Bottled Water in the U.S.

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Bottled Water in the U.S.

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The market for bottled water has a promising future. As consumers continue to turn away from carbonated soft drinks and embrace bottled water in all forms, many beverage industry analysts and marketers are convinced that the category will soon become the dominant non-alcoholic beverage. Health and wellness concerns, the fitness fad and the perennial struggle of many consumers with obesity and being overweight have combined to make bottled water the zero-calorie/ultra-low calorie beverage of choice for growing millions of Americans. Innovations in flavoring and packaging have made bottled water ever more appealing to consumers swearing off sugary drinks. An increasingly favorable public policy environment has given bottled water a competitive advantage over high-calorie beverages viewed by consumer activists as menaces to public health. While consumption of premium European sparkling water brands has long served as a status symbol for urban elites, premium still water packaged in designer bottles has become the fashion statement du jour for more and more Millennials and GenXers.

Major marketers of bottled water, however, face a number of disruptive forces, even in the midst of this generally upbeat view of the prospects for the bottled water category. As supermarkets stock their shelves with loss-leading cases of plain bottled water, simply competing on the basis of volume and price no longer seems feasible to marketers of major brands. Major players such as Coca-Cola Company and PepsiCo, Inc. have been forced to revisit their strategies in the face of increasingly fierce competition from branded premium products from upstart brands like Talking Rain Beverage Company as well as low-priced commodity products from private label manufacturers.

Bottled Water in the U.S. highlights the challenges facing marketers of bottled water and analyzes their strategic responses in an increasingly hostile competitive landscape. The report also highlights trends shaping the market for bottled water; provides an estimate of U.S. retail sales of bottled still and sparkling waters for the 2008 through 2013 period and a projection of U.S. retail sales through 2018; identifies marketing and new product trends; and provides an in-depth look at today's consumers of bottled water.

Scope of the Report

This report analyzes the U.S. market for the following categories of bottled water: still water packaged in polyethylene terephthalate (PET) bottles; still water sold in jugs or bulk; and sparkling/mineral water. Bottled still water can either be sourced from natural springs or consist of purified water from other water sources. The sparkling/mineral water category includes naturally carbonated bottled water but does not include seltzers and club soda, which are artificially carbonated. Both bottled still and carbonated waters can be enhanced with vitamins or minerals and various flavorings.

Methodology

The main source of consumer data in this report is the Simmons National Consumer Survey (NCS) for Fall 2013 (and Fall 2004 in the case of 10-year-trend tables and figures) from Experian Marketing Services. On an ongoing basis, Experian Marketing Services conducts booklet-based surveys of a large and random sample of consumers (approximately 25,000 for each 12-month survey compilation) who in aggregate represent a statistically accurate cross-section of the U.S. population. Simmons NCS uses the term "non-carbonated water," but for the sake of consistency, the term "still water" is used throughout this report.

Retail sales figures credited to IRI (Chicago, IL) are based on IRI aggregated multi-outlet (MULO) sales tracking, which represents sales through U.S. supermarkets, drugstores (including Walgreens, CVS, and Rite Aid), mass merchandisers (Walmart, Target, Kmart, and Shopko), warehouse clubs (Sam's Club and BJ's, but excluding Costco), dollar stores (excluding Dollar Tree), and military commissaries.

The report is also based upon data collected from field surveys of food retailers in various channels as well as a wide range of industry sources, including company websites, trade publications, business newspapers and magazines, consumer blogs, and annual reports, 10Ks and other releases from public companies.

Chapter 1: Executive Summary
Scope of the Report
Methodology
Market Overview
Insights and Opportunities

Premium Waters Seen as Salvation for Meager Profits
Perceived Purity of the Product Still Matters
"Natural" Enhancements Important
Bold Colors and Flavors Start to Trend Upward
Water Enhancers Create Promise and Loom as a Threat
At-Home Carbonation Enters the Fray
C-Stores Offer Hope for Bottom Lines of Bottled Water Marketers
Sparkling Water Users Are Elite Consumers

Competitive Strategies

Major Marketers Forced to Hit Reset Button
Talking Rain Beverage Company Disrupts Sparkling Water Market

Marketing and New Product Trends

PepsiCo Markets New Water Brand to Teens
Essentia Water Promotes Health and Happiness
Bottled Water Companies Support Drink Up Initiative
Premium Still Water Offers "Ectrolytenment"
Evian Takes Steps to Rebuild Brand
LaCroix Revives Spree and Launches C?rate

Demographic Highlights

Users of Bottled Still Water Tend to Be Young and Multicultural
Sparkling Water Works for GenXers
Perrier and S. Pellegrino Succeed with Upscale Urbanites
Bottled Water Appeals to Weight-Conscious Americans
Fitness Buffs Key Segment in Bottled Water Market
Bottled Water Users Less Likely to Eat Three Square Meals a Day
Healthy Snacking Appeals
Bottled Water Fans Like to Try New Food and Beverage Products
Sparkling Water Devotees Shop Natural Channel
Ads Can Reach Bottled Water Drinkers on Social Media and Cellphones

Chapter 2: Insights and Opportunities
Bottled Water Market Rich with Opportunities and Rife with Challenges .. 16
Major Brands Threatened from All Sides

Table 2-1: IRI-Tracked Dollar and Volume Sales of Selected Beverages for the 52 Weeks Ending March 23, 2014, Private Labels vs. Branded .. 18

Upstart Firms Become a Major Force
Premium Waters Seen as Salvation for Meager Profits
Perceived Purity of the Product Still Matters

Table 2-2: Excerpts of Marketing Claims Made about Sources of

Selected Water Brands
"Natural" Enhancements Important

Table 2-3: Excerpts of Health and Wellness Marketing Claims Made by Selected Enhanced and Flavored Waters

Bold Colors and Flavors Start to Trend Upward

Table 2-4: Flavors and Colors of Selected New Bottled Water Products

Water Enhancers Create Promise and Loom as a Threat
At-Home Carbonation Enters the Fray
Dispensing Caps Open New Vistas
C-Stores Offer Hope for Bottom Lines of Bottled Water Marketers
Bottled Water Becomes a Fashion Statement
Bottled Water Users a Desirable Demographic
Sparkling Water Users Are Elite Consumers
Chapter 3: Market Overview
Historical Trends

Consumers Shift from Carbonated Soft Drinks to Bottled Water

Table 3-1: Number of Adults Drinking Five or More Glasses of Non-Alcoholic Beverages in Last Seven Days by Type of Beverage, 2004 vs. 2013

More Consumers Drink Large Quantities of Bottled Water

Table 3-2: Number of Adults Drinking Bottled Non-Carbonated Water by Number of Glasses Consumed in Last 7 Days, 2004 vs. 2013
Table 3-3: Number of Glasses of Bottled Non-Carbonated Water Consumed in Last 7 Days, 2004 vs. 2013

Bottled Water Use Mirrors Demographic Trends in U.S. Society

Table 3-4: Selected Demographic Characteristics of Adults Drinking 7 or More Glasses of Bottled Non-Carbonated Water or 5 or More Glassesof Sparkling Water in Last 7 Days, 2004 vs. 2013
Table 3-5: Number of Adults Consuming 7 or More Glasses of Bottled Non-Carbonated Water in Last 7 Days by Age Group, 2004 vs. 2013

Size and Composition of the Market

Market for Sparkling Water Bubbles, Still Water Flat

Table 3-6: U.S. Retail Sales of Bottled Still Water, 2008-2013

Still Water Volumes Up, Dollar Sales Down
Convenience Stores Bolster Bottled Water Sales

Figure 3-1: Projected U.S. Dollar Retail Sales of Bottled Water by Retail Channel, 2014 (% of total U.S. retail sales)
Figure 3-2: Projected U.S. Dollar Retail Sales of Bottled Water by Retail Channel, 2014 (in million $)

Factors Affecting Market Growth

Shift from Carbonated Soft Drinks Expected to Last
Industry Sources Bullish about the Future
Still More Room for Growth in American Market
Health and Fitness Movement Will Boost Bottled Water Market
Public Policy Favors Bottled Water as Better-for-You Beverage
Higher Prices for Premium Waters Will Help Dollar Sales
Sparkling/Mineral Water to Stay on High Growth Curve
Liquid Enhancers Will Boost Interest in Water
Continued Commoditization of Plain Bottled Water Will Squeeze Profits
PET Bottle Bans Create Obstacles to Growth

Projected Market Growth

Growth Will Accelerate
Sparkling/Mineral Water Will Continue to Lead the Way

Chapter 4: Competitive Strategies
Overview

Top Marketers Lose Ground to Private Labels

Figure 4-1: Top 5 Marketers' Shares of IRI-Tracked Dollar Sales of Bottled Still and Sparkling/Mineral Waters, 52 Weeks Ending February 23, 2014
Table 4-1: Leading Marketers' Shares of IRI-Tracked Dollar Sales of Bottled Still and Sparkling/Mineral Waters, 52 Weeks Ending February 23, 2014

Private Labels Get Boost from PET/Convenience Segment

Table 4-2: Private Labels' Shares of IRI-Tracked Dollar Sales of Bottled Still and Sparkling Waters, 52 Weeks Ending February 23, 2014

Nestlé Waters North America Stays on Top of Still Water Market

Figure 4-2: Top 5 Marketers' Shares of IRI-Tracked Dollar Sales of Bottled Still Water, 52 Weeks Ending February 23, 2014
Table 4-3: Leading Marketers' Shares of IRI-Tracked Dollar Sales of Convenience/PET Still Water, 52 Weeks Ending February 23, 2014
Table 4-4: Leading Marketers' Shares of IRI-Tracked Dollar Sales of Jug/Bulk Still Water, 52 Weeks Ending February 23, 2014

Talking Rain Beverage Company Disrupts Sparkling Water Market

Figure 4-3: Top 5 Marketers' Shares of IRI-Tracked Dollar Sales of Sparkling/Mineral Water, 52 Weeks Ending February 23, 2014
Table 4-5: Leading Marketers' Shares of IRI-Tracked Dollar Sales of Sparkling/Mineral Water, 52 Weeks Ending February 23, 2014

Competitive Strategies

Nestlé Waters North America Remains in the Lead

Table 4-6: IRI-Tracked Dollar Sales of Bottled Still and Sparkling/Mineral Waters by Nestlé Waters North America, 52 Weeks Ending February 23, 2014
Table 4-7: IRI-Tracked Dollar Sales of Perrier and S. Pellegrino Brandsvs. Other Brands of Nestlé Waters North America, 52 Weeks Ending February 23, 2014

Coca-Cola Company "Hits a Speed Bump"

Table 4-8: IRI-Tracked Dollar Sales of Bottled Still and Sparkling/Mineral Waters by Coca-Cola Company, 52 Weeks Ending February 23, 2014
Table 4-9: IRI-Tracked Dollar Sales of Major Brands of Bottled Still andSparkling/Mineral Waters by Coca-Cola Company, 52 Weeks Ending February 23, 2014

PepsiCo Hopes Premium Products Will Keep Its Water Business Afloat .. 60

Table 4-10: IRI-Tracked Dollar Sales of Bottled Still and Sparkling/Mineral Waters by PepsiCo, Inc., 52 Weeks Ending February 23, 2014

Sparkling ICE a One-Hit Wonder for Talking Rain Beverage Company

Figure 4-4: IRI-Tracked Dollar Sales of Sparkling ICE Brand of Talking Rain Beverage Company, 52 Weeks Ending February 23, 2014

Chapter 5: Marketing and New Product Trends
Marketing Trends

PepsiCo Launches Water Brand for Teens
Essentia Water Promotes Health and Happiness
Bottled Water Companies Support Drink Up Initiative
Premium Still Water Offers "Ectrolytenment"
Evian Takes Steps to Rebuild Brand

New Product Trends: Sparkling Water

Talking Rain Expands Fast-Growing Brand
LaCroix Revives Spree and Launches C?rate
Coca Cola Launches DASANI Sparkling

New Product Trends: Still Water

New Brand of Premium Fashion Water Launched
Blossom Water Introduces Essence Water
Oceans Omega Offers Healthy Hydration with Omega Infusion
Balance Water Adds Flower Extracts
Ultra-Premium Canadian Water Introduced

Chapter 6: Demographic Highlights
Who Drinks Bottled Water

Users of Bottled Still Water Tend to Be Young and Multicultural

Table 6-1: Selected Demographic Characteristics of Adults Drinking Bottled Still Water by Number of Glasses Consumed in Last 7 Days, 2013

Sparkling Water Works for GenXers

Table 6-2: Selected Demographic Characteristics of Adults Drinking Sparkling Water by Number of Glasses Consumed in Last 7 Days, 2013

Perrier and S. Pellegrino Succeed with Upscale Urbanites

Table 6-3: Selected Demographic Characteristics of Adults Naming Perrier or S. Pellegrino the Brand of Sparkling Water Used Most Often, 2013
Figure 6-1: Percent of Consumers Naming Perrier or S. Pellegrino the Brand of Sparkling Water Used Most Often with a Household Income of $100,000 or More, 2013

Focus on Health and Fitness

Bottled Water Appeals to Weight-Conscious Americans

Table 6-4: Attitudes toward Weight Management of Adults Drinking High Volumes of Bottled Still and Sparkling Waters in Last 7 Days, 2013

Fitness Buffs Key Segment in Bottled Water Market

Figure 6-2: Percent of Adults Drinking High Volumes of Bottled Still and Sparkling Waters in Last 7 Days Who Exercise Five or More Times a Week, 2013
Table 6-5: Physical Fitness Activities of Adults Drinking High Volumes of Bottled Still and Sparkling Waters, 2013

Eating Habits and Food Preferences

Bottled Water Users Less Likely to Eat Three Square Meals a Day

Figure 6-3: Percent of Adults Drinking High Volumes of Bottled Still and Sparkling Waters Who Eat Several Small Meals throughout the Day, 2013

Healthy Snacking Appeals

Table 6-6: Healthy Snacking by Adults Drinking High Volumes of Bottled Still and Sparkling Waters, 2013

Households of Bottled Water Drinkers Eat Lots of Other Snacks

Table 6-7: Household Use of Snacks by Adults Drinking High Volumes of Bottled Still and Sparkling Waters by Type and Volume of Snack Consumed in Last 30 Days, 2013

Energy and Sports Drinks Favored

Table 6-8: Use of Other Beverages by Adults Drinking High Volumes of Bottled Still and Sparkling Waters, 2013

Sparkling Water Drinkers Have Gourmet Tendencies

Table 6-9: Food Preferences of Adults Drinking High Volumes of Bottled Still and Sparkling Waters in Last 7 Days, 2013

Bottled Water Consumers Big Spenders in Grocery Stores

Table 6-10 : Supermarket Shopping Profile of Adults Drinking High Volumes of Bottled Still and Sparkling Waters, 2013

Bottled Water Fans Like to Try New Food and Beverage Products

Table 6-11: Attitudes toward Trying New Food and Beverage Products of Adults Drinking High Volumes of Bottled Still and Sparkling Waters in Last 7 Days, 2013

Sparkling Water Devotees Shop Natural Channel

Table 6-12: Attitudes toward Natural Foods of Adults Drinking High Volumes of Bottled Still and Sparkling Waters, 2013
Figure 6-4: Percent of Adults Drinking High Volumes of Bottled Still and Sparkling Waters Who Are Vegetarians, 2013
Figure 6-5: Percent of Adults Drinking High Volumes of Bottled Still and Sparkling Waters Who Shopped at Trader Joe's or Whole Foods in Last Four Weeks, 2013

Receptivity to Marketing and Advertising

Ads Can Reach Bottled Water Drinkers on Social Media and Cellphones

Table 6-13: Receptivity to Marketing and Advertising on Cellphones and Social Media of Adults Drinking High Volumes of Bottled Still and Sparkling Waters in Last 7 Days, 2013 Magazines Work Too
Table 6-14: Importance of Magazines of Adults Drinking High Volumes of Bottled Still and Sparkling Waters in Last 7 Days, 2013

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