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., (http://www.ibisworld.com) 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 http://www.ibisworld.com
or call 1-800-330-3772.
SOURCE IBISWorld

Harvey Jones, Senior Vice President of IBISWorld, +1-310-866-5029, fax,
+1-310-496-1596, harveyj@ibisworld.com; or Todd E. Appleman, President of The
Appleman Group, +1-323-850-7664, cell, +1-213-447-7662, fax, +1-323-850-7663,
tappleman@tag-pr.com