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Highlighting the Opportunity February 2014

zenithinternational

Liquid Water Enhancers 2014


Contents

The contacts at Zenith International in connection with this report are: Christina Fritts Consultant Zenith International Ltd., UK Tel: +44 1225 327918 cfritts@zenithinternational.com Karen Wells Senior Consultant Zenith International Ltd., UK Tel: +44 1225 327917 kwells@zenithinternational.com Simon Johnson Senior Consultant Zenith International Ltd., UK Tel: +44 1225 327919 sjohnson@zenithinternational.com

Section

Page

1: Methodology and definitions

4

2: Executive Summary

8

3: USA Market Overview

12

Macroeconomic and overall soft drinks consumption trends

4: Emergence of liquid water enhancers

19

5: Products in market

23

Key companies and brands, new product development, channels, distribution, packaging

6: Market drivers

31

Key drivers for manufacturers, retailers, consumers; product features and benefits

7: Consumers

37

Target demographic, household penetration, marketing, use

8: Consumption volume and value

40

Category volume, value, expenditure; market share by companies and leading brands

9: Opportunity Market Assessment

48

Benchmarking of global soft drinks markets

10: Opportunity Country Profiles

53

Macroeconomic overview, soft drinks consumption, insights and recommendations

11: Future outlook

69

Forecast of future trends in the category

12: Brand profiles

74

10 brand profiles

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Methodology & definitions Liquid water enhancers Definition: liquid water enhancer Product concentrates are becoming an increasingly common trend in retail. In general, smaller pack sizes provide added convenience for consumers, added value for retailers in terms of value by shelf space, and added margin for manufacturers. In modern-day retail, concentrates have a wide array of applications. A quick internet search for ‘liquid water enhancers’ will return a variety of product results, from soup stock to laundry detergent. Concentrated products have a long history in the beverages sector, in many forms that can be diluted in water. This includes frozen products, liquids (known as ‘squash’, ‘cordials’ or ‘syrups’ in some markets), powders and tablets. For the purpose of this report, Zenith is limiting the research scope of concentrated liquid water enhancers (LWE) as products that are mainly marketed to add flavour or function to water for consumption, known to some as ‘drops’ because of the limited amount of product required to produce the intended beverage. We define the category using the following criteria:  Liquid  Ambient  Super-concentrated – predominantly packed in 48ml format, though can range from 32ml-90ml packs, intended for dilution in up to 6 litres of water  Mainly merchandised among non-alcoholic drink mixes in retail. Variants with functional properties are included in market quantifications. Dispensing caps (liquid and powder formats), traditional squashes, cordials, syrups, frozen dilutables and tablets are excluded from the definition.

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Methodology & definitions Reference terms General definitions Other terminology used for market quantification in the report Soft Drinks Non-alcoholic drinks of all kinds, including carbonates, dilutables, bottled water (both plain and flavoured), juices and still & juice drinks. Carbonates Ready to drink beverages; regular including sparkling juice; low calorie and zero calorie; cola; lemon including lemonade; lemonlime; mixers including tonic and bitter drinks; orange; shandy; others including other carbonated fruit flavours and energy drinks. Bottled Water Still, sparkling water and lightly carbonated water; natural mineral water, spring water, bottled drinking water; bottled water in sizes of 10 litres and below. Flavoured water Sweetened with sugar, sweetener or unsweetened with added fruit essence; sparkling and still natural mineral, spring or bottled drinking water with added flavourings.

Sports drinks Drinks that enhance physical performance before, during or after physical/sporting activity. Sports drinks replace fluids and electrolytes/minerals lost by sweating and supply a boost of carbohydrate. Energy drinks Traditional glucose based energy drinks and functional or stimulation energy drinks which claim a particular energy boost from caffeine, guarana, taurine and ginseng or other herbs or some combination of these ingredients. Dilutables Squashes, cordials, powders and other concentrates for dilution to taste by consumers. Dilutables are expressed as ready to drink for ease of comparison where measuring overall soft drinks market figures/shares.

Flavoured functional water Flavoured waters with added functional ingredients, such as botanicals, vitamins, minerals, oxygen or other, as well as flavoured waters marketed with functional positioning. Ready to Drink Tea Tea-based or tea-flavoured beverages in ready to drink format.

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Executive Summary Key Findings

Overview  Super-concentrated, ambient, “pocket-sized” liquid water enhancers were first introduced to the US mass market by Kraft Foods Group when they launched fruit flavoured MiO Liquid Water Enhancers in March 2011

Market Overview

 In less than three years, the category has grown to an estimated US$412 million in value, with over 126 million units sold  The market for this category resides almost exclusively in the US. However, some major manufacturers such as Kraft Foods Group, Nestlé Waters North America and The Coca-Cola Company have distribution in other markets

 A number of companies are starting to invest in markets outside the US, developing products with flavours and ingredients that appeal to consumers within specific geographies, such as Western Europe  Zenith International anticipates that category will continue to grow in the US, backed by increased consumer awareness, as well as incremental market growth being achieved through innovation and new product development  It is Zenith’s belief that the global potential for super-concentrated liquid water enhancers is substantial, in part there is limited presence in markets outside the US, also because of an increase in plain, flavoured, and functional water consumption in many countries.

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Market Overview Timeline of major brand launches in the category DPSG Crush (December 2012)

Timeline of key liquid water enhancer brand launches in the USA market

PepsiCo Aquafina FlavorSplash (October 2013)

Coca-Cola Dasani Drops (October 2012)

Kraft MiO (March 2011)

NestlĂŠ Nestea (September 2013)

Kraft Kool-Aid (January 2013)

2011

2012

2013 DPSG Hawaiian Punch (December 2012)

2014

Kraft Crystal Light (January 2013)

Kraft MiO Energy (December 2011)

AriZona Beverages (October 2013) Kraft MiO Fit (December 2012)

Coca-Cola Powerade Zero Drops (June 2013)

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Country A

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Country A

Country assessment Consumer Population age breakdown, 2010 GDP per capita (PPP)

% change

US$

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 -

8.5%

9,055

Recommendations

10,661

8.7%

11,587

12,594

8.6%

13,682

35-49, 25%

2013

• • • • • • • •

Commentary Commentary Commentary Commentary Commentary Commentary Commentary Commentary

• • • • •

Commentary Commentary Commentary Commentary Commentary

2014

2015

2016

0-14, 18%

15-24, 18%

0 2012

Insights

9,828

8.5%

8.7%

50+, 24%

25-34, 15%

2017

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Country A

Country assessment Soft drinks market

120 100 80 60 40 20 0

Recommendations

Litres

Per capita consumption

0.1

0.1

0.1

0.1

100

100

100

100

Flav & Flav Energy Func Water drinks & shots

Insights

Bottled water, 2012

Segment volume, 2012

Million Litres

• • • • • • • •

Commentary Commentary Commentary Commentary Commentary Commentary Commentary Commentary

• • • • •

Commentary Commentary Commentary Commentary Commentary

RTD tea

Sparkling, X%

0 0 0 0 0 0 0 0 0

Still, Y%

Dilutables Total volume: X billion litres

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USA & Canada

MiO Liquid Water Enhancer Kraft Foods Group

Company Kraft Foods Group Markets USA & Canada Value sales 2013 US X million Volume sales 2013 X million litres Packaging formats 48ml (standard), 32ml Pricing (local) US $2.99-$3.99

Product Description Commentary

Variants Commentary Positioning Commentary Marketing Commentary Ingredients Commentary Distribution/placement Commentary

zenithinternational specialist consultants to the food and drink industries worldwide

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Zenith International

Zenith tracks developments across food and drink markets worldwide. For more information on the contents of this presentation or to enquire about further information on Zenith’s products and services within this segment, please contact: Karen Wells or Christina Fritts on +44 (0)1225 327900 or email kwells@zenithinternational.com / cfritts@zenithinternational.com

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Zenith also offers specific news services, including a bottled water newsletter, plus online data resources and continuous market monitoring. Zenith's associated company, Foodbev Media, also publishes several highly respected industry magazines.

Our consulting activities are wide ranging. These include tailor made market studies, strategic advice, acquisitions and due diligence, business plans and cost modelling through to plant construction and operational efficiency, environmental audits and groundwater development.

To discuss any of Zenith’s services, please telephone our head office on +44 (0)1225 327900 or visit www.zenithinternational.com

zenithinternational specialist consultants to the food and drink industries worldwide

11 This report is CONFIDENTIAL and its circulation and use are RESTRICTED.

Š Zenith International. All rights reserved.

Global Liquid Water Enhancers Report 2014  

Global Liquid Water Enhancers Report 2014

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