ausdrinks presentation by jason holway mc director,...

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AUSDRINKS

Presentation by Jason HolwayMC Director, Zenith International Ltd

BOTTLED WATER THE NEW CENTURY’S BEVERAGESponsored by Lindale Plastics

24th May 2004, Australia

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About ZenithAbout Zenith

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Zenith International

Business and technical consultancy specialising in food and drink industries

Formed in 1991, now with 40 staff

Based in Bath with associate offices in Denmark, Georgia, Italy, Netherlands and United States

1000 clients in 60 countries

Turnover of £2.5 million

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information

business management &

strategy

production and technical

◆publishing

◆market reports

◆events

◆market consulting

◆strategy

◆operations

◆water & environment◆f

ood

& d

rink

sec

tors

Zenith Services

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A lot can happen in a centuryA lot can happen in a century

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History of waterCan be traced back to the earliest civilisationsRomans developed sourcesSpa movement emerged in the 18th century in Europe

Beneficial medicinal effects for bathing, showering and drinkingCold spa waters bottled for the first time in France in 1850sBecame popular in North America around this time tooWas a drink for the rich and royaltyBy mid-nineteenth century consumption had spreadVittel launched first plastic bottle in 1968

Campaign emphasised vitality rather than medicinal benefits1980s saw PET become the packaging benchmark worldwideToday more and more people see health benefits of drinking bottled water, particularly in countries where sanitisation is an issue

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100 years of Poland Spring

19951985

1975

19561931

Today19261906

1895

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Market contextMarket context

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Global soft drinks consumption1997-2007f

194185175165

205216

118101 109

94130 141

201155

90

109132 177

0

100

200

300

1997 1999 2001 2003 2005 2007

000 million litres

Other

Bottled waterCarbonates

Source : globaldrinks.com

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Asia Pacific soft drinks consumption, 1997-2007f

1997 2007f

Bottled water11%

Coffee4%

Carbonates8%

Milk14%

Beer10%

Others10%

Tea41%

Tea50%

Bottled water4%

Beer9%

Carbonates6%

Others8%

Milk15%

Coffee5%

522 billion litres395 billion litres


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Regional resumé

5 to 10Mk 11Car 12Tea 47Car 11Mk 11Tea 54AME

4 to 11BW 11Mk 14Tea 41Beer 9Mk 15Tea 50AP

13 to 18Cof 16BW 18Car 23Cof 17Cof 27Car 24LA

8 to 14Cof 12BW 14Car 27Cof 13Mk 13Car 30NA

4 to 9Beer 16Mk 18Tea 21Beer 12Mk 23Tea 29EE

14 to 18Car 13Cof 18BW 18BW 14Mk 15Cof 20WE

BW %3rd2nd1st3rd2nd1st

2007f1997

TOP 3 sectors 1997 and 2007f

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Bottled water marketBottled water market

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Global bottled water regions 1997-2003e

1997

W Europe35%

N America17%

Asia/Aust16%

E Europe4%

L America22%

Af/Mid E6%

2003e

Asia/Aust25%

W Europe26%

L America19%

N America17%

E Europe6%Af/Mid E

8%



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Global bottled water consumption 2003e

1 United States 24,370 162 Mexico 13,850 93 China 11,850 84 Italy 10,820 75 Germany 10,550 76 France 9,470 67 Indonesia 8,060 58 Brazil 6,515 49 Thailand 5,600 410 Spain 5,210 3

Rank Country M litres % share

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Global bottled water per person 2003e

1 UAE 2572 Italy 1873 France 1584 Belgium 1405 Spain 1316 Mexico 1287 Switzerland 1288 Germany 1269 Argentina 10710 Malta 105

Rank Country Litres

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Global bottled water growth 1997-2003e

6

15

40

49

6

12

10

14

31

23

7

81

4

10

0 20 40 60 80 100

Asia/Aust

Africa/Mid. East

E Europe

WORLD

L America

N America

W Europe

1997

Growth 1997-2003e

Litres per person


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Global bottled water types 1997-2003e

1997 2003e

Still retail42%

Still bulk31%

Sparkling27%

Still retail47%

Still bulk35%

Sparkling18%


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Bottled water regions by sector 2003e

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

W Eur E Eur N Am L Am AP AME

%

Still retail Still bulk Sparkling

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Bottled water countries by sector 2003e

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

USA Mexico China Italy France Germany Indonesia Brazil Thailand Spain

%


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Global bottled water type by region 2003e

All still SparklingAsia Pac.

1%

W Europe60%

L America16%

N America2%

E Europe20%

Af/ME1%

N America20%

Asia Pac.30%

E Europe3%

L America19%

Af/ME9%

W Europe19%


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Global bottled water type by region 2003e

Still retail Still bulk

Asia Pac.34%

W Europe2%

L America34%

N America17%

E Europe1%

Af/ME12%

W Europe33%

N America22%

Asia Pac.26%

E Europe4%

L America8%

Af/ME7%


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Global bottled water sources

31

60

65

67

87

97

26

0 20 40 60 80 100

Af/Mid. East

Lat Am

WORLD

Asia P

North Am

E Europe

W Europe

% volume natural

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Natural versus processed water

Market histories and consumer motivations are different

European heritage is naturalMineral benefits, contrast to poor tap qualityDeveloping world wants availability and safety Infrastructure can’t keep up with populationNorth America is making lifestyle choicePurity all important, brands provide guarantee

Processed waters have not triggered backlash ... until!

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Global bottled water trends - SUMMARY

Around 10% volume growth each yearHigh concentration in few countriesMost developed markets still growingAsia greatest growth but lowest pricesStill water is main driverPrices are falling and polarisingCompanies look for added value in branding, convenience, service, flavours

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CompaniesCompanies

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Global big four by volume 1999-2003

1999 2003

PepsiCo 3%

Danone 12%

Nestlé 12%

Coca-Cola 6%

Others 75%

PepsiCo 4%

Others 66%

Coca-Cola 3%

Danone 9%

Nestlé 10%

Note : Coke and Pepsi including bottlers

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Global big four origin of volume by region 2003

N America 40 15 24 28L America 4 11 33 47

W Europe 41 31 9 7E Europe 5 2 6 10

Africa M East 7 1 3 1Asia Aust 4 40 26 8

Total 100 1000 100 100

% company volume Nestlé Danone Coca-Cola PepsiCo

Note: Coke and Pepsi including bottlers

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Global big four ranking by region (volume)

Ranking Nestlé Danone Coca-Cola PepsiCo

N America 1 4 3 5

L America 6 3 1 2

W Europe 1 2 - -

E Europe 1 4 2 3

Africa/M East 1 5 - -

Asia/Aust 4 1 2 -

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Global big four international brands 2003

Brand Nestlé Danone Coca-Cola PepsiCo

Over 10 Contrex Badoit Bonaqua Aqua Mineralecountries Panna Evian

Perrier VolvicPure LifeSan PellegrinoVittel

Other Aquarel Ferrarelle Dasani Aquafina

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Global big four new brand development

Brand Nestlé Danone Coca-Cola PepsiCo

Spring Aquarel (Dannon) Dannon

Purified Pure Life Bonaqua AquafinaDasani Aqua Minerale

Mineral Valvert Taillefine DasaniVitasnella

Functional Vittel + Activ’ NutriWater Essentialsenergy PropelWellness

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Global big four developments 2003

NestléAberfoyle switch to Pure Life in USAcquisitions of coolers in Europe

DanoneCooler joint venture with Suntory in USAcquisitions of coolers in Europe

Coca-ColaPrice cutting of Dannon in USRisco to Ciel in MexicoAcquisitions of source waters in Europe

PepsiCoOther priorities

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Global big four developments 2004

NestléUS source expansion complicationsAcquisition in Asia - Pulmuone

DanoneHayat into UKTakeover bid speculation

Coca-ColaDasani launch in UK - France and Germany “on hold”Dasani roll out plan for 20 countries - delayed

PepsiCoUS value brand expected

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Global big four outlook

NestléDefence of US strongholdDevelopment of Nestlé branding

DanoneDefence of US presenceConversion of acquired volume to profit

Coca-ColaCompletion of entry into key marketsConsolidation of branding positions

PepsiCoDevelopment of US rangeSelective Aquafina expansion

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Emergent water sectorsEmergent water sectors

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Characteristics of/conditions for flavoured waters

Sweetened or unsweetened; sizes up to 2 litreSweetened or unsweetened; sizes up to 2 litre

Still or sparkling; can be both clear and opaqueStill or sparkling; can be both clear and opaque

Not always premium priced Not always premium priced -- own labelsown labels

Can be child and/or adult (female) orientedCan be child and/or adult (female) oriented

Retail orientation generally; often merchandised like a soft driRetail orientation generally; often merchandised like a soft drinknk

Can be RTD variants ofCan be RTD variants of dilutablesdilutables

Sweet toothSweet tooth

Existence of discretionary soft drinks purchasingExistence of discretionary soft drinks purchasing

Mainstream possibility Mainstream possibility -- convenience keyconvenience key

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Flavoured waters volume 2003 & 2007

2003e 2007f

Nordic4%

France11%

Czech R10%

USA8%

Japan2%

UK9%

Germany13%

Nordic7%

France11%

Czech R15%

Others29%

USA9%

Japan5%

UK11%

Germany11%

Others40%

5.3 billion litres2.8 billion litres

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Characteristics of/conditions for functional waters

Added value Added value -- premium price; convenience packedpremium price; convenience packed

Still not sparkling; can be both clear and opaqueStill not sparkling; can be both clear and opaque

Low calorie Low calorie -- not always very lownot always very low

Often use best known vitamins; awareness of the attributesOften use best known vitamins; awareness of the attributes

Trust in the quality of bottled water; acceptance of buying wateTrust in the quality of bottled water; acceptance of buying waterr

Presence of convenience marketPresence of convenience market

Existence of discretionary soft drinks purchasingExistence of discretionary soft drinks purchasing

Premium possibility Premium possibility -- a certain affluencea certain affluence

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Functional waters volume 2003 & 2007

2007f2003eCanada

4%France

4%

Japan38%

Others6%

USA32%

Austria6%

UK3%

Germany6%

Canada5%

France6%

Japan24%

Others9%

USA37%

Austria5%

UK3%

Germany9%

2.3 billion litres1.1 billion litres

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Global bottled and bulk water 2003Global bottled and bulk water 2003

25countries

43countries

-155 billion litresGlobal bottled water

12countries

26countries

Bulk> €0.10 per l

€0.28 per lGlobal bottled water

Hong KongAustraliaChileArgentinaSingaporePhilippinesNew ZealandMalaysia

RussiaPolandBalticsUK

LebanonJordanIsraelVietnamTaiwanSouth Korea

SwedenNorwayNetherlandsIrelandFinlandDenmarkUSCanadaMarkets where bulk

water is > €0.10 per

litre, and where bulk is

>10% and >25% share

of total bottled water

€0.10 per lGlobal bulk water

33% share51 billion litresGlobal bulk water

Bulk >25%Bulk >10%2003Country

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IssuesIssues

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Public perception that bottled water is safer and better tasting than tap waterIn many countries this is true:

Population growth and poor quality local water supply are causing an increasing number of consumers to choose bottled water over tap waterE.g. India has only 31% sanitation coverage

Even in countries such as the UK quality is questioned:53% of British adults are concerned about the quality of their tap water

One third of the world’s population lives in areas where consumption is more than supplyMore than 1 billion people do not have access to clean drinking water This could rise to 4 billion by 2025 when two thirds of the world’spopulation may be living with serious water shortages

Bottled water - advantages over tap water?

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Distribution of the global population not served with improved water supply, by region

63%

28%

7% 2%

Asia Africa Latin America & the Caribbean Europe

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Lack of water/sanitation around the world

22%38% 52%NO SANITATION

15%40% 18%

NO CLEAN WATER

AFRICA LATIN AMERICAASIA

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Global bottled water issues (1)

◆ Water as commodity◆ Globalisation brand led?◆ Global leaders now ALL water companies◆ Distribution and delivery◆ Competition - sports drinks, portable filtration, POU◆ Niche markets - near-waters, flavoured, calcium-enriched◆ e-commerce procurement◆ Packaging - PET convenience, 50cl/2 litre polarisation◆ Packaging - self-fill, filtration, water stations

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Global bottled water issues (2)

◆ Water management - flashpoint in Middle East◆ Access to safe water◆ Infrastructure issues◆ Acceptance of processed waters◆ Water tables in decline - China, India◆ Environmental regulation◆ EU directives◆ Recycling◆ Anti-trust legislation may prevent some consolidation

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Distribution and delivery

◆ Even in high consumption markets, growth opportunities remain - France

◆ Where bulk consumption is high it is often not associated with a water cooler - Mexico, China, India

◆ Where climate indicates high consumption requirements, distribution has still to catch up - China, India, Africa, Mid East

◆ Where water is a discretionary purchase, occasion targeting and brand building potential remains - USA, West Europe

◆ Where parallel distribution systems exist they remain to be fully exploited - Mexico, North America

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Bottled water - how does it compare to other beverages?Beverage Digest survey - changes and alternatives in beverage consumption (May 03)

AgeGenderUSA

11%5%4%1%12%6%Alcoholic beverages

7%7%10%8%9%8%Milk

17%6%6%10%7%9%Coffee

26%17%13%23%12%18%Tea/iced tea

28%36%53%40%41%40%Juice

60%58%75%68%63%65%Water

55+35-6418-34FMAll persons

Consumed instead of CSDs:

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Bottled water - how does it compare to other beverages?

Teenagers’ favourite beverages*

8%4%14%Enhanced water

14%10%19%New age drinks

31%23%40%Sports drinks

39%35%42%Regular lemon-lime

48%38%58%Regular dark/caramel-coloured soda (cola)

58%53%63%Tap water

58%53%64%Milk

65%75%54%Bottled water

Total Sample

FemalesMalesBeverages - USA

*Beverage Digest survey amongst 13-18 year olds in USA

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The near futureThe near future

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Where will future bottled water growth come from?

Established markets will continue to grow due to the healthy perception of bottled water. Other regions will see significantly higher growth because of the need for clean, reliable water

Asia:Particularly Pakistan, India, China, Indonesia, MalaysiaBy 2007, Asia and Australasia forecast to become the largest single region for soft drinks with a 25% share, overtaking North America on 24%.

Latin America:Particularly Ecuador, Chile, Argentina

Africa & Middle East:Particularly Jordan, South Africa, Egypt

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Global bottled water regions 1997-2007f

1997

W Europe35%

N America17%

Asia/Aust16%

E Europe4%

L America22%

Af/Mid E6%

2007f

Asia/Aust29%

W Europe23%

L America18%

N America17%

E Europe6%Af/Mid E

8%



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Global bottled water by region 2007f

Still all SparklingAsia Pac.

1%

W Europe59%

L America14%

N America2%

E Europe23%

Af/ME1%

N America19%

Asia Pac.34%

E Europe3%

L America18%

Af/ME 9%

W Europe17%


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Global bottled water by region 2007f

Still retail Still bulk

Asia Pac.40%

W Europe3%

L America30%

N America14%

E Europe2%

Af/ME11%

W Europe28%

N America23%

Asia Pac.29%

E Europe5%

L America9%

Af/ME7%


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Global bottled water per capita and growth 1997-2007f

6

15

40

49

81

10

20

16

22

52

37

124

10

0 20 40 60 80 100

Asia/Aust

Africa/Mid. East

E Europe

WORLD

L America

N America

W Europe

1997

Growth 1997-2007f

Litres per person


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Global bottled water regions by sector 2007f

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

W Eur E Eur N Am L Am AP AME

%


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Where will bottled water growth come from?

+3.1

+7.8+6.8

+4.9

+10.4

+5.7

+0.0

+2.0

+4.0

+6.0

+8.0

+10.0

+12.0

%

2004/2008 CAGR

W Europe E Europe N America L America Asia Pacific Africa & ME

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Asia Pacific - where will the growth come from?

+8.0+9.8

+1.8

+14.6+12.9

+7.5

+11.3

+14.1

+20.0

+11.0

+6.9+8.5

+7.0+5.8

+10.8

+0.0

+5.0

+10.0

+15.0

+20.0

+25.0

%

2004/2008 CAGR

Australia China Hong Kong India Indonesia Japan Malaysia New Zealand

Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam

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2121stst Century issuesCentury issues

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Context issuesClimatic changeParadox - global warming will give more resource (water) but also create more demandExisting resource already under pressureAdditional resources:

Desalination - currently expensiveUndersea springsMelting icebergs - polar bear pee!

“If we are not careful, future wars are going to be about water and not about oil” Kofi AnnanTwo or more countries share some 261 riversDublin principles

Finite/vulnerableParticipatory developmentThe role of womenEconomic value recognised

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Should bottled water be an alternative to tap water?Wateraid fears that if people see bottled water as an alternative to local supply, there will be less pressure placed on the government to improve the quality of the waterPakistan’s Ministry of Water and Power, “...the growth of water bottling companies may be one of the factors working against the political pressure for improvement”UNESCO, “Bottled waters should not be considered a sustainable alternative to tap water. Clean water is a basic right. Protecting our rivers, streams and wetlands will help ensure that tap water remains a public service which delivers good quality drinking water for everyone at a fair price”

Nestlé, “Local authorities in developing countries tend to be unable or unwilling to support the cost of constructing an extensive network of water pipes and the necessary water treatment plants and control equipment”

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Are we missing the point?Water is an essential of life - and of industryClean water to homes is a basic rightInfrastructure is either maintained or installed at vast costThe % of water delivered by infrastructure that is actually consumed is tinyUNESCO, “Protecting ... will help ensure that tap water remains a public service which delivers good quality drinking water for everyone at a fair price”For how many people can’t it “remain” because it’s not accessible already?The most important thing is to supply clean, safe water - the method of delivery is not as important, although controlling the costs areBottled water has a role to play in this scenarioIdealism versus pragmatismMunicipality/government involvement in supply?Remove the politics from the equationStill have a branded/lifestyle/convenience market - provide bulk solution

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Sector breakdown by volume - leading countries 2003e

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

USA Germany France UK Mexico Japan Czech R Austria Canada Nordic

%

Still retail Sparkling Flavoured Functional

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POU POU -- multiple factors for adoptionmultiple factors for adoption

Not all markets suitable. Complex mix of key criteria...

Established bottled water cooler market

Coolers rather than dispensersHigher water price per litre

Higher unit rental price

Consumer acceptance of filtration

Favourable economic conditions

Intensifying price competition in HOD

Short bottled cooler contracts

Carbonation preference sometimes helpsActive market drivers crucial

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Themes

Natural Purified

Fun

Health Lifestyle

Wellbeing

Functionality

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Australian c. 1880 Australian c. 1980

ausdrinks presentation by jason holway mc director,...

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