Bottled water strengthens position as No. 2 beverage, reports Beverage Marketing

Bottled water emerged as the second largest commercial beverage category by volume in the United States in 2003, and, despite its significant stature, it continued to grow at a rapid pace in 2004. In recent years, U.S. volume has been increasing more rapidly than dollar sales, but on both fronts, the industry's performance is unparalleled...

NEW YORK, NY, 25 April 2005 -- Bottled water emerged as the second largest commercial beverage category by volume in the United States in 2003, and, despite its significant stature, it continued to grow at a rapid pace in 2004. In recent years, U.S. volume has been increasing more rapidly than dollar sales, but on both fronts, the industry's performance is unparalleled. Beverage Marketing Corporation, the leading research, consulting and financial services firm dedicated to the global beverage industry, analyzes these developments in the forthcoming edition of " Bottled Water in the U.S.".

In 2004, total U.S. category volume surpassed 6.8 billion gallons, an 8.6% advance over 2003's volume level. The category includes sparkling and non-sparkling water, domestic and imported water, water in single-serve bottles (the PET segment, named for the plastic used for packaging) and larger packages as well as vended and direct delivered waters. U.S. residents now drink more bottled water annually (23.8 gallons per person in 2004) than any other beverage other than carbonated soft drinks (CSDs).

While CSDs still have volume and average intake levels more than twice as high as bottled water, the soft drink market has been stagnant lately, in no small part due to competition from bottled water. Per capita consumption of bottled water has been growing by at least one gallon annually, thereby more than doubling in a decade. Average intake of CSDs has dipped slightly for several consecutive years. The diet segment has been the strongest part of the CSD business. However, bottled water volume was almost 2.2 billion gallons larger than diet CSDs' 4.6 billion gallons, and bottled water grew at a faster clip than diet CSDs' 6.2% growth rate in 2004.

"Bottled water truly is an awesome category," observes Michael Bellas, chairman of Beverage Marketing. "It just keeps growing. And with factors such as concern over calories and health and wellness trends, there's room for even more growth."

The U.S. bottled water market reached new highs not only in volume but also in wholesale dollar sales, which approached $9.2 billion in 2004. However, not only did sales growth slow compared with the previous year, which was not the case with volume, but sales also grew at a lower rate than volume for the second year in a row. This reflects the impact of price promotions, especially on multipacks of single-serve bottles, which are increasingly the focus of such promotions as well central to volume growth. Once primarily a tactic used on the West Coast, lowering prices to attract buyers is being seen with greater frequency throughout the United States.

Domestic non-sparkling water is by far the largest component of the U.S. bottled water market. Its 6.4 billion gallons represented 94.2% of total volume in 2004. The most vital piece of the non-sparkling segment is the retail PET segment, which account for almost half of total bottled water volume in the U.S. in 2004 and is projected to exceed 50% in 2005.

Reflecting the vibrancy of the retail PET segment, the three leading companies in that area strengthened their position in the overall U.S. bottled water market in 2004. Primarily this meant strong growth for industry leader Nestlé Waters North America (NWNA) and for Pepsi-Cola's Aquafina brand and Coca-Cola's Dasani brand.

NWNA remained the largest bottled water company in the country, with more than $2.7 billion in wholesale dollar sales. The purveyor of major regional brands such as Poland Springs, Arrowhead and Zephyrhills accounted for approximately 30% of total bottled water sales in 2004.

In 2004, Pepsi-Cola's Aquafina, which has reigned as the number-one brand for several years, became the U.S. bottled water business's first billion-dollar brand. The brand's share of overall wholesale dollars increased from 11.0% in 2003 to 11.3%.

Coca-Cola's retail PET brand, Dasani, also saw its sale grow more forcefully than the overall market (albeit not as strongly as the PET segment itself) and its share of sales increase to 10.0%. The brand is poised to join Aquafina with sales greater than $1 billion in 2005 (although Aquafina is likely to remain the leading brand).

A detailed analysis of the 2003 bottled water market by Beverage Marketing's editorial director, John Rodwan, will appear in the April/May edition of Bottled Water Reporter (www.bottledwater.org), a publication of the International Bottled Water Association (IBWA). For a related IBWA release, see: "Bottled Water: More than just sales growth".

Beverage Marketing Corp. (www.beveragemarketing.com) is based in New York City.

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