A new report from global beverage research specialist Canadean suggests that the market for PET packaging is set to grow at an even greater speed thanks to the global increase in bottled water sales.
Not that long ago the world was given the vision of cola flowing from the kitchen tap. How ironic then to find that today the global consumer instead drinks water from bottles. Water - commercially sold - is set to be the number one beverage. The Canadean report forecasts that in 2005, packaged and bulk water (water cooler) volumes will overtake those of carbonates.
Commercial water volumes globally currently stand at about 150 billion litres, split into 63 per cent packaged water and 37 per cent bulk water. Canadean is forecasting that volumes will grow at an average rate of 8 per cent per annum to 2005, with total volumes rising to just over 190 billion litres. The growth rate for the carbonates category is predicted to be considerably lower at 2 per cent per annum, resulting in a 2005 estimated volume of 187 billion litres.
A key factor behind the surge in commercial water volumes is the increasing health awareness of consumers, and the preference for water as the "best" thirst quencher in this respect. Crucially, this trend towards healthier beverages is found across both developed and developing markets - it is not the preserve of the more affluent Western economies.
Furthermore, a shortage of potable drinking water in many developing countries also serves to boost demand for clean commercial water. A look at forecast growth rates of water versus carbonates in some key markets (both developed and developing) illustrates this point: in none of them does the carbonates growth rate exceed that of commercial water.
Predicted growth rates for packaged water between 2002 and 2005 include 16.8 per cent growth for the Brazil market, 16 per cent for China, 9 per cent for Japan and 2.4 per cent for the far more developed German market.
Packaged water, defined as that in containers of less than 10 litres, is expected to grow most strongly in Asia and North America. Indeed, the USA - the world's largest carbonates market - is set to contribute more incremental packaged water volume than any other market, and more than the entire Asian region put together. Thus the rise in water demand has strategic implications for the multinational carbonates producers - not only abroad, but perhaps more significantly, in their home market.
It is not surprising that there has already been considerable corporate activity in the packaged and bulk water market, involving multinational soft drinks companies. Recent examples include Danone's purchase of the Canadian water cooler company Sparkling Spring and the Coca-Cola/Danone partnership agreements in the US covering the Evian brand and several other Danone bottled water brands.
Analysing the packaged water market further, Canadean's report shows that the global split between still and sparkling water is 70:30. This varies substantially between regions, with still water accounting for over 90 per cent of the North American and Asian markets, whilst in Eastern Europe many traditional local waters are sparkling, and still variants take less than one third share of packaged water consumption.
A key beneficiary of the growth in packaged water is the PET plastic packaging industry. PET currently accounts for approximately 70 per cent of the pack mix at a global level. This share is steadily increasing, mainly at the expense of glass, as consumers take to the lighter, cheaper and more convenient pack type, but the market for aluminium cans - traditionally the most popular means of packaging soft drinks - is expected to stagnate.
The switch from canned, sugary beverages should have a major impact on packaging firms specialising in beverages. As PET is the preferred material for water packaging, it is expected that that market will continue to grow rapidly. Many European players such as Amcor and Tetra Laval are battling to establish themselves in the PET sector in order to capitalise on this expected growth.
The bulk water market is forecast to grow by nearly 10 per cent per annum over the next three years. Over 85 per cent of the incremental volume growth here is set to come from Asia and Central & South America, driven by the need for clean safe drinking water - and concerns about the quality of local supplies. In per capita terms, annual global consumption of bulk water stands at a comparatively low level of 12 litres, compared to 18 litres for packaged water and 29 litres for carbonates.
Canadean's Global Packaged Water Report 2002 covers eight regions, and 83 markets in detail. Consumption and litres per capita volume data is provided for 1996-2005, plus market share data, including flavour/type, leading company, pack type, and on-premise vs off-premise consumption.