A sporting summer should buoy bottled waters - but in the long term, the UK must look to Europe to change the way Brits think (and drink)

Could 2012 be the year bottled water stops being a nice to have and becomes a need to have? The category has long recovered from its annus horribilis of 2008, when negative publicity around its environmental impact caused sales to crash.

In the past year, total sales across all channels have grown 6% to £1.47bn [Zenith International] and grocery take-home sales have leapt 7.5% to £290.6m [Kantar Worldpanel]. More encouragingly still, it’s not just own label that’s thriving: seven of the brands in the top 10 have posted solid growth (see right).

Yet consumption still lags significantly behind Continental Europe. France and Italy have populations of similar sizes to the UK, but the category is worth £3.29bn in the former and £4.32bn in the latter - and in Germany, value sales are almost four times higher (at £5.59bn) than in Britain [Zenith].

So, on paper, there’s plenty of scope to grow UK sales, especially with the full calendar of sporting events this year - and the raft of new affordable water propositions (see p48). But are Brits really ready to hit the bottle when it comes to water, elevating it above its current discretionary purchase status?

Aside from health & safety and quality concerns over tap water elsewhere, the geographical disparity can largely be attributed to cultural differences. “Traditionally, European markets are ‘natural mineral water’ cultures whereas the UK has quite a ‘soft drinks’ culture,” says Silika Shellie, Nestlé Waters retail category controller.

There’s also the matter of weather. In warmer climes, people drink more water. And they can more readily afford to: bottled water is a staple, and so cheaper.

Belu ethical water

Launching: April 2012 Manufacturer: Belu

Making its UK supermarket debut in Sainsbury’s this spring, Belu pledges to donate all profits to WaterAid, with a minimum commitment of £300,000 by 2013. The retail range of still and sparkling water comes in recyclable bottles (rsp: from 59p). “Until now, Belu has only been available in restaurants and hotels,” says MD Karen Lynch. “We are thrilled consumers will be able to buy our water in Sainsbury’s.”

Hydr8 Flavours

Launched: August 2011

Manufacturer: Highland Spring

Highland Spring is hoping to capitalise on demand for flavoured waters with the launch of Hydr8 Flavours, an extension of Highland Spring’s value Hydr8 range, sold primarily via wholesalers. “We’re starting to expand in flavours. It will be interesting to see how it develops,” says Highland Spring brand marketing manager Paul Condron.

Volvic Juiced

Launching: March 2012

Manufacturer: Danone Waters

Danone is straddling bottled water and juice drinks with Volvic Juiced, a blend of fruit juice and Volvic water, initially in Orchard Apple and Cloudy Lemon variants (rsp:99p). “We’ve identified consumers who want the health and hydration of water, but a little more exciting,” says Danone Waters sales director Richard Trechman.

Aquaroma

Launched: November 2011

Manufacturer: Montgomeryshire Natural Still Water

Independent retailer Harry Tuffins has launched a new flavoured water brand. Aquaroma, bottled by the Tuffins-owned Montgomeryshire Natural Still Water Company, is pitched as a value alternative to big branded offerings. The 500ml bottles cost 29p individually or £1 for a four-pack, with larger bottles and new formats due to roll out by May.

Despite the recent flurry of affordable water launches, it will be some time before that price gulf is bridged. In the meantime, one way in which bottled waters are addressing the dominance of soft drinks in the UK is by becoming more like them. Danone Waters sales director Richard Trechman claims the ‘water plus’ segment - flavoured water, juicy water and functional water - is “the emerging powerhouse within soft drinks”.

His assertion is backed up by the figures. Flavoured still and sparkling waters have enjoyed double-digit value and volume growth over the past year. Robinsons Fruit Shoot Hydro range is already worth £10.9m and growing at a rate of 25% a year [SymphonyIRI], while CCE’s Glacéau Vitaminwater is now worth £12.2m and is in 17.6% growth, according to the company [Nielsen 52 w/e 31 December 2011]. Danone, too, has been looking to capitalise on the trend, following its Volvic Touch of Fruit range with new Volvic Juiced (see p48).

Sparkling water is also proving a viable rival to carbonates, growing in value by 10.2% over the past year [SymphonyIRI]. “Sparkling has proven more resilient to credit crunch cuts and poor weather and has benefited from a growing marketplace as an alternative to carbonated soft drinks,” says James Cain, MD of Water Brands Group.

Despite its growth, though, penetration in the UK remains well below that in Europe. Sparkling is still seen as a drink for special occasions, says Paul Condron, brand marketing manager for Highland Spring, who believes brands can do “much more” to grow the sub-category - for instance, by encouraging the use of sparkling water as a mixer.

Sparkling water isn’t the only sub-category that needs to broaden its usage if it is to grow. “Bottled water is underdeveloped in most drinking occasions,” says Trechman.

One of the occasions that is ripe for further development is breakfast. Bottled water features on most European breakfast tables - but in the UK, it’s rarely seen. Office-based consumption, too, could benefit from tailored products and promotions, says Aqua Pura marketing director Joanna Watling. “The 1.5-litre pack is becoming common on office desks as people become increasingly conscious of their water intake,” she notes. “There is an opportunity for retailers to tap into this trend and cross-promote larger bottles with lunch products.”

And what better time to do that than the year London is hosting the Olympics? In anticipation of a stellar summer for the impulse channel, suppliers are already formulating campaigns to support their on-the-go formats. Highland Spring will run an on-pack promotion offering consumers the chance to ‘win’ Sir Chris Hoy for the day, while Glacéau Vitaminwater has challenged the public to create a limited-edition flavour.

The take-home water market has continued to grow this year, with sales up 7.5% - slightly ahead of the total soft drinks market, which grew 7.4%.

A 4.6% increase in the retail price per litre has helped drive value growth, although volume sales have also risen, by 2.8%, driven by flavoured waters.

Flavoured waters have driven value growth. Plain still water continues to make up 46% of the market in value, but has grown behind the market.

Branded water has also grown behind the market as shoppers trade down to own label - saving, on average, 27p per litre.

Aldi is the most improved retailer, growing by 23.2% with a sales share index of 119. The other retailers to grow ahead of the market were Lidl (up 7.6%) and Morrisons (up 16.5%)


Coca-Cola’s Schweppes Abbey Well brand is the official water of London 2012, and owner Coca-Cola Great Britain expects it to account for around 40% of all CCGB products sold during the Games. In preparation, the brand underwent a redesign this month aimed at dialling up its British heritage.

Provenance has already become a key trend in bottled water as consumers seek to minimise environmental impact and support homegrown brands through the downturn. “There is a consistent move towards consumers buying locally, turning to products that are produced in Britain or owned by British companies,” says Craig Smith, CCE vice president operational marketing.

It’s a change that has been “to the detriment of brands produced further afield”, suggests Condron - and the data bears out his claim. In the past year, category leaders Volvic and Evian appear to have ceded market share to British waters Highland Spring, Buxton and Abbey Well [SymphonyIRI].

Even own label is splashing out on British branding. Tesco, for instance, has launched Welsh Natural Spring Water - and its own-label range also includes Perthshire and Ashbeck Still Water. “Most major retailers have revised their own-label ranges to focus on different provenance,” says Condron.

But, as Nestlé’s Shellie points out, British heritage alone “is not going to be enough”. The summer may well be good to bottled water - provided the mercurial British weather, still the main driver of sales, doesn’t rain on its parade. But for long-term growth, the industry can’t rely on British branding - it needs to channel overseas attitudes and change the way Brits drink water.