Figures from the trade association Verband Deutscher Mineralbrunnen (VDM) show 2001 was another good year for Europe's biggest mineral water market. Per capita consumption climbed again, to 103.4 litres and demand has now doubled since the mid 1980s. With Germans also drinking on average another 31 litres of mineral water-based soft drinks (demand in this segment was up over 5%), overall output from German wells rose 3.7% to 106m hl.

Yet many in the industry still see the glass as half empty. The surprise insolvency of VMH Rosbach last autumn was a warning to other small and medium sized wells, unable to respond to changing consumer tastes or finance the switch to PET packaging and the costly promotion of premium brands. This is still a fragmented and often localised industry. While the leading 40 firms already control 85% of output, around half the 240 wells have less than 10m fillings per year. The market is on the move, with the former cosy network of local and regional suppliers facing the squeeze from both global brands and cheap private label output. "An unhealthy trend," concedes VDM head Wolfgang Stubbe. Sales of 'no-name' waters nearly doubled in 2001, to take a 10% market share.

Still is booming
Industry Cassandras also points to French domination of the booming still water segment, where sales leapt over 65% last year. Brands such as Volvic (Danone) and Vittel (Nestlé) enjoyed startling growth, as health and brand aware Germans switched from tap water to premium bottled still waters. Indeed with Coca-Cola's Bonaqua brand enjoying a 2.5% market share, foreign multinationals now control five of the top ten selling mineral waters in Germany. And domestic wells will come under further pressure later this year, when Nestlé launches its prestigious San Pellegrino mineral water in Germany's retail trade.

German thirst for still waters helped Nestlé subsidiary Blaue Quellen close in on market leader Gerolsteiner, as sales jumped 15% to 8.4m hl. Alongside Vittel, the fastest growing French brand in Germany, Blaue Quellen also markets the still water Contrex via pharmacies. It enjoyed double-digit growth last year. The still spring water Aquarel, introduced in Germany (and five other European markets) in June 2000, is already the leading premium water in this segment. The breakout of these premium brands from their original niche markets helped lift Blaue Quelle's turnover by almost 40% to €234m last year - ahead of Gerolsteiner.

"We intend to focus ever more on our profitable brands," says Blaue Quellen chairman Wolfgang Pasewald. "All five of our German wells have at least one premium brand, so we are well positioned." For Pasewald, "the twin-track approach of the Nestlé Water Group with both international and local brands is proving a success."

By contrast some German wells have looked flat-footed. Industry leaders such as the Uberkinger group and Apollinaris delayed over switching to PET, or looking much beyond carbonated waters, which is still the dominant segment, but one where demand fell in 2001. Hamburg firm Apollinaris has reacted to its own loss of sales last year with the launch this May of a returnable 1 litre PET bottle. Boss Frank Hezel hopes this "will reattach the firm to industry trends." He is also happy with the progress of Apollinaris Silence, the still water launched to the restaurant trade in March 2001.

Profiting from PET
Nor is all doom and gloom at German giant Gerolsteiner. The Rhineland group is profiting from its early switch into PET packaging. "Gerolsteiner is the industry pioneer of PET and we continue to lead the way in this fast growing market," says chairman Dr Peter Traumann. In February the firm launched a 1 litre PET variety to strengthen leading brands Gerolsteiner Sprudel and Stille Quelle in the convenience market. Traumann expects that over half of group output will be in plastic bottling this year.

Gerolsteiner is established as the main premium brand in returnable PET bottles; even rival firms able to commit the €10m to re-equip production lines will struggle to claw back this company's three-year headstart. But the clear trend to PET (one-quarter of industry output will soon be in plastic) is forcing many wells to switch. For once not even a recent scare story on trace chemicals found in several leading PET-bottled brands seems to have fazed German consumers.

Gerolsteiner group output rose 4% to 8.9m hl in 2001, and even more for flagship brand Gerolsteiner - with sales of 7.5m hl, it has nearly 10% of the mineral water market by volume. No other bottled water is above 4%. Traumann calls the, as yet unreleased, group profits, "Very satisfactory," and predicts "our strong performance will continue in 2002."

The non-carbonated Gerolsteiner variety matched French imports with 50% sales growth. The firm has just installed a new still water bottling line, and is now threatening to go head-to-head with foreign suppliers in this market. "We want to catch up with the French," says Traumann. "We aim to be one of the three leading producers within three to five years." Market research for the firm identifies women and teenagers as the target Dauerbefeuchter (all-day drinkers) who view still water premium brands as a chic and healthy way to maintain their body water levels.

Gerolsteiner is one of the very few German wells with the revenues to launch new premium brands. As part of the Bitburger group, it is also backed by one of Germany's more successful brewers. Brewers own several other leading wells, but these are often struggling or - as with Holsten recently - keen only to dispose of their mineral water holdings.

Gerolsteiner exports of 202,000hl are 25% of the industry total. The group sells in 25 countries, with the main markets in North America and Benelux. Here too Traumann aims to do battle with the multinationals, sponsoring one of Germany's top professional cycling teams as part of a marketing drive to raise Gerolsteiner' s profile across Europe.

Adding value

Expert Analysis

Global Packaged Water/East Europe - 2001
This regional section of Canadean's Global Packaged Water Report gives top-line market data at country/ regional level, including forecasts out to 2004. Market segmentation is shown, together with packaging and distribution splits, relevant taxes/duties, selected retail prices and, where available, corporate shares.

Christinen Brunnen, Vilsa and Adelholzener Alpenquellen are all German regional wells benefiting from an early switch to PET or the launch of innovative value added drinks. Bavarian well Adelholzener is locked into both trends. Two new PET bottling lines were installed at the Bad Adelholzen plant last year as the firm marketed its products nationwide. Brands include a full range of mineral waters, plus an apple Schorle and a 10 fruit nectar drink.

Adelaqua is the firm's oxygen-enriched energy drink and it launched its exotic Pflaume Body-Balance in Bavaria last October. The still water-based drink, which contains gingko, ginseng and six vitamins, is said to relieve stress and improve concentration. The flavoured drink uses Seaquist Loffler's new standard Simplidrink closure.
The bold product range and the hi-tech packaging comes from a well run by a group of convent sisters, who plough most of their profits back into good causes. TV and radio spots are shared between Bayern Munich goalkeeper Oliver Kahn and Sister Theolinde Mehltretter, the 56-year-old head of Adelholzener. For Sister Theolinde, "the ingredients of our mineral water are truly a gift from God."

Such 'near water' drinks - the mix of still water, fruit juice concentrate and vitamins - are one of the most dynamic sectors of Germany's soft drinks industry. And the success of Adelholzener and Gerolsteiner suggests two routes away from a German water market dominated by pan-European brands. Yet the future is clearly less promising for dozens of wells. "If we have a bad summer, many firms will be in trouble," warns Christinen boss Juergen Doerr.