Bottled water has increased markedly in popularity across Europe due to consumers being more health conscious, according to an industry analysis.

Frost & Sullivan said in its report European Bottled Water Industry: Investment Analysis that "the market earned EUR24.52bn (US$38.62bn) in 2006 and is expected to grow at a compound annual growth rate of 2.5% in Western Europe and 17.7% in Eastern Europe during 2007-2010".

Frost & Sullivan senior research analyst Ramakrishnan Sitaraman said: "Water is perceived to be an essential part of skin hydration and is linked strongly with health and beauty. Not surprisingly, bottled water manufacturers have built on this link by positioning bottled water as a skincare product."

The report claimed that the Eastern European market is "likely to outstrip the western market in growth due to its larger untapped potential".

Ramakrishnan added: "Companies are likely to be cost conscious, since water is a low-margin, penny business. They have begun to adopt financial management systems on a systems, applications and products in data processing (SAP) platform, which is considered one of the best practices in the industry."

The analysis warned that bottled water companies will have to put in place strategies to justify drawing freely available water from freshwater resources and selling them for a price. The report outlined that participants need to balance this with rising public awareness, adding that publishing statistics and demonstrating corporate social responsibility by using eco-friendly materials would help their course.