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EXPORT MARKET RESEARCH CENTRE

Manufacturer Tips How to diversify, expand your markets, and stay ahead of the competition.

PORT EX

Market Potential What is the best potential new market for T&T’s bottled water exporters to tap into?

GUIDE

Threats to the Industry What are the main threats to the bottled water industry in T&T and worldwide?

SEPTEMBER 2013

ISSUE 1

Spotlight on the

Bottled Water Industry Bottled water consumption has grown exponentially over the past ten to fifteen years. This growth has taken place globally particularly in Europe and North America. Between 1998 and 2007, the global bottled water market generated a compounded annual growth rate of 9% and a whopping 108 billion litres of new consumption. It was one of the biggest drinks booms ever seen. This ascension of bottled water came undone by a double whammy of the financial meltdown and mounting environmental concern over non-reusable plastic bottles. In North America, for example, the sector leaked over 200 million litres in 2009 compared with a gain of 3 billion litres only two years earlier. This begs the question “What does the future hold for the bottled water industry?" The diagram opposite shows a simple but detailed breakdown of the bottled water industry. It shows the various types of water including the traditional still and carbonated bottled waters as well as the newer niche markets that have emerged which are the flavoured and functional bottled waters. It then depicts the various types of still bottled water from spring water to distilled water, mineral and purified water. This provides manufactures with a holistic snapshot of the bottled water industry and potential new markets to venture into.

Based on 2010 statistics from Euromonitor International, still bottled water remains the largest consumed category with 171 billion litres. This was followed by carbonated bottled water with 31 billion litres consumed in 2010. Flavoured and Functional bottled waters had the least consumption with 8 billion and 5 billion respectfully. Although still bottled water had the largest consumption, it was the niche categories of functional and flavoured bottled water that experienced the strongest percentage growth over the 2005-2010 period. The main reason for this is due to the change in lifestyle habits and growing consumer affinity with “better for you” beverages. Carbonated bottled water showed the weakest growth over the period and this again confirms the change in consumer behaviour towards consuming healthier beverages.

BOTTLED WATER STILL BOTTLE WATER

SPRING BOTTLE WATER

CARBONATED BOTTLE WATER

DISTILLED BOTTLE WATER

FLAVOURED BOTTLE WATER FUNCTIONAL BOTTLE WATER

MINERAL BOTTLE WATER PURIFIED BOTTLE WATER 1


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Global Imports of Water USD ‘000 4000000 3000000 2000000 1000000 0 2003

2004

2005

2006

2007

Spotlight on the

Bottled Water Industry (Continued) The top importing countries of water are as follows: China, USA, Japan, Germany, Belgium, UK, France, Netherlands, Switzerland and Canada. Together these 10 countries account for approximately 16% of total imports of bottled water. Based on the graph below there has been approximatly 50% increase in the level of bottle water being imported. The global economy is now recovering from

2008

2009

2010

2011

2012

the effects of the 2008 recession which can be seen in the upward trend in the level of imports from 2009 to 2012. The bottled water industry is an industry of major growth and potential but in order for local manufacturers to benefit from this growth there is a need for in-depth research and development. This will allow manufacturers to tap into the niche markets which are the emerging and profitable segments of the industry. It is important to ensure that local manufacturers are on par with the latest trends and developments enabling them to grab hold of new opportunities as they arise and are not left in the dark.

Areas that Bottled Water Manufacturers can look at: 1. Health and lifestyle habits The trends driving the growth in the bottled water industry can broadly be divided into health and lifestyle. The ever increasing focus by manufacturers and consumers on health awareness is well documented as consumers are increasingly demanding products offering health benefits and are moving away from those which are deemed detrimental to health. This is driven by widespread media coverage, the dissemination of scientific information through the internet and a general shift from remedies to prevention. The increase in working hours, stress and a perceived reduction in free time and exercise has put intense pressure on many workers in the developed and developing world, this has boosted the sales of these health and wellness drinks. The way health trends and altering lifestyles interact is often nuanced as consumers chose different products for various functions. Energy drinks and sports drinks have seen sales boom as workers opt for energy boosting offerings, even though these are usually packed with sugar. Other consumers opt for functional products

with health benefits such as relaxation aides, slimming or vitamin enhancements. Additionally, from 2003-2008, the global population over 65 years of age grew 13%, representing the largest increase for any age group. This is seen as another catalyst for the growth in functional products since customers are looking for beverages that will aid them in the challenges faced during the aging process. This information will be helpful with respect to packaging and targeting the right market. Functional products with health benefits will appeal to a more mature market and this will heavily impact on the advertising and packaging of the product. Packaging should clearly state the ingredients and emphasize the health benefits of these ingredients in order to attract the target market. Whereas, sports and energy drinks are geared toward a younger generation, mainly teenagers and young adults who are seeking a burst of energy and less likely to be concerned with the high sugar and caffeine content. Packaging should therefore be eye catching and innovative to capture the attention of this younger generation.

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Areas that Bottled Water Manufacturers can look at: 2. Moving away from purified water towards spring and mineral water Purified and distilled bottled water is the norm by water manufactures in Trinidad and Tobago and the Caribbean at large. However, because the aim of most governments is to provide clean and purified water to its citizens, low cost of household water filtration systems that are being sold on a large scale poses a threat to purified and distilled water producers. It is imperative that water manufacturers diversify their interests and source new means of retaining and expanding their markets. Mineral and spring bottled water are becoming increasingly popular worldwide due to a shift towards a healthier lifestyle by customers. Purified water is water that comes from any source, but has been purified to remove any chemicals or contaminants. Similarly, distilled water is a type of purified water which has gone through a rigorous filtration process to strip it not only of contaminants, but any natural minerals as well. Spring water is defined by the Canadian Bottle Association as natural water which shall be collected from an underground source and have total dissolved solids content not exceeding 500 ppm. Spring water is characterized by its purity at source, its content of minerals and trace elements. Magnesium, calcium, sodium and potassium are the main minerals found in spring water.The World Health Organization stated that the incidence of osteoporosis and heart diseases might be notably reduced by drinking water with reasonable concentrations of magnesium and calcium.

The properties of spring and mineral water can be seen as a major differentiator as compared to regular distilled or purified water and attract the attention of health conscious customers.

3. Flavoured Water Bottled water on the whole is “bland” with no taste and with a wide range brands of bottled water on the shelves of supermarkets, something is needed to help differentiate the product and capture the attention of potential customers. A growing trend both globally and in Trinidad and Tobago, is the popularity of flavoured bottled water. A process can be applied to all types of water: mineral, spring, distilled and purified water where they are infused with real fruit juice or artificial fruit flavouring to give the water a refreshing and improved taste. These flavourings change the taste of the water without affecting its calorie content thus making it appealing to health conscious customers and improve the bland taste for others. Bottle water manufacturers in Trinidad and Tobago can capitalize on the country's rich local culture and tradition by infusing the bottled water with refreshing Caribbean flavour such as coconut, mango, passion fruit, papaya, sapodilla among others. This will offer customers a new taste that is representative of the Caribbean and not provided and distributed by any other manufacturer. 

4. Product differentiation: Bottle Design The main difference among various brands of bottled water is the packaging of the product. Packaging needs to be innovative, creative and eye catching to capture the attention of the potential buyers. Therefore, proper thought and research should be executed at the product design stage. For instance, companies can design a water bottle that may give the appearance of being “high end” or expensive, to capture an exclusive buyer market or simply produce a sturdy and durable water bottle that can be re used several times before disposal. This feature of durability can attract a large market of buyers while reducing the amount of waste created from the constant disposal of non-durable bottles. A proper cost benefit analysis will have to be performed to determine if this product-design avenue is feasible while achieving some level of profits for the company.

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Environmental impact

Market Potential Bottled water is an extremely competitive market based on the developments of the local water industry. Exporting water to the US and Europe maybe a very difficult and unwise task, as these markets are already dominated by Coca Cola’s ‘Dasani’, Pepsi’s ‘Aquafina’, Nestle’s‘Zepherhills’, Poland Springs, Fiji, Evian etc. Most of these waters are even imported into Trinidad and Tobago. Therefore, a potential market for Trinidad and Tobago's bottle water manufacturers to explore is CARICOM. By targeting CARICOM countries, manufactures will benefit from the free trade movement of goods among the countries which will help control cost of shipping as opposed to shipping to the US and UK markets where shipping cost would inflate prices and reduce the price competitiveness of the products being sold. CARICOM accounts for less than 1% of the world’s total import value. Although this is a small market, it will provide Trinidad and Tobago manufacturers with an avenue to export their product and increase their brand awareness. This is important because in foreign markets, brand awareness builds brand loyalty and this is one of the major factors that influence a customer’s decision to purchase a product. Also, tapping into a market with a culture similar to that of Trinidad and Tobago will allow manufactures to target persons with similar tastes and preferences. This can lead to an easier transition into these markets.

Threats There are two main threats to the bottled water industry both in Trinidad and Tobago and worldwide. These are as follows:

Popularity of purified tap water As stated earlier, governments are aiming to provide clean and purified water to citizens and with the invention of low cost water filtration systems, individuals are able to have access to purified tap water. This is seen as a threat because customers may not demand a product that they have access to “freely” at home. Therefore, there is a need for water manufacturers to diversify their products and offer one that customers will be interested in purchasing. Moving from purified and distilled bottled water to spring and mineral water could be a possible option to overcome this hurdle. Also, re-examining the possibility of producing flavoured water with Caribbean fruit flavours may be another alternative that companies can explore.

Many consumers would agree that over-use of plastic packaging poses a serious environmental risk. Presently, for the soft drinks industry, innovation in more environmentally friendly packaging is one of its biggest and most urgent challenges. The bottled water industry had been a major contributor to the carbon footprint and this is seen as a disincentive to many customers to purchase water in plastic bottles. It is important for companies to show their social responsibility to the environment and they can do this by redesigning their water bottles to be more environmentally friendly. Some alternatives that can be used are materials that can be easily recycled or more plant based materials. Another alternative that companies can consider is the use of boxed water. This comprises of 90% renewable resources and in some cases leave behind a carbon footprint 80% lower than its plastic counterparts. The Boxed water container is made from responsibly harvested trees. In addition, the boxes are shipped flat to the filler, so it takes up about 5% of a truckload, verses five truckloads for a similar number of plastic bottles, saving a significant amount of fuel for at least one leg of distribution. They are recyclable after they are used.

Conclusion The bottled water industry seems to be an industry of major growth and potential. It is important for local bottled water manufacturers to stay abreast of industry trends and developments to be competitive and one step ahead of their competition. It is therefore important for manufacturers to tap into the new niche markets that are becoming very popular with customers. These segments include functional bottled water, energy drinks and flavoured bottled water. These trends developed over time because of individuals’ active and healthy lifestyles. Product diversification is vital to manufacturers to ensure their survival in the market, moving away from purified and filtered water to spring and mineral water is important in meeting the varying needs of customers. Spring and mineral water contain a variety of natural minerals that are good for consumption. Additionally, companies need to engage in in-depth research and development to help design a water bottle that may attract the attention of customers and allow the product to stand out from the many competitors in the market. These are just some of the many approaches that bottled water manufacturers can engage in to remain ahead of the competition and become a competitive force to be reckoned with.

For more information on the Bottled Water Industry or any other industry please contact us at the EMRC. We would also be interested in getting feedback on this bulletin and suggestions of topics for future bulletins.

C O N TA C T U S research@exportt.co.tt 623-5507 ext. 380, 412

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exporTT Export guide newsletter sept'13