well as water, to meet daily fluid needs. However, the researchers showed that fluids other than water were more likely to increase your risk of dying from heart disease. Plain water was the best.

How water works is easy enough to understand when you consider dehydration thickens and slows the blood, making heart attacks more likely. But why isn’t any fluid good enough to do this? The researchers give a couple of likely explanations, the first being that caffeinated drinks with their slightly diuretic action might make blood thicker rather than thinner. Because Seventh-day Adventists generally avoid caffeine, this is unlikely to explain the whole story.

The second explanation is that drinks with lots of sugar (fruit juice and soft drinks) can “pull” water out of the blood and into the digestive tract. This movement of fluid helps to digest of all the extra sugar, but it also makes the blood thicker.

More research will help us understand the role of fluid and heart disease, but in the mean time you can be certain that the health industry and beverage marketers generally will keep pushing the health benefits of water consumption.

Reference: Chan J et al. Water, other fluids and fatal coronary heart disease. The Adventist Study. American Journal of  Epidemioly 2002;155:827-33

The Future of Bottled Water

The outlook for the category is very positive with more brands coming into the market and new innovations to motivate shoppers. Industry leaders are quick to point out the following trends by way of a positive outlook for the category:

• Globally the market has been recently growing at 8% per annum
• Locally value growth is outstripping volume growth
• The take-home market is growing where the majority of tap water is consumed
• Water is becoming part of the regular shop rather than a special occasion purchase
• New packaging and pouring technologies continue to add excitement to the category
• More established brands like H2GO are achieving revitalised growth as they introduce new compatible flavours like lemon-lime
• Offshore there is huge momentum behind functional waters; added calcium; vitamins; slimming waters; waters for skin health; emotional well-being; naturo-therapeutic waters etc

Summary for Manufacturers and Retailers

From a small exclusive niche, bottled water has developed into a healthy vibrant category in food and beverage retailing. Who’d have believed it? With NZ per capita’s so far behind the rest of the world we can guarantee that the category is going to continue to grow. With the government’s emphasis on getting obesity rates down we will see increased support for water across the community, health providers, the education sector and wherever the government can influence diet. Water distribution and market penetration is also on the increase with work-places making chilled water more easily available and even our friends in the fast food sector making water one of the drink options in a food combo. The beverage manufacturers are highly committed to water. It’s low risk, high social responsibility and very profitable. Maybe The Marketing Guy should be thinking about launching a product or two?

Rob Bree – The Marketing Guy ™ is a marketing consultant and regular contributor to FMCG and Grocers Review. You can contact him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it  or call him on 0272 777 832.