British water market to feel the Dasani effect?

UK bottled water sales surged by 18 per cent to 2,070 million litres in 2003, worth almost £1.2 billion in retail sales, according to the latest edition of the UK Bottled Water​ report from specialist beverage consultants Zenith International​, continuing the double-digit growth trend of recent years.

But despite this growth, per capita consumption of just 35 litres still remains well below the west European of 100 litres, showing that there is still huge potential for bottled water there. In fact, Zenith forecasts UK sales rising to over 3,500 million litres in 2008, a continuing annual growth rate of 10-12 per cent.

Last year alone, still water sales rose by 20 per cent, and they continue to be the main driver of growth in the market as a whole. Still water accounts for 85 per cent of all bottled water sales in the UK, helped in no small part by the proliferation of water coolers in homes and offices throughout the country.

"Greater public understanding of health issues has enabled bottled water to capitalise on its hydration benefits,"​ said Zenith research director Gary Roethenbaugh. "Single serve packs offer consumers convenience on the move with a zero calorie beverage for today's obesity-aware times. Water coolers are also continuing to build scale as a chilled and caffeine-free office refreshment."​

The across-the-board popularity of bottled water has also contributed to its growth, with both adults and children alike stepping up consumption. In 2003, over 1,600 million litres of bottled water were sold in retail size packs, Zenith's report said, while some 2,300 million cups were filled from water coolers.

Despite the recent furore over Coca-Cola's Dasani brand - the company has marketed the water as 'pure' although it is simply purified mains water, prompting an outcry from consumer groups and the media - this type of water has just a small share of the UK market at present.

According to Zenith, natural mineral water remains the preferred type, accounting for 65 per cent, led by the top three brands - Evian and Volvic from Danone and local favourite Highland Spring.

Both Coca-Cola and PepsiCo dominate their home market with purified water brands (Pepsi's is called Aquafina), but neither are currently big operators in Britain (and the fuss over Dasani suggests that they will find it difficult to build a substantial presence, at least in the short term). In fact, it is world market leaders Danone and Nestlé which dominate the UK market, both in terms of bottle consumption (Nestlé owns the Perrer and Vittel brands) and, increasingly, the water cooler sector, where they have a combined market share of 37 per cent according to Zenith.

Local producers Highland Spring, Well Well Well and Campsie Spring are the next three largest players.

But if British scepticism could put the brakes on Coca-Cola's immediate growth plans for Dasani, the launch of the water in the UK is nonetheless likely to have an impact on producers, according to Roethenbaugh.

"The UK market also has an array of smaller operators carving out their own niches. The entrance of Dasani and other new brand launches is intensifying competition and putting further pressure on shelf space."​

In the end, the sheer marketing might of Coca-Cola is likely to win through, with retailers switching smaller local brands for Dasani as part of wider agreements with the US group, whose carbonate brands remain a must-have. This is unlikely to impact the leading brands - which already sell at a premium to many other products and so are generally unaffected by the arrival of low-cost rivals - but could hamper sales of the myriad of smaller producers which have neither the brand equity nor the marketing budgets to tackle Dasani head on.

For details of how to order your copy of the Zenith UK Bottled Water report, click here.​​