March 12, 2012 / 9:41 PM / in 6 years

Thirst for bottled water strong despite prices: Nestle

CHICAGO (Reuters) - Consumers are shunning carbonated soft drinks in favor of bottled water, even in the face of recent price increases, Nestle Waters North America’s top executive said.

“It’s convenience we are talking about,” said Kim Jeffery, president and chief executive of Nestle Waters North America, at the Reuters Food and Agriculture Summit in Chicago on Monday.

Nestle Waters in early 2011 raised prices about 10 percent -- the first price increase in a decade for the company, which sells a billion cases of water a year.

When competitors refrained from following suit, volume dipped, but it began to recover late in 2011 and appears to continue tracking higher. With private-label rivals still lagging in terms of comparable price moves, no price increases are on Nestle Waters’ agenda this year, Jeffery said.

Unlike other categories of food and beverages, bottled water had experienced significant price deflation in recent years due to competition from an ever-increasing host of brands, Jeffery said.

Commodity prices that prompted the price increase have stabilized after a spike early last year, though they remain at “nosebleed levels”, Jeffery said.

Nestle Waters’ biggest purchases include cardboard, resin to make plastic bottles and bottle caps, and plastic for packaging.

Nestle Waters North America sells 15 different brands of bottled water including Poland Spring, Perrier and Nestle Pure Life. It is a unit of Nestle SA NESN.VX, the world’s largest food company.

Jeffery said bottled water appeals to an increasingly health-conscious consumers, who have been drinking fewer sugary soft drinks. Convenience is also a factor in the popularity of bottled water.

Over the last 10 years, the bottled water industry has gained 8 gallons per capita while carbonated soft drinks have lost 10 gallons per capita, Jeffery said.

Bottled water now outsells soda in several U.S. markets currently he said, primarily along the coasts. Jeffery sees water eventually outselling soda overall, as U.S. consumption of soda declines.

Reporting by Carey Gillam and Martinne Geller in Chicago; Editing by Dale Hudson and Steve Orlofsky

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