Although it is a large and mature market for bottled water, Italy is still seeing strong growth in bottled water sales, driven principally by consumer demand for healthier drinks. Hope Lee, beverage analyst for Euromonitor, reports.

According to Euromonitor, Italy is the largest bottled water market in Western Europe, with total volume sales of 10.2 billion litres in 2003 with the highest annual per capita consumption at 177 litres per person. Despite the maturity of the market, bottled water sales in Italy increased by 22% between 1998 and 2003. The hot summer of 2003 fuelled demand but the chief spur for growth has been the trend towards healthy products, as bottled water is perceived as a safer alternative to tap water.

The key contributing factor for the high level of water consumption is bottled water's low unit price but the low price carries with it attendant problems of profitability for the water industry. Italy boasts 175 mineral water sources which package and sell 280 brands. Natural mineral water accounts for around 98% of the market.

Still water represents 65% of total bottled water consumption in Italy, growing by over 30% in volume terms between 1998 and 2003, in contrast to 8% growth for carbonated water. Still water benefited is perceived as a healthy alternative to other drinks and more thirst-quenching than sparkling water. It is also used for cooking at home.

Still water also benefited from the increasing segmentation of functional or 'enhanced' waters. Some are marketed as diuretic waters, as is the case with Rocchetta, others as digestive aids, such as Uliveto. Some new launches have also been targeted at newborn babies, as is the case with Sangemini or Sant'Anna. Research suggests that fortified bottled water is likely to grow in popularity.

With the market at saturation point, the cost of new brand launches has skyrocketed so manufacturers are increasingly opting for brand extensions such as Danone's Boario Active, with a high calcium content.

Apart from functional water, still spring water is another bright spot in the Italian water industry. The spring water segment is still very small in Italy and accounts for around 1% of volume sales in 2003, according to Euromonitor's latest research. But it is increasingly employed in the HOD sector and its use for home consumption has also increased recently as a result of two major launches.

In 2001, Parmalat, Italy's largest dairy manufacturer, successfully launched a new microfiltered bottled water brand, Aqua Parmalat, while in the same year, San Benedetto entered the spring water market with the brand Sorgente di Bucaneve. Large-size packaging formats such as 5 litres are not permitted for mineral water in Italy; legally it can only be bottled in up to 2-litres packages.

Negative publicity
Sparkling water sales totalled 3.5 billion litres in 2003. Between 1997 and 1999, artificially carbonated bottled water suffered from negative publicity regarding high levels of sodium. In the ensuing years, sales of carbonated water recovered slightly, with volume growing at 4%, aided by the introduction of lightly carbonated waters.

Expert Analysis

Bottled Water in Italy (download)

This report is part of a series of 52 individual country reports analysing the market for bottled water. It covers the time period of 1998-2003 and forecasts to the year 2008. Analysis includes the latest on-trade vs off trade sales statistics, comprehensive sector sales breakdowns and company and brand share data. Use this Euromonitor analysis to develop market strategy, evaluate opportunities and threats and anticipate industry developments.

To find out more about this report and to order your copy, please follow this link.

 

However, research indicates that carbonated water is unlikely to exhibit fast growth in the future as the consumer trend favouring healthier drinks is set to continue and still water is predicted to continue to outperform sparkling water.

Flavoured water is a niche product in Italy, accounting for a fraction (barely 0.1%) of total volume water sales in 2003. Italian law does not allow flavoured water to be called 'water', which makes it difficult to market the product. San Benedetto - which is to date the only manufacturer of flavoured water active on the Italian market - got around this problem by using the names 'Bevi il Gusto' and later 'San Benedetto Ice', which do not use the term 'water'.

The bottled water sector is relatively concentrated in Italy, with the big four players - San Pellegrino (owned by Nestlé), San Benedetto, Italaquae (owned by Danone) and CoGeDi - accounting for two thirds of off-trade volume sales in 2002. San Pellegrino leads the market with its flagship brand Levissima, representing over 10% of retail volume sales.

High profile campaign
Parmalat, the most recent new entrant, managed to achieve a 1.4% volume share in 2002, despite having launched its Aqua brand only the previous year. The launch was supported by a high profile advertising campaign, which the company repeated throughout 2003. Euromonitor predicts that Aqua is likely to increase its shares further as some consumers migrate to spring water.

In 2002-2003, soft drinks giant Coca-Cola launched Bonaqua, its global water brand. The launch initially took place only in Sicily. Coca-Cola has expressed its commitment to extending the new brand to the country as a whole in the near future. Bonaqua is a mineral water with a low sodium content, directly bottled at the Tinnea spring.

Smaller players appeared to be the losers in the water war. The price-cutting strategy employed by big firms has effectively squeezed their share. Smaller
companies tend to focus on door-to-door sales, the on-trade channel and sales through independent food stores.

But the still water category has benefited from wide distribution of regional brands. The increasing consolidation of the retail market means that well established regional brands, such as Vinadio's Sant'Anna and Trafficante's Lilia, now have a chance to be present in other regions. Stronger local manufacturers are also extending into other regions expanding the number of brands available.

And still growing
Despite having the highest per capita consumption of bottled water in the world, Italian volume sales of bottled water are expected to grow by 7.8% between 2003 and 2008. This is a slowdown in growth compared with the historical period as a result of high market maturity. Consumer awareness and concerns over artificial additives, caffeine, alcohol, calories, salt and fat content in food and beverages will continue to drive the demand, especially for functional water.

Advertising activity will continue to play an important role, targeting new occasions for consumption as well as introducing new packaging and other innovations. In terms of value, sales are forecast to slow down, with price pressure increasing. Brand loyalty will become an increasingly rare commodity, with branding becoming more important as the number of brands available results in a fight for supermarket shelf space.

Top 10 Major Markets in Western Europe - million litres
2003 actual
% growth 1998-2003
per cap 2003
Italy
10267.8
21.7
177.1
Germany
9708.0
21.6
118.6
France
9074.3
28.5
152.5
Spain
6199.3
58.0
156.7
Turkey
5291.3
61.0
78.2
UK
1711.9
65.4
28.7
Belgium
1339.7
26.3
130.1
Portugal
1006.9
57.2
96.8
Switzerland
809.3
19.0
112.0
Austria
793.6
48.1

98.0

 

Sectoral Performance in Italy - million litres
2003 % growth
1998-2003 % growth
2003-2008 % growth
Still bottled water
6702.7
30.4
9.5
Carbonated bottled water
3554.9
7.9
4.1
Flavoured bottled water
10.2
1100.6
10.9
Total bottled water
10267.8
21.7
7.6