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					BUSINESS INSIGHTS

Innovations in Bottled Water
NPD opportunities in flavored, functional, natural and premium waters

New Food and Drinks Report - Published October 2007



       Percentage growth in bottled water products
                  launched, by category




 Source: Innovations in Bottled Water


“Between 2004 and 2007 there has been an overall growth in bottled
water NPD of 12%. The figure above shows the percentage growth in
each category. The strongest rate of growth is in the fruit and fruit
flavored bottled water category, albeit from a very low base.
This category has grown by 504% over the period. The increase has
predominantly been driven by consumers switching from sugary
carbonated drinks to healthier flavored bottled water alternatives.
Plain waters have also experienced growth in new product
introductions at 17%. The plain waters category is by far the largest
category...“



                      Identify future revenue opportunities from NPD in bottled water
                                        using the analysis and forecasts in t his report...
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Some key findings from this report...

                                                             • There has been a decline in the number of manufacturers
              Minute Maid Fruit Falls                          making overt health claims on th eir packaging, and this has
            appealing to two audiences                         resulted in an ‘apparent’ decline in the health drinks category.
                                                               However, subtle health positionings are important in NPD.

                                                             • 25% of all Asia-Pacific new product introductions are occurring
                                                               in the Chinese market in 2007. The Chinese market is growing
                                                               stronger and challenging the traditional dominance of NPD in the
                                                               Japanese market.

                                                             • US bottled water NPD centers on natural and pure, kids and
Source: Innovations in Bottled Water
                                                               functional products. The US has a pa rticular problem with
                                                               childhood and adult obesity, and the switch to healthier functional
“Coca-Cola’s introduction of co-branded Minute Maid
                                                               products is a key trend affecting the bottled water market.
   Fruit Falls is a good e xample of the new types of
   flavored water drinks being brought to market for
                                                             • Manufacturers are aligning themselves with the beauty industry
  children. Introduced to the US in August 2006, it is
 marketed as a ‘healthful, refreshing and fun flavored
                                                               and developing products to aid weight control, skin health, and
water beverage for kids – with five calories per serving.’     wellbeing. A close link between hydration and beauty is being
  This water is claimed to be made from pure filtered          promoted.
    water, a splash of real fruit juice, Splenda® and
                  acesulfame potassium....”                  • New packaging solutions will form a major part of brand
                                                               extension activity as manufacturers reach new markets with more
                                                               convenient packaging formats.
Innovations in Bottled Water
NPD opportunities in flavored, functional, natural and premium waters

                                                               Consumer concerns over rising obesity levels combined with an increase
    Borba Skin Balance and L'Eau Bronzante                     in public knowledge of health issues, has had a positive effect on the
                                                               bottled water market. Consumers have been switching from sugary
                                                               carbonated drinks to healthier alternatives. In addition, manufacturers are
                                                               creating new premium and super-premium brands to satisfy demand at
                                                               the high end of the market. These trends, combined with convenience
                                                               and ethical issues, mean there is currently a significant amount of
                                                               innovation in the bottled water market.

                                                               Innovations in Bottled Water is a new management report published by
                                                               Business Insights that analyzes innovation and NPD strategies by
Source: Innovations in Bottled Water
                                                               category, region and type of innovation. This report provides global
 “Launched to the French market in August 2005, Sun            bottled water market values and volumes and profiles the leading players.
 Water L’Eau Bronzante is a mineral water which claims
                                                               It identifies key growth opportunities and emerging trends and also
to offer skincare and nutritional benefits. It is positioned
 as water that helps prepare skin for sun-tanning. The
                                                               assesses the impact of regulations and social trends on NPD.
  carbohydrate-free water contains aloe vera extract,
concentrated betacarotene, vitamin C and lycopene. It
                                                               Use this report to assess the competitive landscape in the bottled
 is marketed under the Microfluid Biotechnology name           water market and identify future growth opportunities across key
       and bottled by Microfluid Biotechnology...“             trends, products and geographies.


This new report will enable you to...

                                                               •   Quantify the value, size, geography and growth potential of
      Energy positioning; Nestlé Energy E
                                                                   the bottled water market using this report’s data for key
                                                                   categories including still and sparkling, flavored and unflavored
                                                                   waters across Europe, the US and Japan.

                                                               •   Identify the key trends in bottled water NPD providing the
                                                                   greatest growth potential with this report’s analysis of trends
                                                                   within health, premiumization, ethical and convenience.

                                                               •   Benchmark leading manufacturers NPD with this report’s analysis
                                                                   of the corporate strategies and market shares of Groupe Danone,
 Source: Innovations in Bottled Water
                                                                   Nestlé and PepsiCo and the product positioning strategies being
 “An example of a mainstream energy drink is Nestlé                introduced to comply with legislation.
 Waters’ introduction to the Chinese market of Nestlé
Energy E Drink. Launched in December 2006 Energy E
                                                               •   Improve targeting and the effectiveness of your NPD strategies
is targeted towards young urban achievers between the
 ages of 20 and 35 who require optimal performance.
                                                                   with this report’s analysis of innovation by category, region, product
 This energy drink is claimed to contain the vitamin B             tag and flavor using global Productscan data from over 1,200
group, and many minerals to ‘help transform the exiting            bottled water product launches between 2004 and 2007.
  fat, protein, and carbohydrates inside the body into
                             energy...“
Key issues examined in this report...

                                                           • Obesity. Growing awareness of the dangers of obesity is driving
                      Carpe Diem
                                                             demand for healthy alternatives to sugary carbonated drinks.
                Subtle health positioning

                                                           • European legislation. Manufacturers will be unable to make health
                                                             claims that have not been ratified by th e European Food Safety
                                                             Authority. This has led to mor e subtle health propositions being
                                                             brought to market.

                                                           • Environmental issues. Significant trends over the next five years
                                                             will include finding alternatives to reduce packagin g, replace PET
                                                             bottles and increase bio-plastic usage.
Source: Innovations in Bottled Water
                                                           • Premiumization. The market for premium products is set to show
   “Carpe Diem’s Botanic water, launched on the UK           healthy growth, particularly in the lesser developed categories of
   market in August 2006 consists of three varieties;        flavored still and sparkling water and unflavored sparkling water.
 Relaxing, Vitalizing, and Harmonizing. The waters are
    claimed to be 100% natural and free from colors,       • Health and wellbeing. Drinks with functional ingredients intended
preservatives, added sugar, and added flavors. They are
                                                             to help with specific health iss ues are common to the Japanese
 formulated using plant extracts and spring water. The
                                                             market and are growing in popularity in the US and Europe.
names of the three varieties suggest that the drinks are
    wellbeing drinks, but there is no explicit claim...“



Your questions answered...

                                                           •   How much will the bottled water m arket grow by over the period
              Bottled water market
         volume growth rates 2006-2010
                                                               2006-2010?

                                                           •   Which bottled water categories will see the highest value and
                                                               volume growth rates?

                                                           •   What are the major trends influencing bottled water NPD?

                                                           •   How are the new government r egulations relating to health claims
                                                               influencing product categorization and positioning?
 Source: Innovations in Bottled Water


    “Between 2006 and 2010, volume growth will be
                                                           •   How are environmental concerns influencing bottled water
   healthy at a projected CAGR of 4.7% for the total           packaging NPD?
    market. This is just behind value growth at 5.0%,
      suggesting that the bottled water market will        •   What NPD trends are likely to remain niche and what trends are
experience a degree of premiumization with consumers
                                                               likely to become mainstream?
 trading up to better quality products and higher price
 points. The highest volume growth rate is forecast to
occur in the UK market with volume between 2006 and        •   Which emerging trends are being championed by the top global
2010 projected to rise by 7.8%, taking the market from         bottled water manufacturers?
      2.3bn liters to 3.1bn liters over the period...“
Sample Information: ‘Innovations in Bottled Water’

Chapter 4: Key Trends in the Bottled Water Market
Prestige
The emerging trend of ‘prestige’ bottled waters is reliant not only on the
                                                                                                   Figure 4.32: Evian Palace
sourcing of the ‘purest’ water, but also very much on packag ing, designed
to appeal to a super-premium audience. A good example of such a product
is Evian Palace. This new luxury bottle is currently only available in fine-
dining restaurants and hotels. Launched in early 2007 it is available across
several regions including North America and Europe. The Palace Bottle is
claimed to have been designed to represent the modern vision of Evian
whilst maintaining a strong tie to E vian’s heritage with the Alps. It
incorporates a unique pouring instrument called the ‘Palace Pourer’ claimed
to be the first of its kind in the bottled water industry. The pourer has been
designed to deliver both on form and function, to provide a true luxury
water experience’. The restricted distribution of this product helps to secure
its status as a ‘prestige’ item – though for Evian and other bottled water
manufacturers there is an opportunity to market a restricted number of such
products to retail – as luxury items.

Another example of a prestige bottled water comes in the form of Voss.
Launched on the Greek Market in November 2006, Voss is a lightly sparkling
‘artesian’ water. The water is produced by Voss Production ASA in Norway
and distributed by New Age Media. The bottle, a sleek cylinder, is claimed         Source: Innovations in Bottled Water

to have been designed by one of Calvin Klein’s designers.

Artesian water is water collected from confined, underground aquifers. Because the water is protected by an impermeable
layer it does not come into contact with pollutants and therefore is pristine in nature. Artesian waters are often marketed
as super-premium products.

One of the most famous of artesian waters is Fiji water. Claimed to be a favorite of celebrities, the water is promoted as
the ‘taste of paradise’. Marketing literature claims; ‘450 year-old rain water passes through nature’s most perfect filtration
system, giving Fiji Natural Artesian Water an unparalleled purity that provides consumers with the best possible tasting
water’. Launched on the Canadian market in February 2007, Fiji water has been a favorite of US celebrities since 1998. By
ensuring product placement in films and TV, supplying the water free of charge to a number of celebrities as well as
gaining listings in top quality h otels and restaurants, Fiji Water secured its fortunes as a sought after super-premium brand.
The product is now widely distributed and can be enjoyed as an ‘affordable luxury’ by all. Fiji Water exemplifies how
bottled water can attain premium status.

Evian Palace, Voss and Fiji water are examples of the growing importance of packaging design in marketing products as
super-premium. With the health and premium trends set to grow in importance over the next five years, packaging design
will becoming increasingly important as a product differentiator.


                                                            - 86 -



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Table of Contents

 EXECUTIVE SUMMARY                                CHAPTER 4: KEY TRENDS IN THE BOTTLED
                                                  WATER MARKET
 CHAPTER 1: INTRODUCTION                          • Summary
 • What is this report about?                     • Introduction
 • The bottled water market defined               • Health
 • Report structure                                 - Marketing bottled water to kids
 • Research methodology                             - Weight control
                                                    - Beauty
 CHAPTER 2: GROWTH OPPORTUNITIES IN                 - Functional
 BOTTLED WATER                                      - Fortified waters
 • Summary                                          - Wellbeing
 • Introduction                                     - Sports, performance and energy
 • Bottled water market value                       - Natural, pure, additive free
 • Bottled water market value by category         • Premiumization
   - Sparkling flavored water                       - Prestige
   - Sparkling unflavored water                   • Convenience
   - Still flavored water                           - Portability
   - Still unflavored water                         - Storage
 • Bottled water market volume                      - Bottled water and the env ironment
 • Bottled water market volume by category
   - Sparkling flavored water                     CHAPTER 5: CONCLUSIONS
   - Sparkling unflavored water                   • Introduction
   - Still flavored water                         • Market influences
   - Still unflavored water                         - Obesity and health
                                                    - Labeling regulations
 CHAPTER 3: INNOVATION AND NPD IN THE               - The environment
 BOTTLED WATER MARKET                             • Market o pportunities
 • Summary                                          - Wellbeing
 • Introduction                                     - Premiumization
 • Growth in new bottled water product launches     - Convenience
 • Share of bottled waters launched by category     - Emerging markets
 • Category analysis
   - Plain waters                                 TABLES
   - Fruit and fruit flavored bottled waters      • Bottled water market value, $m, 2006-2010
   - Health waters                                  - Total Europe, the US and Japan
   - Isotonic and energy producing bottled          - By category, Europe, the US
   waters                                         • Bottled water market volume, $m, 2006-2010
 • Regional analysis                                - Total Europe, the US and Japan
   - Europe                                         - By category, Europe, the US
   - North America                                • Top 20 tags on new product packaging - % of
   - Asia-Pacific                                   all bottled water drinks launched, 200 5-2007
 • Product tags on bottled waters                 • Top 20 flavors of new product introductions
 • Flavor trends                                    % of all bottled water drinks launched,
 • Innovative manufacturers                         2005-2007
   - Danone                                       • Overweight and o bese EU and US children
   - Nestlé                                         (5-9 year olds), by country, millions, 2005-2010
   - PepsiCo
Table of Contents (contd.)

 FIGURES                                             • Kids drinks
 • Percentage growth in bottled waters launched,       - The importance of packaging design,
    by category, 2004-2007                                Aquapod, Aquarel and Eden
 • Fun bottled waters for kids                       • Minute Maid Fruit Falls
    - Nestlé’s blackberry flavored Vittel for kids     - Appealing to two audiences
 • Percentage share of bottled waters launched,      • Wateroos all natural flavored water
    by category, 2004-2007                           • Low calorie positionings
 • Subtle health positioning                           - Rosemary Conley’s Spring Waters
    - Carpe Diem                                     • Slim Fluid, Slim Water and Watercare
 • Natural and pure plain waters                     • Evian Skin Care
    - South Pole Pure Water                          • Borba Skin Balance and L'Eau Bronzante
 • Premium plain waters                              • Otsuka Match, The Juice Doctor and Infinit e
    - Hartridges Speyside Glenlivet Natural            Health +
      Mineral Water                                  • Functional Wellbeing Drinks
 • Healthy positioning of fruit and fruit flavored     - Asahi Fujisan
    waters                                             - Melodian Platinume Aqua
    - Vitsmart                                         - Calpis Aqua Ny usankin
 • Health waters                                     • H2O and Glaceau XXX Vitamin Water
    - St Yorre’s L’eaux Minerales                    • Hi Ball, Energy E Drink and Water Joe
 • Energy positioning                                • Pristine source water
    - Nestlé Energy E                                  - Virga, Iceberg and Kona Deep
 • Percentage share of products launched, by         • Power Water, SubZero and Priya Yours
    region, 2004-2007                                • Talking Rain Twist, Metromint and Hint
 • Danone                                            • Evian Palace
    - Global brands                                  • Super-Premium Artesian Waters and Fiji Water
    - Functional drinks: Mizone                      • Stylish portable packaging
    - Fruit flavored waters                            - Lil’ Figi, Evian and Evian Env ie
 • Nestlé                                            • Convenient Packaging
    - Global brands                                    - Nestlé Pure Life, Nestlé Ice Mountain Spring
    - Flavored waters and waters for kids                 Water and Evian Minibar
 • PepsiCo                                           • Park City IceWater
    - Aquafina and brand extensions                  • Biodegradable packaging: Belu
 • Propel Calcium and Propel Fitness Water           • Apollinaris Silence
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