Is the plug being pulled on the bottled water industry?

The news that campaign group Sustain is calling for all government departments to ban staff from drinking bottled water on its premises comes at a vulnerable time for the bottled water industry, which has been hit by a welter of adverse publicity in the last year.

Sustain is compiling a report of local and national Government departments’ usage of bottled water, and hopes individual departments will follow the lead of public bodies including Liverpool City Council and the Department for Environment, Food and Rural Affairs (Defra) in banning bottled water and dispensers in offices.

Sustain believes bottled water should be banned – except in emergencies – because of the cost and environmental footprint of a resource which is pumped into homes at a lower cost. Government figures leaked to Marketing Week suggest that of the 13 billion plastic bottles bought in Britain last year, less than 3 billion were recycled.

Sustain’s research, set to be unveiled in the next two months, follows a wave of negative publicity on both sides of the Atlantic that has beset the industry, worth almost £2bn in the UK alone.

An advertising campaign in New York last year encouraged the use of tap water, while calls for European laws to enforce the recycling of all plastic bottles across the Union have prompted brands such as Coca-Cola and PepsiCo to pledge improvement of their recycling rates.

Industry observers suggest the growing backlash is likely to impinge on further growth, particularly among new entrants looking to establish a foothold in a market swamped by big brands. Danone has market-leading brands Volvic and Evian, which dominate the off-trade market. Volvic had 16% of the off-trade market in terms of volume share at the end of 2006, according to Mintel, while Evian had 14%. Own-label Highland Spring, the NestlÈ-owned Buxton, Perrier and Vittel are also established players.

The peak of the wave
Nick Cloke, director of strategic marketing consultancy Catalyst, says: “I think bottled water is at the top of its life cycle and new entrants will have to grow very quickly to establish themselves. There are now issues including transporting water, whose cost has been exacerbated by the cost of fuel. People are also starting to wise up to what benefits bottled water actually brings.”

Yet the adverse publicity has not, yet, undermined sales. Food and drink consultancy Zenith International estimates sales will grow by between 6 and 8% over the next five years. Some believe bottled water will overtake carbonated drinks in global consumption, as brands expand their portfolios with functional and flavoured variants.

A British Soft Drinks Association spokesman denies there has been a backlash. He says the industry has a lot to “shout about”, citing the convenience and provenance of bottled water. He also points to the decision by the House of Commons to continue to use bottled water because of its “taste” and “cost-effectiveness”.

A confusing issue
Others point to growing confusion around the issue. Former Britvic marketing director Andrew Marsden says that if worries surround the transportation of water from overseas then there are plenty of UK manufacturers.

The sector has been one of the fastest-growing areas of the soft drinks market over recent years. According to Mintel, the bottled water market grew from £1.3bn in 2003 to £1.6bn in 2006. Over the same period, volume share grew from 1.47 billion litres to 1.7 billion litres. Mintel is estimating the industry will reach a value of £2.6bn by 2012.

Despite growing pressure to buck the bottle and back the tap, it seems bottled water’s status as a healthier option to fizzy drinks is still more important than any backlash over the environmental impact of its production.


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