Plastic is not fantastic, so how can operators best satisfy customers' thirst for bottled water? Richard McComb reports
For a while, the bottled water sector could do no wrong. Here was a relatively inexpensive, mass market, natural product, which was in tune with the right health messages.
What could be better than drinking bottled water? It was essential for hydration, it did not rot children's teeth, and it was linked to the beauty/lifestyle agenda by aiding weight loss and promoting a glowing complexion.
Putting it in a small bottle was nothing short of genius, making this life-giving, health- promoting product eminently portable. The sugar tax was timely and the boom in the ‘grab and go' dining market was an added bonus, as consumers sought healthy drinks to sip with their BLT or falafel wrap.
Water can be packaged in smart bottles, with seductive branding and images of mountain scenery, for sale in restaurants. Operators could charge lucrative mark-ups. Everyone was happy and the potential for growth in the bottled water market appeared to be, well, untapped.
Then the backlash against plastic waste started. There had already been rumblings about the environmental damage caused by discarded plastic bottles, but the issue became front-page news thanks to Sir David Attenborough's Blue Planet II series for the BBC.
Plastics are now at the top of the news agenda. Scientists at the State University of New York at Fredonia launched an investigation into major brands of bottled water, purchased in nine countries, revealing that nearly all of them contained tiny particles of plastics. And in September, Scottish Water announced plans to put "top-up taps" in 30 towns and cities to encourage people to use refillable water bottles and cut back on single-use plastic.
If bottled water is not entirely a sector under siege, it is undeniably facing huge challenges, as borne out by a Mintel "state of the nation" update for 2018. The report revealed how the market had enjoyed rapid growth over the past five years, with volumes and values up 56% and 52% respectively in 2012 and 2017. Sales of still bottled water outstripped cola for the first time last year.
However, the spotlight on plastics waste and the roll-out of water refill stations, allied to uncertainty of Brexit, means volume sales are forecast to a grow at a slower rate of 16% between 2017 and 2022. Inflation is expected to drive a 29% value growth over the same period.
So there is huge value in the market and huge appeal to consumers, with unflavoured still water a "powerhouse of growth," according to Mintel. In fact, on-premise volume sales of bottled water grew by 7% year-on-year in 2017, driven by concerns over sugar and the trend to drink less alcohol with meals.
Since June, all Harrogate Water's PET bottles contain 51% recycled content (rPET), matching the 50% recycled content of Harrogate Spring glass bottles. PET bottle labels now have green lettering to reinforce the rPET message, the first use of colour on Harrogate's labels.
Brand manager Nicky Cain says bottled water consumers are environmentally conscious and eager to recycle. "The use of colour stands out, encouraging consumer interaction and a better understanding of the link between recycling and the use of rPET in the lifecycle of the product," adds Cain.
Cain reinforces the importance of a strong brand identity and customer reassurances over quality and provenance, adding: "Our history, heritage and provenance are hugely important in differentiating Harrogate Spring in a crowded marketplace. We work with customers in the 'on-the-go' category. Some supply jugs of water in addition to naturally sourced water. Since doing so, sales of bottled water remain in growth. Taking away bottled water as a choice would lead to greater consumption of sugary soft drinks, juices, energy drinks and caffeinated beverages."
Matthew Orme, director of Wenlock Spring, explains that consumer purchasing decisions are driven by a trio of factors: quality, taste and ethics/sustainability.
"Consumers are demanding water that originates from a naturally occurring source," says Orme. "This is because provenance is still key, with the UK having some of the best water sources in the world. Brands which also have a story about their heritage will be looked on favourably by consumers. Wenlock Spring is bottled at a source that has been in constant use since 1086, providing it with a unique blend of minerals and provenance."
Orme insists that diners are happy to pay a premium for a quality water. For a sense of exclusivity, operators should consider selling brands that cannot be purchased in the supermarket, he adds. Wenlock Spring is available via delivered wholesalers for the hospitality sector.
Highland Spring Group is a powerhouse within a powerhouse, bottling 550 million litres of water a year, producing brands including Highland Spring, Speyside Glenlivet, Hydr8 and a range of private label flavoured and unflavoured waters for supermarkets and foodservice.
Highland Spring is worth £36m in the out-of-home sector and is growing ahead of the category in restaurants, travel and leisure, licensed and food to go. Provenance is playing an increasingly important role and the same expectations apply to water, according to Carol Saunders, the group's head of customer marketing. Highland Spring is bottled at source from a privately owned catchment area covering 2,000 hectares of the Ochil Hills, Perthshire.
Saunders says: "Highland Spring research has shown that consumers do have an interest in information about this provenance and the impact it has on the taste of the water they choose, both in the still and sparkling categories. There is a real opportunity to leverage these elements - sparkle, minerals and taste - to communicate the relevance of bottled water for different occasions and encourage healthy hydration choices so the consumer habit continues to grow."
With environmental factors so important, the company is investigating new packaging formats. In June, Highland Spring began a retail trial of a 100% recycled plastic 'eco-bottle', to help keep plastic in the "circular economy and out of the oceans". The eco-bottle will be rolled out in 2019.
A paper-based 'bottle' designed to appeal to environmentally conscious consumers is central to Just Water, which has been launched in the UK via 800 Boots stores. In total, 82% of the materials in the packaging come from plant-based renewable resources.
The brainchild of Jaden Smith, son of Hollywood actor Will Smith, Just Water contains still spring water, sourced from the firm's bottling partner in Ballymena, Northern Ireland. It is available in a 500ml serving, priced individually at £1.29, or as part of the Boots meal deal (a main, a snack and a drink from £3.39). The bio-plastic cap and shoulder of the package are made from sugarcane.
Clark McIlroy, managing director of Red Star Brands, whose UK beverage portfolio includes Just Water, says: "Plastic usage has become a hot topic in recent years, with six in 10 UK shoppers looking to minimise their own plastic consumption, showing there is a demand for ethical brands like Just Water to enter the UK market and disrupt consumer habits."
Radnor Hills, a family-owned soft drinks manufacturer in Powys, mid-Wales, is moving the majority of its PET bottles to 51% recycled plastic (rPET) and is working to create a "closed loop" system with suppliers for all waste created on site. All waste that can be recycled from production processes are recycled and, by the end of 2018, it will achieve zero to landfill on all waste.
Flavoured still water saw volumes grow ahead of the market at 8% in 2017. However, the segment saw a drop in average prices, leading to value growth of just 1%, according to Mintel.
Vimto is one of the new players in the category with Vim2o - a still, spring water drink flavoured with Vimto's blend of three fruits, spices and no added sugar. In 2017, the company launched Feel Good Infusions, a natural water product infused with contemporary flavours such as strawberry and mint, lemon and elderflower, and apple and rose, satisfying the duel demand for flavoured water and healthier alternatives. Feel Good Drinks has seen strong growth this year, with a double-digit increase.
The on-site filtered water sector continues to innovate for operators with specific challenges, such as cafés and coffee shops. Nordaq Grab & Go provides a premium water where customers do not require a new bottle each time. Instead, they are given a reusable sports bottle which they can refill with Nordaq filtered water. Nordaq also makes the point that restaurants and hotels that bottle water on-site can make savings in logistics and labour costs associated with moving bottles.
Harrogate Spring www.harrogatespring.com
Highland Spring www.highlandspring.com
Radnor Hills www.radnorhills.co.uk,
Wenlock Spring www.wenlockspring.co.uk
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