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H2O = Big Business in a Bottle

Changing Consumer Tastes Creates Explosive Growth for Domestic and International Bottled Water Brands - Revenue in 2007 Expected to Reach

$5.974 Billion With Growth Set to Climb Higher Through 2012

LOS ANGELES, May 20 /PRNewswire/ -- With another sweltering summer forecast for 2008, IBISWorld, Inc., today revealed the hot trends that are driving growth in the burgeoning, multi-billion dollar bottled water industry - and two worldwide mega brands are bound to benefit - Coca-Cola Enterprises, Inc., and The Pepsi Bottling Group. From fashion, to flavour, to function, the outlook for the bottled water industry is bright, yet there are some issues with regard to purity and value that marketers will face in the foreseeable future. IBISWorld, Inc., ( is recognized as one of the nation's most respected independent publishers of business intelligence research.

Profit In A Bottle

This financial year, IBISWorld expects the global soft drink and bottled water manufacturing industry will produce revenue of $146.5 billion, with growth expected to continue at a rate of four percent, with the U.S. at its forefront, producing revenue of an estimated $168.6 billion by 2012.

Driving this growth is the global rate of consumption rising by 10 percent in 2007. And at the forefront of the industry, selling purified water aimed at the low-cost, bulk purchase market, are U.S. companies bottlers Coca-Cola Enterprises, Inc., and The Pepsi Bottling Group. Both companies are dominating the arena through aggressive marketing programs that have turned both the Aquafina and the Dasani brands into block-buster successes.

Driven largely by health consciousness consumers with strong disposable income, and warm weather, the bottled water market has been identified by IBISWorld as being the fastest growing beverage segment in the U.S., with the market share for bottled water increasing from 11.7 percent in 2005 to 14.5 percent in 2007, and producing revenue of $5.974 billion for fiscal year 2007.

Purified water is currently the leading global seller, with U.S. companies dominating the field. The U.S. is the largest consumer market for water the world, followed by Mexico, China, and Brazil. Natural spring water, purified water and flavoured water have been identified by IBISWorld as the fastest growing segments.

Designer Drops

"But there's more to the industry's strong performance than meets the eye," according to Senior Analyst with IBISWorld Mr. George Van Horn. "Because of the homogenous nature of the product, producers need to invest substantially in branding, advertising, and promotional activity to differentiate their offering, and to attract and retain consumers who would otherwise substitute readily between waters," said Mr. Van Horn. "As a result, we're seeing growth in the so-called 'premium' section of the industry, with some manufacturers promoting their water as superior in an attempt to extract higher margins." He added, "This has led to an increase in the market for imported products, as is demonstrated by the success of cafe- focused European brands such as Perrier and San Pellegrino, and the recent success of Fiji water in the U.S."

"In the U.S., the supply market is largely geared toward the production of purified water, to be sold in bulk - often through supermarkets and small retailing stores," said Mr. Van Horn. "And while this has spurred the dominance of the U.S. as a global market supplier, providing low cost, bulk purchase water to local and international markets, the growing trend towards fashionable, premium products may see more infiltration from imported brands within the U.S."

Mr. Van Horn explained that following trends abroad, bottled water had the potential to become as much a fashion accessory as a beverage, predicting savvy producers will establish niche operations supplying limited market segments with specialized and top-of-the line products.

"The current mediascape, particularly women's magazines, is saturated with images of celebrities flaunting premium water products in fashionable designer bottles," he said. "This has particularly been the case with Fiji water, with celebrity uptake no doubt contributing largely to the brand's success in the U.S."

"Females and younger consumers account for slightly larger levels of bottled water consumption, with media support behind a brand, the bottle design, and the label all playing a part," said Mr. Van Horn. "Women are also more diligent than men at drinking the recommended eight glasses of water a day, as well as being, on the whole, more health conscious."

Function Over Fashion

Alongside premium waters, 'functional' water is another area that is driving industry revenue, with products making unique health claims targeting consumers who switch drinks during the day depending upon their immediate needs.

"The creation and promotion of sports waters and other near waters has helped bottled water win market share from high-sugar soft drinks, energy drinks, and sports drinks," he said, anticipating that this trend will continue," said Mr. Van Horn.

Functional waters - encompassing sports, flavoured, near and enhanced waters - compete as substitutes for soft drinks, as they are flavoured but do not have a high sugar content found in soft drinks. IBISWorld believes that as the industry matures and consumers become more informed, these sub-segments should become more clearly defined in the market.

Functional waters - encompassing sports, flavoured, near and enhanced waters - compete as substitutes for soft drinks, as they are flavoured but do not have a high sugar content found in soft drinks. IBISWorld believes that as the industry matures and consumers become more informed, these sub-segments should become more clearly defined in the market.

"The rapid introduction of new products, and new packaging, make the bottled water market an extremely dynamic industry, and America's high level of carbonated soft drinks (CSD's), energy drinks, and sports drinks, and comparatively low-level of consumption of premium and enriched water products suggests that the U.S. market still has potential for a high rate of sales growth before reaching saturation," Mr. Van Horn added.

Water To Go

The bottled water industry has gained from the increasingly frantic pace of life. "With people trying to accomplish more each day, with less time for rest, and the rising preference for convenient snacks, dining out and takeaway meals, bottled waters are becoming an important convenient fact of life," explained Mr. Van Horn.

Are All Bottled Water Brands Safe and Pure?

And though most brands of bottled water have been tested and shown to have no health benefits above those of tap water, many consumers won't be convinced. In fact, consumers are increasingly worried about the quality of bottled water that is often bottled using the same municipal water supplies that come out of home tap water.

"Following a recently released report based on a five-month undercover story, the Associated Press (AP) revealed that a vast array of pharmaceuticals have been found in the drinking water supplies of millions of Americans," said Mr. Van Horn. "What most consumers don't know is that most brands of bottled water undergo no filtration during the bottling process. Many bottled water brands are essentially the same quality that comes from everyday home tap water. Consumers are essentially buying a brand, a nice label, and the convenience."

Members of the AP Investigative Team reviewed hundreds of scientific reports, analysed Federal drinking water databases, visited environmental study sites, treatment plants, and interviewed more than 230 officials, academics and scientists across the U.S.

What they found was alarming. For example, officials in Philadelphia said testing there discovered 56 pharmaceuticals, or drug by-products in treated drinking water, including medicines for pain, infection, high cholesterol, asthma, epilepsy, diabetes, heart disease, and mental illness. Sixty-three pharmaceuticals or by-products were found in the city's watersheds.

At a conference last summer, Mary Buzby, director of environmental technology for Merck & Co. Inc., said: "There's no doubt about it, pharmaceuticals are being detected in the environment and there is genuine concern that these compounds, in the small concentrations that they're at, could be causing impacts to human health or to aquatic organisms."

At a conference last summer, Mary Buzby, director of environmental technology for Merck & Co. Inc., said: "There's no doubt about it, pharmaceuticals are being detected in the environment and there is genuine concern that these compounds, in the small concentrations that they're at, could be causing impacts to human health or to aquatic organisms."

"We know we are being exposed to other people's drugs through our drinking water, and that cannot be good," says Dr. David Carpenter, who directs the Institute for Health and the Environment of the State University of New York at Albany. While the bottled water industry is beginning to address this issue, according to the EPA, currently there are no sewage treatment systems specifically engineered to remove pharmaceuticals.

According to Mr. Van Horn, not all bottled water is laced with various pharmaceutical drugs. "Brands like Fuji Water, Evian, and many other premium brands are bottled from water sources that are found in remote places such as in the mountains where pharmaceutical drugs from human waste don't exist."

Tougher Times Ahead?

Looking ahead beyond safety issues, Mr. Van Horn said there will be significant challenges facing the industry, mostly in the form of increasing infrastructure in developing countries, competition from premium labels and imports, and competition from low-calorie, sugar free carbonated soft-drinks (CSD's) and energy drinks, as well as dental care and environmental concerns, and mounting packaging costs.

Mr. Van Horn added, "Within the U.S. suppliers currently focus on the production of low cost purified water, a market that is largely supported by developing countries, and concerns about the quality of tap water rather then fashion or brand loyalty."

"In the coming years, due to developments in infrastructure in these countries, we may see great improvement in the quality of public water sources which may detract from further growth," predicted Mr. Van Horn.

"The U.S. is also still the major consuming country of soft drinks in the world with Americans consuming around 51.4 gallons of carbonated soft drinks per person each year, while at the same time Americans are becoming increasingly health-conscious. With that, the bottled water market increasingly finds itself competing with low-calorie, sugar free CSD's, and nutrient-enriched energy and so-called sports drinks.

"As consumption of bottled water by children increases, so too will concerns about the impact on their teeth - with tap water currently providing their main source of fluoride," said Mr. Van Horn. "Increasing environmental awareness, and concerns about the effects of manufacturing bottled water will also place pressure on the industry - with studies showing that it can take up to seven quarts of water and a quart of crude oil to produce about one quart of bottled water."

"In addition, over the next few years packaging costs, particularly for petroleum-based PET resin, will rise, putting pressure on profit margins. This is another reason why manufacturers will ramp up investment in developing higher priced premium spring waters and functional waters to partially offset cost pressures," Mr. Van Horn added.

Yet on the flip side, IBISWorld predicts these changing trends will surely see dominant U.S. players Coca-Cola Enterprises, Inc. and The Pepsi Bottling Group moving forward in the premium water market, creating new products focusing on nutrient enriched and flavoured water products and adopting fashionable packaging to appeal to the style-conscious. A move, which coupled with strong marketing campaigns, and the brand strength already achieved by these companies, could lead to U.S. premium water brands expanding more aggressively into the South American, Asian and Australian premium product markets.

About IBISWorld

Founded in 1972, IBISWorld provides a unique and extensive online portfolio of business research and analysis products designed to serve a range of business, professional service and government organizations. Delivered through enterprise subscriptions, the company publishes in-depth reports on more than 700 industries and offers profiles on more than 8,000 U.S. companies. In addition, the company provides databases of economic analysis, demographic data, and risk assessment reports relevant to virtually every business sector. IBISWorld's materials are valued for the breadth and depth of the research and analysis covering the entire U.S. economy, incorporating both financial and non-financial information impacting tracked industries and companies. IBISWorld Business Information is well known for its accuracy, consistency and timeliness. This is why almost all online information aggregators seek us out to include our reports as part of their global databases. Current IBISWorld partners include Hoovers, Valuation Resources, Superfactory and American Small Business Development Centers. With U.S headquarters located in Los Angeles, IBISWorld has offices in New York, Melbourne, and Sydney. For more information, visit or call 1-800-330-3772.

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