23 November 2007 - Bottled water sales in the US have grown steadily over the last two decades. In 2006, sales amounted to 8.25 billion gallons, a 9.5% increase on the year. The sales volume of bottled water is higher than milk and nearly outsold beer last year.
According to economic consultancy firm ECONorthwest, bottled water sales are expected to exceed carbonated soft drinks in overall sales volume in the next decade.
Nestle, the world’s largest water bottler with 72 brands of bottled water in 37 countries, held a 43.3% market share of the North American market in 2006, an increase from a 42.7% market share in 2005.
ECONorthwest adds that Nestle is known in the industry as a low-cost producer, employing efficiencies across its production process that Nestle officials believe allow the company to maintain its competitive edge.
“Most of its facilities are less than 15 years old, and they use high-speed, vertically integrated manufacturing processes. For example, in many of its facilities, Nestle manufactures its own bottles from plastic ‘preforms’, and its production lines run with just three to four employees per line”.
The US bottled water market has recorded extra growth in recent years with the introduction of flavoured water and enhanced water (water with added vitamins, herbs, and extracts).
Flavoured water and enhanced water represent a small, yet rapidly-growing segment of the market.
The consultancy firm goes on to say that, in 2005, sales volume of enhanced water grew by 41.7% and flavoured water grew by 197%. Nestle is, of course, positioning itself to play a leading role in these new product categories, which typically rely on municipal tap water or well water rather than spring water.
In 2004, industry leader Nestle predicted steady growth in its bottled water sales over the next decade, expecting to build one new plant every year from 2004 to 2014. Since then, growth of Nestlé’s bottled water business has remained strong.
In a January 2007 interview Nestle Waters North America’s CEO said that future growth will be realized only if the current downward trend in sales of carbonated soft drinks continues. Other factors may also affect the long-term growth predictions for the bottled water industry, such as rising fuel costs.
ECONorthwest does, however, stress that the bottled water industry is coming under increased scrutiny for a number of its practices.
“These include the inefficiency of the water bottling process (Nestlé reports that it requires 1.86 liters of water to produce one liter of bottled water); environmental impacts of plastic bottles (over 75 percent of which are never recycled); the fuel usage and emissions that arise from trucking so many billions of gallons of water around the country; questions regarding the purity of bottled water compared to tap water; and the local impacts on communities whose aquifers are being tapped by the bottled water companies”.
Environmental concerns have begun to affect consumer behaviour and could consequently affect the market for bottled water.
In June 2007, for instance, the mayor of San Francisco ordered all city departments to phase out the purchase of bottled water in the City. Since then, other cities have taken similar steps. Also, some restaurants in California and New York have stopped offering bottled water.
Earlier this week, FLEXNEWS reported that Nestle is planning to build a 1-million-square-foot plant in McCloud in California. However, the company is faced with a new obstacle under the form of a recently-published economic study prepared by ECONorthwest, who is sceptical to Nestle’s predictions that the plant would bring more local jobs and improve local economy.