Health, sustainability and innovation were the watchwords for bottled water in 2015

Health, sustainability and innovation were the watchwords for bottled water in 2015

As 2015 draws to a close, we are starting our review of the year in the global drinks industry. First up, Ben Cooper looks back at the last 12 months in the bottled water category.

Arguably the most notable news item concerning the bottled water sector this year was not a launch or a merger or a new campaign, but the publication in April of a report from market analysts Canadean, forecasting that 2015 will see global consumption of packaged water overtake carbonated soft drinks. The Canadean report predicted that packaged water volumes will reach 233bn litres in 2015, while CSDs, growing at a slower rate, will only reach 227bn litres. The report speaks to the progress the sector has made in recent years, with global volumes rising from 170bn litres in 2010 to 215bn litres in 2014. In fact, the bottled water sector has already surpassed CSDs in Asia and West Europe.

Consumers seeking healthier diets has clearly been a growth driver for bottled water in many markets this year, not least in Mexico, where a tax on sugar-sweetened beverages was introduced in January 2014. In February, just-drinks soft drinks and bottled water commentator Ray Rowlands wrote that bottled water had been "a major beneficiary" of the new tax.

While health attributes might be fuelling growth, the bottled water sector has not been immune from criticism regarding sugar levels in some specialty products. Most notably, Coca-Cola's Vitaminwater brand in the US was the subject of a class action brought by consumer campaign group the Center for Science in the Public Interest (CSPI). It was announced by CSPI in October that Coca-Cola had settled the lawsuit, agreeing to include the words "with sweeteners" in two places, where the brand's name appears, and no longer claim that the product provides health benefits, with Coca-Cola also agreeing to pay costs of around $2.7m.

Meanwhile, Nestle Waters faced criticism from campaigners on environmental grounds. The bottled water sector has attracted considerable debate regarding the intrinsic environmental sustainability of packaging water. There are many in the activist and campaign community who feel that ultimately the bottling and shipping of water is an unsustainable practice in itself, particularly given the strain on water resources that will be created by climate change in many regions of the world. The ongoing drought in California has caused huge problems for agriculture and has arguably provided a foretaste of things to come.

In October, Nestle Waters was forced to defend its use of water resources, after environmental groups filed a lawsuit against US park authorities, alleging that the US Forest Service (USFS) has allowed Nestle Waters to take millions of gallons of water from the San Bernardino mountains using a permit that expired more than 25 years ago. In a statement to just-drinks, Nestle Waters stressed that it was not a party to the lawsuit and that its permit for the pipeline "remains in full force and effect" under federal law. "We are working diligently with the USFS on the renewal of the permit," it added. "It is in the best interests of all parties to move the process forward."

Underlining sensitivities around sustainability, the European Federation of Bottled Waters (EFBW) issued a statement on World Water Day, which took place on 22 March, stating its members are "committed to ensuring that natural mineral waters and spring waters are protected efficiently and abstracted responsibly". The EFBW also stated that the industry "has a long standing commitment to preserving resources and continues to play a leading role in promoting recycling, reducing its packaging, and minimising energy and water consumption".

A report published in January by environmental campaign groups As You Sow and the Natural Resources Defense Council suggested progress on sustainable packaging by beverage companies in the US leaves a lot to be desired, but the bottled water sector arguably came out a little better than some categories, thanks to a relatively good showing from Nestle Waters. The company was among four of the 11 beverage companies examined to have its packaging policies rated as "better practices". It has also been commended for its support for Extended Producer Responsibility (EPR) legislation in the US.

Aside from consumers migrating from CSDs because of health concerns, another key growth driver for the water sector is new product innovation, and there were some notable examples in 2015.

In May, Nestle Waters added Perrier L'Orange to its range in the US, while in July, Powerful Water Co launched what it claims to be the UK's first low-calorie and low-sugar sparkling energy water. The new product was launched in three flavours: Coconut & Lime, Citrus & Zest and Cranberry & Apple. Elsewhere, Agua Brands, founded by Carol Dollard, formerly chief operating officer at Glaceau, launched a range of naturally-flavoured waters in September, under the Agua Fruit Essence brand, containing zero calories and no sweeteners and enhanced with electrolytes. Agua Fruit Essence comprises six flavours: lemon & cucumber, lime & mint mojito, peach & mango, grape & watermelon and orange & pineapple.

Perhaps the most significant new product area in the water sector in recent years has been coconut water and 2015 saw continued interest and activity in this category. Among the notable new launches this year were MightyBee's introduction of Virgin Coconut Water in the UK in April, and Coca-Cola's addition of Innocent Coconut Water in May, also in the UK. Global coconut water consumption has risen by 60% in the last ten years, driven mostly by Asia and Latin America, with growth expected to remain in double digits in 2015, according to new Canadean research published in September. According to Canadean, 587m litres of coconut water were sold worldwide in 2014, with growth of 15% forecast for 2015.

There has also been innovation and dynamism in evidence in the tonic water sector, receiving a boost from increasing consumption of gin. In April, Scottish soft drinks maker Summerhouse Drinks launched a tonic water particularly to target the growing demand for gin. In particular, the UK premium tonics and mixers specialist Fever-Tree, founded nine years ago, has been driving growth at the premium end of the mixers market. In March, the company reported a return to profit for the 12 months of 2014 on the back of strongly rising sales, and in November unveiled its first TV ad.

According to Canadean, the global market for tonics and mixers stands at around 5bn litres per year, and is growing. Last year, mixer consumption rose by 4% on the back of rising spirits consumption. In September, Fever-Tree announced the appointment of a former Moet Hennessy executive, John Moreira, as part of a move to drive international growth.

There was also packaging innovation in evidence in the packaged water sector, notably the move into slimline cans. In April, Talking Rain Beverage launched its Sparkling Ice flavoured water brand in slimline cans, following moves by a number of other companies responding to demand for smaller packaging sizes

Perhaps the most glamorous new launch in the bottled water sector in 2015, however, was the introduction in September by Danone of two limited-edition Evian bottles designed by US fashion designer Alexander Wang. The 75cl bottles feature Wang's signature bar-code design - one white and one black – and were launched across global markets from November. Danone said the designs "make a statement about Evian purity in a very contemporary way".

Looking to the near-term, Canadean forecasts that emerging markets will be the main growth driver in the future. Germany, Italy, France and Spain are expected to see a compound annual growth rate (CAGR) of merely 1% between 2015 and 2020, against growth of 21%, 12% and 8% in India, China and Brazil respectively. The US, however, is expected to retain its position as the second largest packaged water market in volume terms in 2015, owing to consumers' continuing soft drink concerns on health grounds.

For just-drinks' full review of 2015, click here