Britain’s thirst for bottled water returns with consumer confidence

December 1, 2009

Bottled water is back in vogue, according to new research from Mintel.

Growth in energy and sports drinks

At the same time, sales of sports and energy drinks are set to reach £1bn in 2009 for the first time.

Researchers claim the renewed interest in bottled water signifies a return to consumer confidence.

Until recently, the bottled water market was thriving, more than doubling its sales between 1997 and 2007 to reach 2.5bn litres. However, a slump in consumer confidence and consecutive poor summers, saw volume sales fall by 11% between 2006 and 2008. With the industry attracting environmental criticism and consumers seemingly happy to exchange bottled for tap water, some were predicting the market to be in terminal decline, says Mintel.

But new research shows signs for optimism. In 2009, the decline in sales slowed by only 1% to £1.9bn or 2.3bn litres.

With economic conditions expected to improve, Mintel forecasts that volume sales will start growing steadily from 2011 onwards and that by 2014 the British will be consuming 2.5bn litres a year, a return to 2007 levels.

Jonny Forsyth, senior drinks analyst at Mintel, said: “Consumer confidence is inextricably linked with bottled water consumption. When the decline in confidence began in the latter half of 2007, bottled water became one of the easiest products for cautious consumers to sacrifice.

“After years of not having to worry about the pennies, the first question consumers started asking when purchasing was “is this value for money?” and at around 250 times cheaper, tap water suddenly seemed a much more sensible option.

“However, with consumer confidence rising over recent months, consumers have started to loosen their purse strings and bottled water has been one of the beneficiaries,” he said.

Sales of sports and energy drinks have continued to thrive in spite of recession, adds Mintel. Even in 2008, as economic pressures put the brakes on markets such as smoothies and bottled water, sports and energy drinks grew by 10% from £855m in 2007 to £941m in 2008.

Volume sales are also impressive - 484m litres in 2008, up 10% on 2007.

In 2009, for the first time, Mintel estimates the market will reach 525m litres with a value of just over £1bn.

Growth is set to continue, Mintel adds. Indeed, over the next five years, value sales are forecast to increase by an energetic 48% to reach £1.5bn, while volume sales will rise by 44% to reach 757m litres.

Within the sector, energy drinks are driving sales. In 2008 the energy drinks market was worth £716m versus the £225m sports drinks category.

Forsyth said: “Unlike other markets such as smoothies, which were seeing impressive growth until the recession arrived, sports and energy drinks have continued to grow their value. Cash-squeezed consumers are viewing these products as value for money rather than a luxury, which stands in contrast to smoothies and bottled water, both of which have suddenly seen growth reverse.

“The challenge for the industry going forward is to grow its user base by successfully targeting females, 35-54 year olds and workers,” added Forsyth.

“This means increasingly stealing share from carbonates and bottled water in particular. The problem is that energy drinks appeal most to the physically active and men aged between 15 and 34 do more exercise than anyone else. A more mainstream opportunity lies in targeting mental rather than physical energy.”