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BOTTLED WATER CONFRONTS PERSISTANT CHALLENGES, NEW REPORT FROM BEVERAGE MARKETING CORPORATION SHOWS

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Both volume and dollars decline a second time

NEW YORK, NY, July 2010: Until the mid–2000s, the U.S. bottled water market seemed unstoppable. It had achieved considerable stature, second only in size to the carbonated soft drink category, yet continued to grow quickly and forcefully. In 2008, however, bottled water market suffered an unprecedented setback, and another, larger decline in volume occurred the following year.

Prior to the economic recession that was the primary reason for the end of bottled water's growth streak, rapid volume growth characterized the category, as reported in the latest edition of Bottled Water in the U.S., Beverage Marketing Corporation's annually published analysis of the market. Bottled water volume achieved double–digit percentage growth rates in two years and advanced at rates close to that level in several others. After growing by 10.8% in 2005, for instance, bottled water volume enlarged by 9.5% in the following year.

The story changed at the end of the decade, however. Bottled water volume declined by 1.0% in 2008 and by 2.5% in 2009. Furthermore, producers' revenues declined in both 2008 and 2009 as well. Bottled water wholesale dollar sales first exceeded $6 billion in 2000. By 2007, they topped $11.5 billion. Category sales declined to $11.2 billion the following year and to less than $10.6 billion in 2009.

In 2009, the top three bottled water companies in the United States — Nestlé Waters North America (NWNA), PepsiCo and Coca–Cola — accounted for 57.5% of total wholesale dollar sales. NWNA remained the largest bottled water company in the country, with $3.8 billion in sales. NWNA, the purveyor of major regional brands such as Poland Spring, Arrowhead, Deer Park and Zephyrhills, claimed 35.4% of total bottled water sales in 2009. The company's Pure Life label was one of the few to buck the downward tendency afflicting the market. The brand's wholesale dollars grew by 18% in 2009. With just one brand — Aquafina — Pepsi–Cola accounted for 11.1% of the market in 2009. Coca–Cola's Dasani brand rang up $1.2 billion in sales in 2009. Coke also manages or owns several current and former Danone brands in the United States.

Domestic non–sparkling water remained the most substantial segment of the U.S. packaged water industry. Domestic non–sparkling water's 8.1 billion gallons represented 96.1% of total volume in 2009. As a whole, domestic non–sparkling declined at a slower rate than the overall bottled water market.

The non–sparkling category includes diverse parts that had very different results. In 2009, all but one of its segments declined, though rates varied considerably. Throughout most of the 1990s and 2000s, the retail premium PET segment — consisting of still water in single–serve polyethylene terephthalate bottles — drove the overall category's development. Indeed, the PET component enlarged by a double–digit percentage rate 16 consecutive times through 2007. Growth slowed markedly in 2008 before it disappeared in 2009. Yet PET's 0.7% reduction was far less than the loss measured for bottled water in general. Besides, PET volume in 2009 of almost 5.2 billion gallons stood more than 4.1 billion gallons higher than it had in 1999, and its share of total bottled water swelled from 24% to more than 61% during that 10–year period.

Retail bulk volume growth slowed as more and more consumers selected convenient PET multipacks in large format retail channels instead of larger (1 to 2.5 gallon) sizes. Its share eroded from nearly one–quarter of the category volume at the beginning of the century to less than 12% by 2009, largely as a result of competition from PET. Direct delivery also confronted intramural competition from handy, portable PET bottles. The segment, which comprised the largest of them all as recently as the mid-1990s, accounted for 14% of total volume by the end of the 2000s. U.S. home- and office-delivery (HOD) volume slipped from 1.3 billion gallons in 2008 to less than 1.2 billion gallons in 2009.

The relatively small, essentially regional vending segment involving refillable jug containers achieved growth late in the decade after several years of contraction. Its low cost during economic hard times undoubtedly explains vending's rebound.

The two segments outside the domestic non–sparkling category both saw declines in 2009. The imported water segment, the smallest of them all, is prone to fluctuations. In the 2000s, it registered double–digit percentage growth in some years, and equally sizeable contractions in others. After one of those up years in 2007, imported water's volume fell sharply in 2008 and then plummeted precipitously in 2009. Sparkling dipped far more modestly.

Despite the persistent challenges facing bottled water recently, longer–term developments point to a continued thirst for bottled water. Americans upped their annual consumption of it by more than 11 gallons from 16.2 gallons per person in 1999 to 27.6 gallons in 2009. As usual, domestic non–sparkling water accounted for almost all per capita bottled water consumption. Sparkling water and imports each represented less than one gallon per person. In the key PET portion, average intake moved from less than 5 gallons in 1999 to almost 17 gallons 10 years later.

New York City–based Beverage Marketing Corporation is the leading research, consulting and financial services firm dedicated to the global beverage industry.

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For immediate release

U.S. BEVERAGE INDUSTRY LOST BILLIONS IN RECESSION, BEVERAGE MARKETING CORPORATION REPORT CONCLUDES

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Liquid refreshment beverage categories especially hard hit

NEW YORK, NY, July 2010: The U.S. beverage industry lost the equivalent of almost $12 billion in retail sales to the recession of 2008 and 2009, a new report from Beverage Marketing estimates. Most beverage categories underperformed original projections that the company calculated prior to the downturn, as outlined in the newly released study The U.S. Beverage Industry Confronts Economic Challenges.

The United States entered into a recession in December 2007 and by most accounts it ended in July 2009. The souring of the economy for these 20 months affected all sectors, beverages included. The negative impact can be observed in the differences between predicted and actual retail sales.

Most beverage categories had 2009 retail sales that were less than those first projected by Beverage Marketing in spring 2008. Overall retail sales grew by 2.0% in 2009. They were projected to grow by 3.3%. This resulted in a shortfall of $5.9 billion in 2009. An identical shortfall occurred in 2008. With 2008 and 2009 in aggregate, the industry lost an estimated $11.8 billion in sales due to the weakened economy. Most of the impact was on liquid refreshment beverages, which lost an estimated $11.0 billion in retail sales in the last two years. For instance, the formerly vigorous bottled water segment, previously on track for continued growth, saw retail sales decline by nearly 6% in 2009, and category off–shoot value–added water decreased even more precipitously. Of all the liquid refreshment beverage segments, sports beverages suffered the harshest setback, with retail sales contracting by nearly 16% in 2009.

Consumers in some cases traded down to less expensive products and in many categories private label has grown. Bottled water has seen a reduction in price per case. Even private label waters lowered their price in the last two years. Not surprisingly, high–end imported waters are struggling. In the carbonated soft drink and fruit beverage categories, companies have remained relatively firm in their pricing despite volume contractions. Put simply, higher commodity costs means companies often must choose between volume and profit. Most opted for the latter, including Coke and Pepsi, who sought to avoid the rampant discounting of carbonated soft drinks that occurred in supermarkets in the 1990s. Private label is growing in no small part due to the improvements in the packaging and formulation of private label products over the past two decades. As a result, premium beverages like imported beer, high–end wine, enhanced water, sports and energy drinks have been hurt the most by the economic downturn.

New York City–based Beverage Marketing Corporation is the leading research, consulting and financial services firm dedicated to the global beverage industry. The U.S. Beverage Industry Confronts Economic Challenges is part of its Focus Reports series of concise reports on emerging beverage segments or on topics of particular interest to the beverage industry.

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For immediate release

THE U.S. LIQUID REFRESHMENT BEVERAGE MARKET DECLINED BY 2.7% IN 2009, BEVERAGE MARKETING CORPORATION REPORTS

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Energy drinks and ready-to-drink tea enlarged;
carbonated soft drinks shrank again

NEW YORK, NY, 24 March 2010: The U.S. refreshment beverage market contracted by 2.7% in 2009, based on preliminary data from Beverage Marketing Corporation. This represented the second consecutive year of declining volume and a more intense decrease than the 2.1% dip registered in 2008, which had been the first down year on record. The weakened economy once again affected the market. Even so, certain key beverage types and brands continued to advance even as most of the larger categories lost volume.

Reflecting consumer demand for healthier and more functional beverages, ready-to-drink tea and energy drinks both grew in 2009. A functional element alone was not enough to sustain growth in challenging circumstances, however, as the atypical decline in sports beverage volume demonstrates. Moreover, energy drinks' 0.2% growth in 2009 was much slower than it had been in recent years. Carbonated soft drinks remained by far the largest liquid refreshment beverage category, but they continued to lose both volume and market share. Yet certain soda trademarks, such as Dr Pepper, did achieve growth.

Carbonated soft drinks held five of the top ten positions in the rankings of trademarks by volume, including four of the first five spots. Those were joined by three bottled water trademarks, including Nestlé Pure Life in the Nestlé Waters North America (NWNA) brand's second appearance on the list of leaders. The biggest sports beverage in the United States still stood as the fifth biggest liquid refreshment beverage trademark despite softness in its category. The only fruit beverage trademark in the group stood in seventh place in terms of volume.

Although bottled water had three trademarks among the top ten for the second time in 2009, the once reliably vigorous category also registered a second decline in volume. In the value-added water category, however, Coca-Cola's Smartwater brand realized substantial 33% growth, while PepsiCo's SoBe Lifewater Zero enjoyed a successful introduction. While not specifically measured for this study, tap water was likely one of the winners in 2009, driven by cost-conscious consumers.

The performances of the leading companies' liquid refreshment beverage portfolios reflected overall market trends. Coca-Cola s total volume dipped by 3% in 2009, while Pepsi's was off by 7.8% compared to the previous year. However, even in the hard-hit carbonated soft drink category, some brands had strong showings. The Coke Zero trademark grew by 20%, for instance, and Diet Mountain Dew enlarged by 4.5% in 2009. Crush, a Dr Pepper Snapple Group (DPSG) brand, bolstered by a move into the Pepsi-aligned bottling system, grew by an especially forceful 375%. Diet Dr Pepper swelled by 4.7%, and total DPSG liquid refreshment volume increased by 3.5%.

Four companies account for all of the top-ten refreshment beverage trademarks. Pepsi-Cola had five brands and Coca-Cola had three while both DPSG and NWNA had one. Nestlé Pure Life achieved by far the fastest growth among leading trademarks in 2009. Indeed, DPSG's Dr Pepper was the only other trademark to realize enlargement during the year. Aquafina and Gatorade (from Pepsi) and Dasani (from Coke) were the fastest growing leading trademarks in 2007, but each declined in 2008 and again in 2009. The Coca-Cola trademark (including all brand variations) held the top spot among liquid refreshment beverages. However, its volume, like the standard carbonated soft drink market as a whole, declined.

"Although 2009 was the second year in a row of unusual weakness in liquid refreshment beverages' performance, the worst may be over," said Michael C. Bellas, chairman and CEO, Beverage Marketing Corporation. "Beverages are likely to be one of the first categories to benefit with a job-led economic recovery because they represent an inexpensive form of pleasure."

New York City-based Beverage Marketing Corporation is the leading research, consulting and financial services firm dedicated to the global beverage industry.

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For immediate release

BOTTLED WATER PERSEVERES IN A DIFFICULT YEAR,
NEW DATA FROM BEVERAGE MARKETING CORPORATION SHOW

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Certain brands continue to see strong growth

NEW YORK, NY, 20 April 2009: Although it performed atypically in 2008, bottled water remains a beverage industry phenomenon. Buoyed by some major liquid refreshment beverage trademarks, it stands as the second largest beverage type in the U.S. market and for many years also ranked as the category with the most forceful growth. Only carbonated soft drinks have greater volume, but they have been declining, in no small part because of bottled water's vigorous ascent.

Developments among leading companies indicate U.S. consumers continued thirst for bottled water. The largest bottled water company, Nestlé Waters North America (NWNA), experienced stronger than average growth and enlarged its market share in 2008. The company's share of bottled water volume advanced from less than 30% in 2006 to almost 33% two years later. DS Waters Enterprises, the second largest bottled water company in terms of volume, also outperformed the overall bottled water marketplace in 2008, as did Crystal Geyser.

The leading companies — NWNA, Pepsi, Coca–Cola (with its Dasani brand as well as the Danone brands it markets), DS Waters and Crystal Geyser — accounted for almost 60% of volume and more than 70% of wholesale dollars in 2008.

Rapid volume growth characterized bottled water for most of the current decade, as chronicled in the latest edition of Beverage Marketing Corporation's comprehensive Bottled Water in the U.S. report. Bottled water volume achieved double–digit percentage growth rates in two years and advanced at rates close to that level in several others. For example, bottled water volume grew by 10.8% in 2005 and then enlarged by 9.5% the following year.

Domestic non–sparkling water, the largest part of the U.S. packaged water industry, consistently outperforms other segments. Domestic non–sparkling water's 8.4 billion gallons represented 96% of total volume in 2008. As it has for years, the retail premium PET segment — consisting of still water in single–serve polyethylene terephthalate bottles — continued to drive the overall category's development. PET volume increased from 1.4 billion gallons in 2000 to 5.2 billion gallons eight years later, boosting its share of total bottled water volume from 29% to more than 60%. Before the slower 0.3% growth recorded in 2008, the PET component enlarged by double–digit percentage rates 16 consecutive times through 2007.

The PET segment includes many of the most prominent bottled water brands, some of which bucked the trend toward sluggish growth afflicting the liquid refreshment beverage market in 2008. Although PepsiCo's Aquafina brand remained number–one when measured in producers' revenues, with wholesale dollar sales greater than $1.3 billion, NWNA's Nestlé Pure Life sustained remarkable double–digit volume growth in 2008 to emerge as the largest bottled water brand when measure in gallons. The brand's share of volume shot from less than 10% in 2007 to nearly 12% in 2008. Only two other brands, Aquafina and Dasani, registered double–digit market shares. Further, while Aquafina dollars declined, Pure Life wholesale dollars saw significant growth during the year. NWNA's Poland Spring grew in both sales and volume as well. Its share of PET segment volume reached 8.6%, while its share of dollars rose to 9.0%.

While total bottled water volume did not realize growth in 2008, its 1.0% dip reflected forces affecting the beverage marketplace generally and did not suggest the start of an ongoing diminishment in demand for bottled water. The weakened economy affected the industry as a whole. High energy and commodities costs had been a challenge during much of the year. Unprecedented input costs relating to multiple aspects of beverage manufacturing resulted in higher prices for consumers, which affected all liquid refreshment beverage segments. Significant portions of the country saw unusually cold or wet weather, which dampened demand for cold drinks. Consumer concerns about the environment may have affected some buying decisions, particularly as a result of campaigns targeting bottled water, though this appears not to be a major factor.

In another departure from previous years, producers' revenues declined in 2008. Bottled water wholesale dollar sales first exceeded $6 billion in 2000. By 2007, they topped $11.5 billion. However, category sales declined to $11.2 billion the following year.

Changes in average intake indicate the level of ongoing consumer interest in a product they perceive as a healthful alternative to other beverages. Americans upped their annual consumption by nearly a dozen gallons from 16.7 gallons per person in 2000 to 28.5 gallons eight years later. During the same period, per capita consumption of carbonated soft drinks dropped by more than six and a half gallons. With these sorts of numbers, bottled water proved itself to be the key contributor to growth in liquid refreshment beverage volume.

A detailed analysis of the 2008 bottled water market based on Beverage Marketing data appears in the April/May 2009 edition of Bottled Water Reporter, a publication of the International Bottled Water Association (IBWA). New York City–based Beverage Marketing Corporation is the leading research, consulting and financial services firm dedicated to the global beverage industry.

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For immediate release

SMALLER CATEGORIES STILL SAW GROWTH
AS THE U.S. LIQUID REFRESHMENT BEVERAGE MARKET SHRANK BY 2.0% IN 2008, BEVERAGE MARKETING CORPORATION REPORTS

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Energy drinks and enhanced waters advanced; carbonated soft drinks again declined

NEW YORK, NY, 30 March 2009: In challenging times, the U.S. refreshment beverage market contracted by 2.0% in 2008, according to Beverage Marketing Corporation. This represented the first volume downturn on record. The weakened economy affected the market during the year. However, beverages still performed better than many other industries, such as automobiles and the financial sector. Indeed, several beverage types continued to shine.

During the first several years of the 21st century, newer beverage categories have been principally responsible for what growth has occurred in the non–alcoholic marketplace. Carbonated soft drinks accounted for close to half of total liquid refreshment beverage volume. However, their market share eroded slightly, as it has for several years. Although the marketplace as a whole lost volume in 2008, energy drinks, enhanced bottled waters and ready to drink coffee grew. While conventional carbonated soft drinks remain the most popular category on a volume basis, innovative and functional beverages altered the industry landscape in recent years.

Carbonated soft drinks held five of the top ten positions in the rankings of trademarks by volume. Those were joined by three bottled water trademarks, including Nestlé Pure Life in the Nestlé Waters North America (NWNA) brand's debut on the list of leading brands. The biggest sports beverage in the United States ranks as the fifth biggest liquid refreshment beverage trademark. The sole fruit beverage trademark in the group stood in seventh place in terms of volume.

Although bottled water had three trademarks among the top ten in 2008, up from two the previous year, the category also registered an unprecedented decline in volume. Looking for ways to reduce spending, some consumers may have refilled water bottles with tap water instead of buying new ones.

The performances of the leading companies' liquid refreshment beverage portfolios reflected the downward tendency characterizing the marketplace as a whole. Coca-Cola's total volume dipped by 2% in 2008, while Pepsi's was off by 5% compared to the previous year. However, even in the hard hit carbonated soft drink category, some brands had strong showings. The Coke Zero trademark grew by 25%, for instance, and Pepsi Max enlarged by 45% in 2008.

The big companies have the leading refreshment beverage trademarks; Pepsi–Cola (with five brands), Coca–Cola (with three), the Dr Pepper Snapple Group (with one) and NWNA (with one) account for all of the top-ten trademarks. Nestlé Pure Life achieved by far the fastest growth among leading trademarks in 2008. Indeed, Pepsi's Mountain Dew was the only other trademark to realize enlargement during the year. Aquafina and Gatorade (from Pepsi) and Dasani (from Coke) were the fastest growing leading trademarks in 2007, but each declined in 2008. The Coca–Cola trademark (including all brand variations) held the top spot among liquid refreshment beverages. However, its volume, like the standard carbonated soft drink market as a whole, declined.

"In today's uncertain climate, consumers seek value," said Michael C. Bellas, chairman and CEO, Beverage Marketing Corporation. "Responsive beverage companies are looking for ways to give it to them."

Some smaller categories, especially those emphasizing functional benefits, saw solid growth in 2008. Energy drinks volume increased by 9.0%. Flavored and enhanced water grew by 8.3%. The ready–to–drink coffee segment also advanced. However, none of these categories has a brand big enough to stand among the top ten.

New York City-based Beverage Marketing Corporation is the leading research, consulting and financial services firm dedicated to the global beverage industry.

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