Water to flow faster than pop by 2005
and bulk water, so much so in fact that water is set to overtake
carbonates as the leading soft drink within just three years,
according to a new report by Canadean.
Last week we reported that children in the UK were steadily increasing their consumption of carbonated drinks, and at the same time their risk of ill health and dehydration.
But a new report from market analysts Canadean suggests that the situation may not be as bleak as it appears. The latest Global Packaged Water Report from Canadean suggests that bottled water will soon overtake carbonated soft drinks as the beverage of choice for most people.
And this change in drinking habits is likely to happen soon - by 2005, according to Canadean, when bottled water and water cooler volumes will overtake those of carbonates. At present, commercial water volumes stand at around 150 billion litres, split into 63 per cent for packaged water and 37 per cent for coolers. Canadean is forecasting that volumes will grow at an average rate of eight per cent per annum to 2005, with total volumes rising to just over 190 billion litres.
At the same time, the growth rate for the carbonates category is predicted to be considerably lower at 2 per cent per annum, resulting in a 2005 estimated volume of 187 billion litres.
The report suggests that the principal reason for the increase in commercial water consumption is in fact the health issue - the very point which Highland Spring was trying to make in its report last week and which has long been a key marketing point for the major bottled water producers.
Crucially, this trend towards healthier beverages is found across both developed and developing markets - it is not the preserve of the more affluent Western economies. Furthermore, a shortage of potable drinking water in many developing countries also serves to boost demand for clean commercial water. A look at forecast growth rates of water versus carbonates in some key markets (both developed and developing) illustrates this point: in none of them does the carbonates growth rate exceed that of commercial water.
In Brazil, for example, the average annual growth rate between 2002 and 2005 is expected to be 16.8 per cent for water and just 1.7 per cent for carbonates. In China, the figures are 16 per cent and 2.8 per cent respectively, while in Russia they are 13.7 per cent and 1.8 per cent. Even in the mature Western European markets, the differences are notable: in Germany, water sales are set to grow 2.4 per cent, while carbonate growth will be just 0.8 per cent.
Packaged water, defined by Canadean as that held in containers of less than 10 litres, is expected to grow most strongly in Asia and North America. Indeed, the US - the world's largest carbonates market - is set to contribute more incremental packaged water volume than any other market, and more than the entire Asian region put together.
This prediction has not been ignored by the major carbonates producers, most of whom are of course based in the US. But far from being concerned about the threat water poses to their core products, the majority of producers have embraced the water market and begun producing (or acquiring) their own brands. France's Danone, for example, recently acquired the Canadian water cooler company Sparkling Spring, while it has also recently signed an agreement with Coca-Cola for the distribution of Evian and other brands in the US.
Canadean's report shows that the global split between still and sparkling water is 70:30. This varies substantially between regions, with still water accounting for over 90 per cent of the North American and Asian markets, while in Eastern Europe many traditional local waters are sparkling, and still variants take less than one third share of packaged water consumption.
A key beneficiary of the growth in packaged water is the PET plastic packaging industry. PET currently accounts for approximately 70 per cent of the pack mix at a global level. This share is steadily increasing, mainly at the expense of glass, as consumers take to the lighter, cheaper and more convenient pack type.
The bulk water market - water coolers - is forecast to grow by nearly 10 per cent per annum over the next three years. Over 85 per cent of the incremental volume growth here is set to come from Asia and Central & South America, driven by the need for clean safe drinking water - and concerns about the quality of local supplies. In per capita terms, annual global consumption of bulk water stands at a comparatively low level of 12 litres, compared to 18 litres for packaged water and 29 litres for carbonates - hence the moves by companies such as Danone and Nestle to increase their share of this potentially important market.
