Despite the wealth of new product innovation, water continues to dominate Italy's soft drinks industry. Annette Sessions reports.

If anyone was in any doubt, the latest figures from Italy, issued to coincide with this month's Simei bottling packaging beverage show in Milan, confirm that the country is the mainstay of European bottled water drinking. For all other soft drink categories, except iced tea, Italy's consumption figures hover towards the bottom of European league tables.
 
It's a cultural and historical phenomenon. Throughout Italy's countryside there is an abundance of natural mineral water sources and water springs. This rich heritage includes 170 active springs, responsible for producing some 300 bottled water brands.

Figures from Mineracqua, the Italian Mineral Water Association, show that per capita consumption of mineral water is 180 litres and 183 litres for spring waters. Considerably more is drunk in northern regions, whilst consumption is below average in southern Italy.

Despite the plethora of water products, 58% of the market is dominated by just  four brand leaders: San Pellegrino with 24.5% market share, San Benedetto (18.9%), Gerrarelle (7.4%) and Rochetta (7%).  Moreover, the top 10 brands account for 80% of the market.

These brand leaders cannot, however, afford to be complacent. The myriad small to medium-sized regional brands, such as Cintoia of Firenze, are all chasing market share.

Margins are tight. It is estimated that in 2004 Italian bottled mineral water turnover was around 2.1bn litres with a consumer value of approximately €3bn,  resulting in some of the lowest prices in Europe - good for consumers, but not great for company profits.

With such established high consumption levels, industry observers say there is little room for significant improvement in volumes. Analysts are forecasting a  steady 2% annual growth for the next five years. "The natural mineral water trade is a well established market that can expand further, thanks to the product's quality and safety," says Mineracqua chairman, Ettore Fortuna. "In fact, if annual per capita consumption is currently half a litre per day, it's reasonable to presume that this figure can increase further."

Italy might lead the table in bottled water consumption, but falls dramatically behind when it comes to fruit juices and nectars. In the league table of European consumption figures, Italy has the penultimate slot with a mere 15 litres per capita consumption, against 42 litres in Germany and 22 litres in the UK.

Analysts put this yawning gap down to the high availability of fresh fruit, the exclusion of juices during main meals and a limited use at breakfast time. Within the juice category, a mere 15% is 100% fruit juice. The market is dominated by nectars (30% fruit with added water and sugar) with a share of 74%. Juice drinks with less than 30% fruit content account for the remainder.

The most popular flavours in the 100% juice range are orange, pineapple, tropical mix and grapefruit. Typical Italian fruits such as peaches and apricots lead the nectar sector while vitamin-enriched variants are becoming increasingly popular. 

In this sector, Conserve Italia leads with its Valfrutta, Derby and Yoga brands, accounting for 29% of the market. Then comes La Doria which, following the acquisition of Confruit, now enjoys a 12% market share followed by Parmalat with its dedicated Santal line. The recent financial problems which have beset Parmalat have not affected production of Santal which is introducing a new line of functional drinks under the Jeunesse brand.

Zuegg, with its Skipper brand, takes the number four slot with 10.2% market share, whilst the Austrian Rauch imports (Bravo, Happy Day and Yippy) has 6.4%. Fellow Austrian manufacturer Pago claims market leadership in the bar sector. 

Italy, despite its lauded Mediterranean diet, has not been immune to concerns over obesity and nutrition. As elsewhere, sales of carbonates have slid by 2% to 3%, with a per capita consumption of 66 litres; however, low calorie/diet/light  cola variants have, according to Euromonitor figures, recorded strong volume sales. At  this year's Pianeta Birra beverage event, both cola giants Pepsi and Coca-Cola had exhibition stands focusing on their 'light' offerings.

Cola is the most popular carbonates flavour (45%) followed by orange which takes a quarter share of CSD consumption. Lime and lemon account for a little over 300m litres followed by traditional Italian regional flavours such as chinottos - positioned as the 'Italian' answer to cola - and spumas. Iced teas (ordinary, fruit-flavoured and green tea) enjoy greater success with a per capita consumption of 10 litres which is higher than the European average.

The sports drinks segment, with consumption estimated at 85m litres, is progressing well. Both PepsiCo's Gatorade and Coca-Cola's Powerade have been introduced. Demarcation lines between categories become somewhat blurred within sports drinks as some mineral water brands also market themselves as sports drinks, such as Paradiso SpA which stresses the importance of rehydration during physical exercise and is the official sponsor of the men's Monitchiari volleyball team. Yet to make a marked impact are energy drinks, with current total consumption at just 25m litres.

Italian analysts Beverfoods Beverages identify Coca-Cola, San Pellegrino/Nestlé, San Benedetto/Schweppes and Pepsico Italia as the four companies which collectively account for 75% of 'sweet soft drinks' (CSDs, still beverages, energy and sports drinks). Spumador, Campari, Ferrero, Sangemini share a further 15% with around 100 regional producers accounting for the remaining 10%.