IBWA 2014
U.S. Bottled Water Market
Market Trends
November 13, 2014
Beverage Marketing Capabilities
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Competition Micro-Marketing Age
Competition,
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market Trends
The Agenda
 Overview of U.S.
U S Beverage Market
 U.S. Bottled Water Market
 Projections
j
-3-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
State of the Industry – The Good and the Bad
Beverage Headlines
-4-
o
Liquid refreshment beverage market essentially flat in 2013 after three
years of growth, but has rebounded in first half of 2014
o
Niche categories are outperforming traditional mass-market categories
o
Bottled water strongest performing of mass-market categories
o
Steadily-improving
Steadily
improving economy remains best impetus for beverage
category success
o
Outlook for modest g
growth in 2014
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
The economy continues to move in a positive direction with modest GDP growth for 21
straight quarters and unemployment now under 6%
6%, but improvement has been slow
Quarterly GDP Change
2009 – 2014 Q3
Unemployment Rate
2000 – 2014*
10%
3.9%
3.8% 3.8%
2.5%
2.3%
1 7%
1.7%
4.6%
4.1%
3.5%
3.1%
2.5% 2.6%
1.8% 2.0%
2 0%
2.0%
1.1%
1.3%
1.3%
0.4%
0.4%
4.1%
8%
6%
-0.7%
4%
2%
-6.7%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
0%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
2009
2010
2011
2012
2013
2014
* YTD through September 2014
Source: Beverage Marketing Corporation; Bureau of Economic Analysis, Department of Commerce, Department of Labor
-5-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
Total beverage volume will grow modestly in 2014, a slight improvement from 2013
• Both
h non-alcohol
l h l and
d alcohol
l h l are experiencing growth
h
• Modest improvement in the economy has helped to boost beverage sales
U.S. Beverage Market
(Billions of Gallons)
2000 – 2014(P)
55.00
Non-Alcohol
Growth
12/13
Growth
13/14(P)
-0.8%
0.8%
Non-Alcohol 0.4%
1.4%
TOTAL
1.3%
Alcohol
50.00
Alcohol
45.00
40.00
35.00
30.00
25.00
20.00
0.2%
15.00
10.00
5.00
)
20
14
(P
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
0.00
P: Projected
Source: Beverage Marketing Corporation
-6-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
As the number of product categories has increased, so have the number of new product
introductions
New Beverage Product Introductions
2001 – 2013
5
3.8
4
Thousands off SKUs
39
3.9
4.0
4.4
4.7
3.2
2.9
9
3
2.6
27
2.7
2.6
2.0
2
1.7
1.6
2001
2002
1
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Beverage Marketing Corporation; Mintel
-7-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
Despite negative publicity on refreshment beverages and especially CSDs,
caloric intake from them has been steadily declining over the last decade,
and is likely to continue to decline
• The growth of bottled water and lower-calorie options have contributed to the
caloric decline
Calories Perr Capita Pe
C
er Day
U.S. LRB Calories Per Capita Per Day
1990 – 2013
251.6
263.0
241.7 235.9
228.0 220.4
212.4 210.1 205.7
202.3 197.9
212.5
1990
1995
2000
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Beverage Marketing Corporation
-8-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
The carbonated soft drink category continues to struggle as consumers opt
for both variety and healthier refreshment options
CSD Volume Growth
2009 – 1H 2014
-0.8%
-0.9%
0 9%
-1.0%
-1.2%
-1.8%
CAGR 08/13:
-2.0%
-1.8%
-2
2.2%
2%
-3.2%
-4.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-9-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
Fruit beverage volume has been declining in recent years because products
are relatively expensive and high in calories
Fruit Beverage Volume Growth
2009 – 1H 2014
0.0%
-0.6%
-1.0%
-1.3%
-2.0%
-1.9%
-2.3%
-2.4%
CAGR 08/13:
-2.6%
-3.0%
3 0%
-3.4%
-4.0%
-4.1%
-4.1%
-5.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-10-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
After experiencing strong growth in 2010 and 2011, sports drink
consumption has been increasing at a more modest pace
Sports Drink Volume Growth
2009 – 1H 2014
15.0%
10.3%
10.0%
7.6%
5.0%
2.3%
2.4%
3.7%
3.2%
CAGR 08/13:
+1.4%
0.6%
0.0%
-5.0%
-10.0%
-15.0%
-12.3%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-11-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
Energy drinks have continued with solid growth in the first half of
2014, but weaker than the growth experienced 2010 through 2012
Energy Drink Volume Growth
2009 – 1H 2014
20.0%
17.2%
14.3%
10.0%
CAGR 08/13:
+9.0%
8.5%
7.6%
6.3%
5.5%
5.1%
0 2%
0.2%
0.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-12-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
RTD tea category continues to grow but at a slower pace
• In recent years, the category has benefited from its innovation and healthy positioning
RTD Tea Volume Growth
2009 – 1H 2014
12.0%
10.1%
10.0%
8.0%
6.0%
5.3%
CAGR 08/13:
+4.5%
5.2%
4.0%
2.0%
2.8%
2.3%
1.7%
1.3%
0.7%
0.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-13-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
RTD coffee has experienced continued solid growth since the recession
• Nevertheless, the category remains the smallest of traditional LRB categories
RTD Coffee Volume Growth
2009 – 1H 2014
15.0%
9.9%
10.0%
11.1%
9.5%
9.1%
8 3%
8.3%
7.1%
CAGR 08/13:
+6.0%
5.0%
2.4%
0.0%
-2.2%
-5.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-14-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
Fluid milk volume continues to decline
• After a modest 0.8% increase in 2009, declines have been in excess of 1% since
• Pricing can often mean the difference between category growth and decline
Milk Volume Growth
2009 – 1H 2014
0.0%
0.8%
-1.0%
-1.1%
-1.7%
-2.0%
CAGR 08/13:
-1.2%
-1.5%
-1.6%
-2.3%
-2.4%
-3.0%
-3.5%
3 5%
-4.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-15-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
The beer category has experienced lackluster performance over the last
five years
• Craft beers have been the category’s greatest bright spot
Beer Volume Growth
2009 – 1H 2014
2.0%
1.2%
1.0%
CAGR 08/13:
-0.7%
0.0%
-0.6%
0 6%
-1.0%
-0.9%
-1.3%
-1.2%
-1.3%
-1.5%
-2.0%
-2.1%
-3.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-16-
Copyright © 2014 Beverage Marketing Corp.
Overview of U.S. Beverage Market
Wine and spirits have experienced consistent growth in recent years
• Both have outperformed beer over the last five years
Wine and Distilled Spirits Volume Growth
2009 – 1H 2014
4.0%
Wine
3.2%
3.0%
3.0%
2.5%2.6%
2.6%
2.4%
2.1%
1.9%
2.0%
1.0%
Spirits
2.4%
Wine CAGR
08/13: +2.0%
2.1%
0.8%
0.7%
Spirits CAGR
08/13: +2.8%
0.0%
2008/09
2009/10
2010/11
2011/12
2012/13
1H 13/14
Source: Beverage Marketing Corporation
-17-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market Trends
Agenda
• Overview of U.S. Beverage Market
• U.S. Bottled Water Market
• Projections
-18-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
State of the Industry
Bottled Water Headlines
• Most successful mass-market beverage category in
the U. S.
• Every segment is growing – a rare feat
• Projections
j
show bottled water will surpass
p
CSDs
by 2016
• With exception
p
of retail PET segment,
g
,p
pricing
g is
strong
• Pricing
g is at all-time low for retail PET
• Category is best positioned since pre-recession
-19-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
Bottled water already outsells CSDs in food stores in 17 cities
• Wi
With
h bottled
b l d water growing
i
and
d CSDs
CSD d
declining,
li i
other
h markets
k
are lik
likely
l to
join this group
160
155
144
140
132
127
123
118
Total U.S.
Food Index
80
108
105
103
102
102
102
101
97
Orland
do
Albany
Washington, D.C.
Tampa
Houstton
Hartfo
ord/N. Haven
n
Dallass/Ft. Worth
Phoen
nix
Sacramento
Philad
delphia
Los Angeles
San D
Diego
Miami
San F
Francisco
Bosto
on
New Y
York
Las Ve
egas
86
* Nielsen Food Markets 52 weeks ending 9/7/13; Bottled Water does not include flavored/enhanced water
Source: AC Nielsen; NWNA
-20-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
While carbonated soft drink pricing has risen, bottled water pricing has dipped. This is
likely impacting the performance of both categories
Wholesaler Dollars Per Gallon
2000 – 2013
4.5
2013 Absolute Price
$3 99
$3.99
Price per Gallon
40
4.0
3.5
3.0
2.5
2.0
1.5
$1.26
1.0
2000
2001
2002
2003
2004
2005
CSDs
2006
2007
2008
2009
2010
2011
2012
2013
PET Single Serve Bottled Water
Source: BMC Strategic Associates
-21-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
Bottled water volume has rebounded since the depths of the recession
with accelerating growth in recent years
• The category is aided by its positioning as the ultimate health beverage
• Additionally, it has gotten a boost from aggressive pricing
Bottled Water Volume Growth
2009 – 1H 2014
8.2%
8.0%
7.5%
6.9%
6.2%
6.0%
4 7%
4.7%
G
Growth
4.1%
4.0%
CAGR 08/13:
+3.2%
3.5%
2.0%
0.0%
-2.0%
-2.5%
-4.0%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
Source: Beverage Marketing Corporation
-22-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
On a quarterly basis, the bottled water category has shown consistently strong growth
since 2011
• Growth in the first half of 2014 has accelerated over 2014 growth
U.S. Bottled Water Market Quarterly
Volume Growth
2011 – 1H 2014
10%
8.8%
8.2%
Growth
8%
6%
7.5%
5.8%
5.5%
3.1%
4.7% 4.8% 4.8% 4.5%
4.5%
4.1%
4%
6.9%
6.4%
3.1%
2%
0%
Q1
Q2
Q3
Q4
2011
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
1H
2014
Source: Beverage Marketing Corporation
-23-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
Total bottled water revenues in 1H14 grew at a rate slightly under volume growth
U.S. Bottled Water Market Quarterly
Revenue Growth
2011 – 1H 2014
12%
10.1%
10%
G
Growth
8%
6.4%
6%
5.3%
5.6%
6.3%
5.3%
5.2%
3.6%
3.0%
2.5%
2.0%
2%
0%
Q1
Q2
5.8%
4.5%
4.3%
4%
5.4%
Q3
Q4
2011
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
1H
2014
Source: Beverage Marketing Corporation
-24-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
Nestle Waters remains the leading bottled water company with a 30% share in 2013
• Private label powerhouse Niagara has gained the greatest share in the last five years
U.S. Bottled Water Market
Leading Companies by Volume Share
2008
All Other
36.9%
Niagara
6.0%
2013
NWNA
32.5%
Pepsi/Aquafina
6.2%
DS Waters
6.4%
CG Roxane
5.8%
Coke/Dasani
6.2%
All Other
29.4%
NWNA
30.2%
Pepsi/Aquafina
4.3%
Niagara
19.1%
DS Waters
5.5%
Coke/Dasa
5.7%
CG Roxane
5.8%
Source: Beverage Marketing Corporation
-25-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
Retail PET’s healthy positioning and aggressive pricing have combined to
boost the segment in recent years
• Private label has taken on an increasingly important role in the segment
Retail PET Water Volume Growth
2009 – 1H 2014
12.0%
10.1%
10.0%
8.9%
8.1%
G
Growth
8.0%
8.1%
6.8%
CAGR 08/13:
+5.0%
6.1%
5.3%
6.0%
4.0%
2.0%
0.0%
-2.0%
-0.9%
2008/09
2009/10
2010/11
2011/12
2012/13
Q1 13/14
Q2 13/14
1H 13/14
*Includes single-serve sizes of bottled water 1.5 liters and smaller
Source: Beverage Marketing Corporation
-26-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
PET water dollars per gallon have continued to drop into the first half of
2014
• Stable cost environment and production efficiencies have contributed to pricing
declines
PET Waters
Wholesale Dollars Per Gallon
2001 – 2014 1H
Price Per
Gallon
Dollars Per
Gallon
Amount
%
2001 YE
$1.95
$0.00
0.00%
2002 YE
$1.94
$
($0.01))
($
-0.51%
2003 YE
$1.90
($0.04)
-2.06%
2004 YE
$1.75
($0.15)
-7.89%
2005 YE
$1.63
($0.12)
-6.86%
2006 YE
$1.54
($0.09)
-5.52%
2007 YE
$1.48
($0.06)
-3.90%
2008 YE
$1.44
($0.04)
-2.70%
2009 YE
$1.40
($0.04)
-2.78%
2010 YE
$1.30
($0.10)
-7.14%
2011 YE
$1.31
$0.01
0.77%
2012 YE
$1.29
($0.02)
-1.53%
2013 YE
$1.26
($0.03)
-2.33%
2014 Q1
$1.24
($0.05)
-3.70%
2014 Q2
$1 22
$1.22
($0 04)
($0.04)
-3.30%
3 30%
2014 1H
$1.23
($0.04)
-3.50%
$2.00 $1.94
$1.90
$1.90
Dollars Per Gallon
Year
Ch
Change
$1.80
$1.70
$1.60
$1.50
2001 YE to 2014 1H
-$0.67 or -63.1%
$1.75
$1.63
$1.54
$1.48
$1.44
$1.40
$1.40
$1.36
$1.29
$1.30
$1.30
$1 20
$1.20
$1.26
$1.24
$1.23
$1.29
$
$1.22
$1.10
Year
Source: Beverage Marketing Corporation
-27-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
While increasingly stable, PET water pricing continues to be historically aggressive
and is likely
likel to remain
emain so at least into 2015
• Every-day pricing as low as $2.49-2.99 for 24-packs at retail
Advances in Supply Chain Costs
• High-speed bottle filling in a range of 1,500-1,800
bottles per minute
• Stable resin costs
• Continued bottle light-weighting
-28-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
The growth of private label has resulted in purified water now outselling spring
water in retail PET category
Retail PET Bottled Water by SOURCE
1993 – 2013
1993
2003
2013
Purified
3.0%
Purified
36.0%
Spring
97.0%
Spring
64.0%
Purified
52.7%
Spring
47.3%
Source:
-29-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
While branded water outsells private label in the retail PET segment, private label
has made significant inroads over the last five years
U.S.
U
S R
Retail
t il PET Water
W t Market
M k t
Branded vs. Private Label
2008
2013
Private Label
12.8%
Private Label
38.3%
Branded
61.7%
Branded
87.2%
Source: Beverage Marketing Corporation
-30-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market
Economically-priced vended water has experienced growth ranging from modest to
solid in recent years
• Vended water serves as a value-priced bottled water option for consumers
Vended Water Volume Growth
2011 – 2014 1H
6%
4.6% 4.5% 4.6% 4.7%
4.6%
4.1%
4.4%
G
Growth
4%
%
2%
2.0% 2.1%
2.3%
2.8%
2.5%
1.5%
1.3%
1.2%
0%
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
1H
2014
Source: Beverage Marketing Corporation
-31-
Copyright © 2014 Beverage Marketing Corp.
U.S. Bottled Water Market Trends
Agenda
• Overview of U.S. Beverage Market
• U.S. Bottled Water Market
• Projections
-32-
Copyright © 2014 Beverage Marketing Corp.
Projections
In the future, the marketplace will be characterized by numerous high-value, low relative
volume opportunities
(2008-2013 CAGR)
High Growth
Alc Pouches
Hard Cider
Coconut Water
Enhanced RTD Teas
20%
0%
Craft Beer
Organic
J i
Juices
Malterna Energy
gy
tives
RTD
Tequila
Coffee
SPFJ
Vodka
RTD Tea
PET Water
Domestic
Wine
Sports
$10 Billion
Drinks
$5 Billion
Enhanced 0%
F it
Fruit
$1 Billion
Waters
Drinks 100%
Imported
Imported
Premium
Enhanced
Juices
Wine
Beer
CSDs
Bulk/HOD Water
Fruit Drinks
-5%
SS Dairyy
Flavored
Drinks
Water
$250 Million
Projected
Value
Straight
Whiskey
10%
$500 Million
Soy
$25 Billion
$35 Billion
Milk
Diet CSDs
$50 Billion
Regular
CSDs
Low Growth
-33-
Copyright © 2014 Beverage Marketing Corp.
Projections
Among LRBs, the strongest growth is projected for bottled water, sports beverages,
energy
g drinks and RTD tea and coffees
• CSDs, milk and fruit beverages will need to innovate and provide healthier options to rekindle
growth
U S Beverage Market Projections by Category
U.S.
2013 – 2015(P)
Categories
Non-Alcoholic
CSDs
Bottled Water
PET
F it B
Fruit
Beverages*
*
RTD Tea
Sports Beverages
Energy Drinks
Value Added Water
Value-Added
RTD Coffee
Subtotal
Alcoholic
Beer
Wine
Spirits
Subtotal
TOTAL
Share
2014(P)
2015(P)
34.0%
26.7%
17.6%
8 5%
8.5%
4.0%
3.6%
1.4%
1 1%
1.1%
0.2%
79.8%
33.1%
28.2%
18.8%
8 2%
8.2%
4.1%
3.7%
1.5%
1 1%
1.1%
0.2%
80.0%
32.3%
29.3%
19.8%
7 9%
7.9%
4.1%
3.7%
1.6%
1 0%
1.0%
0.2%
80.2%
-1.0%
7.1%
8.5%
-2.8%
2 8%
2.6%
3.5%
6.8%
-4.9%
4 9%
8.0%
2.0%
-1.2%
5.6%
6.5%
-2.3%
2 3%
2.7%
2.8%
6.0%
-2.9%
2 9%
7.0%
1.6%
16.9%
16
9%
2.0%
1.3%
20.2%
100.0%
16.6%
16
6%
2.1%
1.3%
20.0%
100.0%
16.4%
16
4%
2.1%
1.3%
19.8%
100.0%
0.0%
0
0%
2.0%
1.5%
0.3%
1.7%
0.5%
0
5%
2.5%
2.0%
0.8%
1.4%
2013
Growth
13/14(P) 14(P)/15(P)
P: Projected
Source: Beverage Marketing Corporation
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Copyright © 2014 Beverage Marketing Corp.