Palatinose - Soft Drinks International

Soft Drinks International – February 2011
Holdings Ltd, are in a virtual dead heat for second
position. Glaceau’s Vitaminwater is the
number one brand from both a volume and value
perspective.
Rounding out the top brands are SoBe from
PepsiCo, Active O2 from Adelholzener
Alpenquellen GmbH and Mizone from Danone.
Nestlé is notably missing from this category.
The charts highlight these results.
Valuable category because
not too high priced
Looking at both value and volume at a country
level also helps to provide insight on the potential
opportunity for functional bottled water. The
countries where bottled water is the most popular
with consumers, based on per capita volume,
are the US, Czech Republic, Japan and Germany.
All of these countries’ consumers have per capita
off-trade volume at least seven times the global
average in 2010. The next closest country, Israel,
has per capita consumption at less than half that
level.
In all four of these heavy consuming countries,
functional bottled water is a less costly alternative
than in other countries. In the four heavy
consuming countries the off-trade average unit
price per litre of functional drinks in 2010 is
almost three times the average unit price of still
bottled water. However, in the balance of the
world, the average unit price of the functional
variety is almost five times the price of still bottled
water. Although functional bottled water is
less expensive in these heavy consuming countries,
it is no longer a niche category from a value
perspective, comprising 22% of total bottled
water off-trade value in 2010 (compared to 9% of
total bottled water off-trade volume). This contrasts
with the rest of the world where functional
bottled water comprises 1% of off-trade volume
sales and only 2% of value sales, despite its
heftier price premium to the heavy consuming
markets.
German case study
– the value of brand image
Nowhere is the impact of a volume vs. value perspective
demonstrated better than in Germany.
Since 2005 off-trade volume growth has outpaced
value growth; volume growth by 177%
from 2005-2010 and value growing by an almost
as impressive 136%. The reason volume grew
faster than value is that private label volume
grew by 284% over this period and branded
players in total grew by 71%.
From a volume perspective private label is the
leading brand in Germany in 2010 and Active O2
is the leading branded player. In fact, private
label is so strong (total private label off-trade volume
share is almost 69% in 2010, plus almost 20
percentage points from 2005) that an individual
chain’s private label, Lidl from Lidl & Schwarz
Stiftung & Co KG, has almost as much volume
share as Active O2; 25.0% volume share in 2010
for Active O2 vs. 24.5% for Lidl.
Private label’s impact seems to be on the secondary
branded players. Active O2 has held its
own in volume share since 2005; gaining almost
five percentage points. However, all other branded
players did not fare as well losing over 20 percentage
points from 2005-2010.
FUNCTIONAL WATER
It is interesting to note that private label’s volume
share gains did not primarily come from the
private label share leader, Lidl, but from Aldi
and Ja (from Rewe Markt GmbH). While Aldi
gained over 14 percentage points in volume
share from 2005-2010 and Ja gained seven percentage
points, Lidl only gained about two percentage
points over this period.
The volume strength of private label helps to
demonstrate the value of a strong brand image.
Active O2 seems to be the only branded player
thriving in the tough off-trade environment.
Although total branded player off-trade volume
grew from 2005-2010, this was entirely driven by
Active O2. All other branded players actually
suffered significant volume losses over this time
period, experiencing a 44% volume decline.
The story in Germany is quite a bit different
from a value perspective. While private label in
total is the share leader based on off-trade volume,
based on value Active O2 is the clear leader
with almost half the market in 2010 and total private
label has under a 15% value share.
Demonstrating the value of a strong brand and
marketing investment, over the period from
2005-2010 Active O2 was able to grow off-trade
value share at a faster pace than volume share.
Implications
The price premium of functional bottled water
offers an attractive chance to manufacturers to
increase revenue growth in mature, more affluent
markets. These markets tend to have an aging
population that could find the product benefits
of functional bottled water appealing. While the
category will likely remain a niche from a volume
perspective, it can become an important
contributor to value growth. To realise the full
value potential of this category, manufacturers
will need to nurture a strong brand image to mitigate
the effect of low-priced competition. The
heavy consuming functional bottled water markets
suggest, though, there is a limit to how high
the price can go. Somewhere around two to three
times the average unit price per litre of still bottled
water seems to be the sweet spot. As
Germany demonstrates, a strong brand image can
be very rewarding and able to brave the
onslaught of private label. ■
35
Source: Euromonitor
Rob Walker is Senior FMCG
Analyst at Euromonitor
International.
rob.walker@euromonitor.com
www.euromonitor.com