The bottled water aisle is getting a makeover in a bid to boost sales nearer to those in Continental Europe. Though sales of UK bottled water are up 11% year-on-year [TNS, 52 w/e 3 December 06] to £305m, consumption levels remain about one quarter of those in Italy, according to Richard Laming, public affairs manager at the British Soft Drinks Association.
So there is plenty of scope for growth - but only if ranges are rationalised dramatically and suppliers work harder with retailers to boost availability.
"One of the key challenges facing the industry is that the market is crowded," says Gill Bullock, marketing manager of Brecon Beacons Natural Waters, supplier of Brecon Carreg. "Suppliers will have to look at how they can simplify choice, and decide what positionings to keep."
Grocery retailers, too, are keen to reduce their SKUs, forcing suppliers to review their portfolios and back only winning lines.
"We don't need a 6 x 1.5 litre format in Evian, Vittel, Buxton and own-label all priced within 20p of each other - customers keep telling us they don't want to browse the aisle," says Asda's soft drinks buyer Jon Cummings. "If we can block the aisle, it will be much easier to shop."
Suppliers and retailers also need to improve their demand forecasting and availability to ensure they meet seasonal fluctuations in demand as consumers continue to move from carbonated to still drinks.
"The number one issue for soft drinks companies during weather changes is to manage availability," says David Patmore, MD of Aqua-Pura owner Princes Soft Drinks. "A hot summer will boost volume sales, but if retailers experience shortages, then manufacturers' reputations can be damaged. We work hard to ensure we manage our stock and do our best to predict surges in demand."
Suppliers are striving to grow the market through innovation in packaging, distribution and marketing. Laming says one of the biggest innovations to hit the category this year has been the association's launch of an information resource in collaboration with leading bottled water producers.
The website - www.bottledwaterinformation.co.uk - was launched last month as its first public initiative, and a range of marketing activities will follow.
"Producers have invested substantial sums of money and we have agreed a way of sharing costs with manufacturers," says Laming. "Every manufacturer has its own activity but we have a collective movement to reassure about issues such as health, provenance, wellbeing, and the environment as consumer concerns grow. We would hate it if people stopped drinking bottled water because of mistaken beliefs."
But as the thirst for bottled water soars, is there a danger of the virtuous halo being taken away from the category by health lobbyists questioning its true credentials?
Last year, the Consumer Council for Water issued a damning report that said tap water was just as healthy as bottled, did far less damage to the environment and was at least 500 times cheaper. Global Ethics, owner of One water, is not worried about any collateral damage, however.
"Consumers purchase bottled water for convenience as much as for quality and purity," says Duncan Goose, director. "While it's not clear what the split is between these two drivers, it's interesting to see that in 2006, Northumbrian Water produced a 'brand' called '97' that was tap water, confirming the theory that consumers like the convenience of being able to carry water."
But he does believe the environmental debate will influence the sector going forward. "The green movement continues to gather pace and the industry is under the spotlight with regard to its environmental stance," he says. "Manufacturers will have to recognise the need to develop new packaging or encourage more recycling. But until a viable biodegradable solution comes to light, the focus should be on encouraging recycling and working with the government to improve facilities."
Manufacturers are working hard to improve their environmental credentials and demonstrate best practice, says Laming. "We want transparency. Traceability concerns people. They want to know where water is from and how it's been treated," he says. "Another public worry is that the sources of bottled water themselves will run out, but strict regulations rule that out. It makes no commercial sense for a manufacturer to drain the source dry."
From the end of the month, Highland Spring mineral water will be reclassified as a 'spring water' to allow the company to manage its water resources more efficiently. The water will be drawn from a consolidated source, giving the company access to another 100 million litres a year. Highland Spring is also working with Tesco to reduce its food miles and is one of the major Scottish participants in Tesco's train transport trial.
Greencore Mineral Water values the own- label category, excluding carbonates, at £83.5m with year-on-year growth of 4.6%.
"The category has been commoditised in recent years by value products. However, rising packaging costs, particularly for PET bottles, will precipitate retail price inflation," says Charlotte Stokes, business development manager at Greencore.
The healthy eating agenda is also top of mind and Nestlé is in talks with retailers to educate the consumer on the benefits of drinking two litres of water per day.
Catherine Morris, trading control manager at Nestlé Waters says: "The biggest challenge is to do the same as the 5-a-day campaign has done for fruit and veg. We need to educate the consumer about the benefits of drinking two litres of water a day. Nine out of 10 of us do not drink enough water and that has a detrimental effect on our health.
"It will be down to manufacturers in conjunction with retailers to get the message across." n