The bottled water market is one of the most dynamic growth sectors in the international soft drinks market. And nowhere is this more the case than in Eastern Europe. With significant double digit growth rates across the region it is fast becoming the focus of the international giants seeking balance to their more mature home markets.

Bottled water sales in East Europe have seen double-digit growth in each of the past five years, reaching more than 6,300m litres in 2001. And, according to new research, despite the economic difficulties experienced by the region in the late 1990s, volume has jumped by almost 90% since 1996.

According to Gary Roethenbaugh research director at drinks consultant Zenith International, which published the research in its 2002 East Europe Bottled Water Report: "The market grew in all of the 15 East European countries covered by Zenith's research, gaining an overall 11.5% in 2001. Consumption has nearly doubled from 10 litres per person in 1996 to just short of 20 litres per person in 2001, but remains a long way behind the West European average which is set to pass 100 litres per person in 2002."

Thanks to a strong tradition, sparkling water dominates the East European market, taking more than two thirds of total volume. Still water, however, has doubled its share from 16% in 1996 to 32% in 2001. "Growing awareness of health benefits and widespread poor tap water quality have paved the way for the bottled water industry. This helps explain the rapid growth of East Europe's youthful water cooler market and underlies the recent boost in still water consumption," added Roethenbaugh.

Poland and Russia were the two leading countries in 2001, achieving a combined 45% share.  But other markets are also performing strongly. With much smaller populations and a greater concentration of industry activity, Slovenia and Croatia had the highest consumption levels at over 50 litres per person. And production in the Czech Republic, according to figures from the country's Association of Mineral Waters, has more than trebled during the last eight years, driven by the same sort of trends we have seen in the past in Western Europe, ie changing attitudes to health.


Interestingly the Czech market also shows a degree of sophistication, with strong growth in flavoured mineral waters. According to the Czech Soft Drinks Producers Association, in 2000, flavoured mineral waters accounted for 59% of the market, while natural mineral waters represented 40%. Curative waters accounted for the remaining 1%.

"The global 'big four' in bottled water - Coca-Cola, Danone, Nestlé Waters and PepsiCo - have all spotted the opportunity in East Europe and have become the market leaders," said Roethenbaugh.

Nestle, in particular, has been on aggressive form in the region. In May the company successfully increased its control of the Hungarian mineral water company Kekkuti Asvanyviz, which holds a 21% share of the domestic market. While in Russia the Swiss food and drinks giant is now the leading bottled water producer, after it acquired the Russian producer Saint Springs. The deal was believed to be worth in the region of US$50m for a company with a 10% share of the Russian bottled water market. And Nestle described it as "a big step" into a "very dynamic market".

Signs of just how important this region is becoming to the health of the global drinks giants was evident in Nestle's recent nine month results. The company posted consolidated sales in the period up 6% to CHF66.2 billion. Nestle Waters performed strongly with internal growth of 9.3% but the Russian operation outstripped even this with 23.3% growth, while the rest of Eastern Europe came in at what is still an impressive 11.6% growth.


Expert Analysis

East Europe Packaged Water Report

This report gives top-line market data at both a country and 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.

 
And neither have Nestle's rivals been quiet in the region. Coca-Cola Hellenic Bottling announced in July that it was to buy a stake in Dorna, the Romanian mineral water company, in a joint venture with Coca-Cola. Meanwhile Danone and San Bendetto have set up a joint venture in Hungary in the form of a mineral water bottling plant. The plans for the JV are ambitious, to reach the number three spot on the Hungarian domestic market in two years.

But there are also many successful local players such as Jamnica in Croatia, Knjaz Milos in Serbia and Karlovarske in the Czech Republic. In an environment of growing acquisition activity and aggressive price discounting, bottled water looks set for sustained growth and change.  Indeed Zenith projects bottled water sales edging towards 10,000 million litres by 2006.