The third in our five-part review of 2012 sees Ben Cooper consider how the last 12 months have treated the bottled water category.

Whatever woes the economic downturn may have brought to consumer markets, the bottled water sector appears to have found renewed impetus over the past year or so.

In October, Groupe Danone posted a 5.6% increase in sales for the first three quarters, with its waters division the star performer. The owner of the Volvic and Evian brands said volumes had also performed well in the nine-month period, rising by 5.3%. Notably, the company said strong growth in emerging markets had continued to drive the division’s performance.

Also in October, Nestlé posted growth for its waters division for the first three quarters of the year. The company said sales at Nestlé Waters had risen by 5.8% to CHF5.58bn (US$6.02bn), with all regions posting growth. The company, which includes the S. Pellegrino, Perrier and Vittel brands in its portfolio, also said emerging markets, along with North America, had driven the growth. 

Research published in May in the US and the UK also pointed to the water sector being in good shape, with consumer health concerns driving sales. Total US bottled water consumption in 2011 rose by 4.1% in 2011, reaching 9.1bn gallons (34.4bn litres), according to figures released by the Beverage Marketing Corporation (BMC). This had followed 3.5% growth in 2010.

The BMC attributed the growth to consumers seeking out healthier beverage options. It also reported that US per-capita consumption rose by 3.2% in 2011 to an average of 29.2 gallons.

A similar pattern was being observed on the other side of the Atlantic. According to Zenith International’s 2012 UK Bottled Water market report, UK bottled water sales grew by 2.1% in 2011, after five years in the doldrums.

The market had grown strongly up until 2006 but had been held back by the switch to purified water coolers, poor summers, the recession and environmental concerns. The improvement in 2011 stemmed from the key benefits of healthy hydration, on-the-go convenience, competitive pricing and environmental measures, Zenith continued. 

The bottled water cooler market declined by 3.1%, however, as customers turned to mains-supply water filters, Zenith reported. 

In fact, earlier in the year the competition between the purified water dispenser sector and packaged water led to a dispute in the UK. 

In March, the UK's Natural Hydration Council (NHC) welcomed a ruling by the Advertising Standards Authority (ASA) upholding complaints the NHC had made against advertising by Strauss Water, which produces a water purifying device.

The NHC said the ads, which claimed that plastic bottles could harbour bacteria and eventually break down to release chemicals and that some water has travelled over 10,000 miles to reach the UK market, were "misleading and denigratory". The ASA ruled that the ads must not appear again in their current form and Strauss would have to ensure it had adequate substantiation before making future comparative or environmental claims.

The NHC told just-drinks at the time that "naturally-sourced bottled water is one of the "healthiest ways to hydrate" and "one of the most environmentally-friendly soft drinks produced". It added: "At a time when the average Briton drinks less than one glass of water a day, all forms of water consumption should be encouraged. It is irresponsible of Strauss Water to use such outlandish and inaccurate denigration in a bid to promote their filtration machines."

Also the subject of a complaint this year was Coca-Cola's Glaceau Vitaminwater brand, which came under fire in a report from the Children's Food Campaign (CFC) in January. 

The CFC's 'Dodgiest Junk Food Marketing Claim of the Year' report said Coca-Cola claimed on its website that the range offers "spring water with fruit juice" when in fact only three of the eight Vitaminwater products "contain any form of fruit", and the fruit in those three was from concentrate.

In response, Coca-Cola said that one reference relating to fruit juice and Glaceau Vitaminwater had been an incorrect description of the brand's ingredients and had been removed from its website with immediate effect.

In December, Coca-Cola unveiled a new look and lower-sugar reformulations for the Glaceau Vitaminwater range. All eight variants now contain a stevia-based sweetener, resulting in a 30% reduction in sugar levels and 30 fewer calories per bottle. Further vitamins and minerals have also been added.

Given the importance analysts attach to the healthful attributes of bottled water in fostering growth, it is interesting that brands are also under fire on health grounds. However, this speaks to another dynamic trend in the water market, namely the introduction of more flavoured waters. And this year saw a number of stories that seemed to confirm this trend.

In January, PepsiCo launched SoBe Lifewater with coconut water flavours, which is available in three variants, Pacific Coconut, Pomegranate Nectarine, and Mango Mandarin. The US launch was accompanied by an ad campaign featuring Australian-born actress Yvonne Strahovski.

In March, Jones Soda introduced a flavoured, carbonated water called Au Naturel in the US. The product contains natural sweeteners, including organic agave syrup, stevia and pure cane sugar, as well as green tea extracts and a small dose of natural caffeine, Jones stated. The range comprises three offerings: Green Apple A Day, Lemon Limelight and Orange Ya Glad Its Mango.

Meanwhile, in April it was announced that Coca-Cola had acquired a further stake in Zico Beverages, giving it majority control of the company, which produces the coconut water brand of the same name. Coca-Cola had acquired a 20% stake in the company in 2009.

In addition to flavoured offerings, the water sector has also continued to see the introduction of new functional variants. In February, Tata Water Plus was launched in India, with two variants - Zinc and Chromium. The product was rolled out initially in Tamil Nadu state.

In February, Skinny Nutritional Corp. signed a manufacturing and distribution agreement with Cott Corp's Cliffstar subsidiary, which will see the company's line of zero-calorie, vitamin-enriched and flavoured waters exclusively manufactured and distributed by Cott to selected new and existing customers in the US through its retail channels. The agreement also included raw materials procurement, research and development, freight management and retail inventory management.

On the people front, in July the European Federation of Bottled Waters (EFBW), which represents around 600 producers of bottled water across Europe,  confirmed the re-election of its current president, Hubert Genieys, for a further term. Genieys, senior VP of corporate communications and sponsoring at Nestlé Waters, will continue in the role for a further two years. 

The year closed with the announcement that the longstanding CEO of Nestle Waters North America (NWNA), Kim Jeffery, would be standing down. NWNA announced that Tim Brown will take over as CEO in February next year. Jeffery, who had been CEO for some 20 years, will assume the position of non-executive chairman.

To capitalise on healthy marketing attributes, sports sponsorships have traditionally featured prominently in the marketing mix for water brands, and it appears at least one company has the knack of picking winners. In January, Nestle Waters UK announced that it was extending the partnership between its Buxton brand and the England cricket team for a further two years. By the end of the year, England's cricketers were carrying all before them by achieving their first series win in India for 27 years.