U.S. Bottled Water Market - Beverage Marketing Corporation · 2017. 12. 28. · 2010 2015 1H 16...

IBWA 2016

U.S. Bottled Water Market Market Trends

November 9, 2016

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Copyright © 2016 Beverage Marketing Corp.-3-

U.S. Bottled Water Market Trends

Overview of U.S. Beverage Market

U.S. Bottled Water Market

Projections

The Agenda


State of the Industry – The Good and the Bad

Beverage Headlines

Liquid refreshment beverage market growing for third consecutive year in 2016, led by bottled water and niche categories

Carbonated soft drinks declining once again in 2016, which will be its 12th consecutive year of volume declines

Bottled water will surpass carbonated soft drinks by end of 2016 or beginning of 2017 on volume basis

Most mass market categories other than bottled water continue to struggle

Wine and spirits lead alcohol growth in 2016, and beer is experiencing essentially flat performance

-4-



Source: Beverage Marketing Corporation; Bureau of Economic Analysis, Department of Commerce, Department of Labor

Quarterly GDP Change2011 – Q2 2016

Unemployment Rate2000 – Q2 2016

2011 2012 2013

4.0%

4.7%

6.0%5.5%

5.1%

9.6%

9.0%

8.1%

7.4%

6.2%

4.9%

4.8%

9.3%

5.8%

4.6% 4.6%

5.3%5.8%

0%

2%

4%

6%

8%

10%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Q116

Q2162014 2015 2016

The economy is greatly improved with unemployment below 5% and modest GDP growth; improvement had been slow due to severity of the recession

-5-



Gasoline Prices2010 – 2016 Q3

$2.77 $2.87

$2.78

$2.92

$3.32

$3.87$3.68

$3.44

$3.66$3.81

$3.72

$3.59

$3.65 $3.67 $3.65

$3.36

$3.46$3.74

$3.56

$2.93

$2.34

$2.76 $2.69

$2.26

$1.99

$2.35 $2.32

$0

$1

$2

$3

$4

$5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

15Q3 – 16Q3: -13.8% Growth


Source: U.S. Energy Information Administration

2010 2011 2012 2013 2014 2015 2016

Gasoline prices are almost a dollar a gallon lower than last year but to date have only had a modest impact on beverage consumption

• Consumers have bought cars and other delayed purchases but also continue to save

• “Thriftiness” under changing economic times is now the new norm


Annual U.S. Consumer Sentiment Index1995 – Q3 2016

Source: Thompson Reuters/University of Michigan

92.2 93.6

103.2 104.6105.8107.6

89.2 89.687.6

95.288.6

87.3 85.6

63.866.3

72.668.0

76.479.2

84.1

92.9 91.6 92.490.3

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q116

Q216

Q316

Consumer sentiment surpassed pre-recession levels in 2015 for the first time, and remained stable, but somewhat uneven through the first three quarters of 2016

-7-



0.7%

-0.1%

1.6%

-0.1%

1.1%

1.7%1.9%

2010 2011 2012 2013 2014 2015 1H 16

Vol

um

e C

han

ge

U.S. Total Beverage Market*2010 – 1H 2016


* Excludes tap waterSource: Beverage Marketing Corporation

The U.S. beverage market has experienced accelerating growth since 2014, and may be poised for steady consistent growth in the coming years

• Coming out of the recession, performance had been more mixed


Cha

nge

0.7%

-0.1%

1.6%

-0.1%

1.1%

1.7%1.9%

0.8%

1.4%

2.4%

3.7%

1.6%

3.1%

2.5%

3.1%

2.7%

2010 2011 2012 2013 2014 2015 1H 16 10/15CAGR

Volume Wholesale Revenue

U.S. Total Beverage Market*Volume and Wholesale Revenue

(Millions of Gallons and Wholesale Dollars)2010 – 1H 2016

Beverage revenues have outperformed volume and been consistently positive, but the differential versus volume growth is narrowing

-9-


* Excludes tap waterSource: Beverage Marketing Corporation


2.9%

-0.2%

0.5%

-5.1%

RefreshmentBeverages

TraditionalBeverages

BeverageAlcohol

Tap Water

U.S. Beverage Market – 2015V

olu

me

Ch

ange

In 2015, refreshment beverages led by bottled water and some niche categories grew fastest, and this trend has continued into 2016

P: PreliminarySource: Beverage Marketing Corporation

• Bottled Water• CSD• Energy Drinks• Fruit Bevs• RTD Coffee• RTD Tea• Sports Drinks• VA Water

• Hot Coffee• Hot Tea• Milk

• Beer• Spirits• Wine


-10-


Estimated Tap Water Volume Growth2000 – 2015

Tap water consumption declined in each of the last two years and is likely to decline once again in 2016, a reflection of an improving economy

• After many years of declines, tap water consumption increased during the recession

Source: Beverage Marketing Corp.

20.0%

6.3%

-4.4%

7.6%

1.2%

23.7%

-2.7%

-11.5%-9.4%

-5.3%-4.0%

-6.6%

-0.5%

-0.7%

-5.1%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

'00/01 '01/02 '02/03 '03/04 '04/05 '05/06 '06/07 '07/08 '08/09 '09/10 '10/11 '11/12 '12/13 '13/14 '14/15


-11-


Volume Share of Stomach by U.S. Beverage Segment – Billions of Gallons2010 – 1H 2016

23.3% 20.4% 19.8%

14.8% 19.1% 20.5%

10.9% 10.4% 10.7%

10.0% 10.8% 10.7%

10.6% 9.2% 9.1%

6.0% 6.0% 6.0%6.0% 5.0% 4.9%2.1% 2.4% 2.3%

2.1% 2.2% 2.1%0.6% 1.0% 1.0%0.8% 0.8% 0.8%

12.8% 12.7% 12.1%

2010 2015 1H 16

CSDs

Bottled Water

Milk

Coffee

Tea

Fruit BeveragesSports Bev

Wine/SpiritsEnergy Drinks

Value-Added WaterTap/Others

Beer

100% = 59.3 100% = 61.7

Since 2010, bottled water has increased its share of stomach by more than 5 share points, while CSDs have continued their decline



100% = 31.0


2015 Category Winners and Losers

* Volume increases** Volume declines

WINNERS*

• Bottled Water

• RTD Coffee

• RTD Tea

• Sports Drinks

• Energy Drinks

• Value-Added Water

LOSERS**

• CSDs

• Milk

• Fruit Beverages

Most non-alcoholic beverage categories grew in 2015, and niche categories generally outperformed large traditional categories

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IMPROVED

• Bottled Water

• Energy Drinks

• Fruit Beverages

• Milk

• RTD Coffee

• RTD Tea

• Sports Drinks

• Value-Added Water

WORSENED

• CSDs

2015 Beverage Report Card

More categories experienced improved performance in 2015 even when they declined

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Thou

sand

s of

SK

Us

New Beverage Product Introductions2001 – 2015

Source: Beverage Marketing Corp.; Mintel

New product introductions have mostly been on the rise after declining in 2009 due to the recession in the beverage industry

1.7 1.6

2.0

2.92.6 2.6

3.2

3.8

2.7

3.9 4.04.4

4.74.5

4.3

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


-15-


Cal

orie

s P

er C

apit

a P

er D

ay

U.S. Refreshment Beverage Calories Per Day1990 – 2015

212.5

251.6263.0

243.7 238.0230.3

222.7 214.8 212.2 208.1 205.2 201.1 200.6 200.5

1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Despite negative publicity on CSDs and other full-calorie refreshment beverages, caloric intake from refreshment beverages has been steadily declining over the last decade

• The growth of bottled water and lower-calorie options have contributed to the caloric decline



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10/155-Yr CAGR -1.9%

Carbonated Soft Drink Volume Growth2010 – 1H 2016

-1.8% -1.8%

-3.2%

-1.0%

-1.5%

-1.0%

-2.2%

-1.6%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16


Carbonated soft drink volume declined for the 11th consecutive year in 2015 and is on pace to decline once again in 2016

• Volume declines in the first half of 2016 are relatively consistent with 2015

• Volume dipped to 12.6 billion gallons in 2015




10/155-Yr CAGR -2.7%

Fruit Beverage Volume Growth2010 – 1H 2016

-3.4%

-4.2%

-1.9%

-2.8%

-1.1%

-2.7%-2.9% -2.8%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16


Fruit beverage volume has been declining in recent years because products are relatively expensive and high in calories



10/155-Yr CAGR 3.8%

Sports Drink Volume Growth2010 – 1H 2016

7.6%

2.3%

0.6%

3.0%

5.5%

3.9%

-0.2%

1.5%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16


Sports drink consumption continues to grow but at a more modest pace



10/155-Yr CAGR 10.4%

Energy Drink Volume Growth2010 – 1H 2016

17.2%

14.3%

5.5%6.4%

8.9%

6.7%5.3% 5.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16


Energy drinks are experiencing solid growth in the first half of 2016, but at a slower pace than 2015



RTD tea category growth has been consistent in a range of 3%-5% since 2014

• In recent years, the category has benefited from its innovation and healthy positioning

10/155-Yr CAGR 3.9%

RTD Tea Volume Growth2010 – 1H 2016

5.3% 5.3%

0.7%

3.9%

4.5%

4.1%

3.3%3.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16




RTD coffee has experienced continued solid growth since the recession, and is likely poised for more growth in the coming years

• Nevertheless, the category remains the smallest of traditional LRB categories

10/155-Yr CAGR 11.5%

RTD Coffee Volume Growth2010 – 1H 2016

7.8%

10.0%10.7% 10.6%

18.5%

13.1%

7.9%

10.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16




Fluid milk volume continues to decline – impacted negatively by competition from other categories, especially dairy alternatives

• Declines have been in excess of 1% since 2010

• Pricing can often mean the difference between category growth and decline

10/155-Yr CAGR -2.0%

Milk Volume Growth2010 – 1H 2016

-1.7% -1.6%

-2.3%

-3.2%

-1.4%

-0.6%

0.1%

-0.3%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16




The beer category has experienced lackluster performance over the last five years

• Craft beers have been the category’s greatest bright spot

Beer Volume Growth2010 – 1H 2016

10/155-Yr CAGR -0.1%-1.3%

1.2%

-0.9%

0.4% 0.3%

0.7%0.9% 0.8%

-2.0%

-1.0%

0.0%

1.0%

2.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16



Source: Beverage Marketing Corporation


Wine and spirits have experienced consistent growth in recent years

• Both have outperformed beer over the last five years

10/15 5-Yr CAGRWine 2.1%Spirits 2.2%

Wine and Distilled Spirits Volume Growth2010 – 1H 2016

5.3%

3.5%

2.2%

3.1%

1.4%1.3%1.1%

1.4%

0.7%

1.7%1.9%

3.3%

2.4%

3.1%

2.2%

3.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16





Projections

The Agenda


State of the Industry

Most successful mass-market beverage category in the U.S.

Every segment has grown in each of the last three years, and are all growing again in 2016

Projections show bottled water will surpass CSDs by the end of 2016 or beginning of 2017

With exception of retail PET segment, pricing is strong

Pricing is at all-time low for retail PET

Category is best positioned since pre-recession

Bottled Water Headlines



354.31,223.9

3,093.1

7,539.1

11,768.7

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1976 2005

U.S. Bottled Water Market1976 – 2015

(Millions of Gallons)

1985 1995 2015

Bottled Water Per Capita

Year Gallons1976 1.6 1985 5.11995 11.72005 25.42015 36.6



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Over the last 40 years bottled water has been the biggest success story of the refreshment beverage marketplace

• Since 1976, bottled water has grown at a CAGR of 9.4%, outdistancing every other beverage category

39-Yr CAGR 9.4%


Modest pricing increases in carbonated soft drinks coupled with significant pricing declines in bottled water have contributed to respective category performances

-29-

50

60

70

80

90

100

110

120

130

140

150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CSDs PET Single Serve Bottled Water

Wholesaler Dollars Per Gallon Indexed to 2000

Inde

x

2015 Absolute Price$4.18

$1.22





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

10/155-Yr CAGR 6.1%

Bottled Water Volume Growth2010 – 1H 2016

4.0%

6.5%

4.7%

7.4%7.9%

8.6%8.2% 8.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

'10/11 '11/12 '12/13 '13/14 '14/15 Q1 15/16 Q2 15/16 1H 15/16



4.7% 4.8% 4.9%4.5%

8.2%

6.9% 6.8%

7.6%

6.7% 6.9%

9.8%

8.3% 8.6%8.2% 8.4%

0%

2%

4%

6%

8%

10%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1H

U.S. Bottled Water Market QuarterlyVolume Growth2013 – 1H 2016

2013

Gro

wth

2014 2015 2016



On a quarterly basis, the bottled water category has shown consistently strong growth since 2011

• Growth in the first half of 2016 has been relatively consistent with 2015 growth


5.9%

4.7%4.0%

2.6%

6.3%

5.4%6.2%

8.0%7.2% 7.3%

11.5%

9.7% 9.9%9.3% 9.6%

0%

2%

4%

6%

8%

10%

12%


U.S. Bottled Water Market Quarterly Revenue Growth2013 – 1H 2016

Gro

wth

2013 2014 2014 2016



Total bottled water revenues in 1H16 have grown at 1% greater rate than volume


U.S. Bottled Water MarketLeading Companies by Volume Share

2010


Nestle Waters remains the leading bottled water company with a 30% share in 2015

• Private label powerhouse Niagara has gained the greatest share in the last five years


2015


Advances in Supply Chain Costs

High-speed bottle filling in a range of 16-18 million cases per year per line

Stable resin costs, which are likely to continue at least through 2017

Continued bottle light-weighting


While stable, PET water pricing continues to be historically aggressive and is likely to remain so into 2017

• Every-day pricing has been as low as $2.49-2.99 for 24-packs at retail


Retail PET Bottled Water by Source1995 – 2015

2005 20151995


The growth of private label, in part, has resulted in purified water now outselling spring water in retail PET category



U.S. Retail PET Water MarketBranded vs. Private Label

2010


While branded water outsells private label in the retail PET segment, private label has made significant inroads over the last five years


2015


Alkaline Water Plant WaterEssence Water

Essentia Trader JoeHint

Structured Water

Penta


Value-added waters of all types are now proliferating and gaining traction in all parts of the country

• These premium value, craft type waters are adding additional benefits to consumers’ water experience

-37-



Revenue continues to grow faster than volume in the retail bulk segment

U.S. Retail Bulk Water Market QuarterlyRevenue Growth2013 – 1H 2016

3.0%

2.5%

0.6% 0.7%

5.9%

2.4%

3.4%

2.6%

4.7%5.2%

8.2%

6.4%

3.9%

5.3%

4.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%


Gro

wth

2013 2014 2014 2016




HOD revenue has generally grown slightly faster than volume, but in the first half of 2016 pricing and volume have increased at a similar pace

• Rising input costs have brought about slightly higher pricesU.S. HOD Water Market Quarterly

Revenue Growth2013 – 1H 2016

1.6%

4.9%

3.6%

5.8%

5.3%

4.3%

5.7% 5.4% 5.5%

4.6% 4.8% 4.5% 4.7%

3.9%4.3%

0%

1%

2%

3%

4%

5%

6%

7%


Gro

wth

2013 2014 2014 2016




Revenue growth has slowed for vended waters and was essentially even with volume growth for the first half of 2016

U.S. Vended Water Market QuarterlyRevenue Growth2013 – 1H 2016

1.6%1.4% 1.3%

2.9%

4.7%

5.8% 5.8%6.1%

2.2%

2.9%

4.1% 4.2%

3.1%

2.1%

2.6%

0%

1%

2%

3%

4%

5%

6%

7%


Gro

wth

2013 2014 2014 2016




Revenue is generally outpacing volume growth for domestic sparkling water in the first half of 2016

U.S. Domestic Sparkling Water Market QuarterlyRevenue Growth2013 – 1H 2016

14.0%

11.1%8.9%

3.9%

11.3%

18.7% 20.1%21.6% 21.4%20.4%

27.0%28.6%

32.1%

43.6%

37.9%

0%

10%

20%

30%

40%

50%


Gro

wth

2013 2014 2015 2016






Projections

The Agenda


In the future, the marketplace will be characterized by numerous high-value, low relative volume opportunities

Projected Value

High Growth

Energy

Enhanced Fruit Drinks

Enhanced Water SS Dairy

Drinks

Low Growth

$500M

20%

0%

-5%

Bulk/HOD Water

Milk

Soy

(2010-2015 CAGR)Coconut Water

Hard Cider

AlcPouches

Table Wine

Imp. Beer

MalternativesCraft Beer

Enhanced RTD Teas

Vodka

SPFJ

100% Juice

Fruit Drinks

Flavored Water

$250M

Almond Milk

$1B

Diet CSDs

Reg CSDs

$35B $50B$25B$10B$5BPrem CSDs

RTD Teas

PET Water

Organic Juices

10%

RTD Coffee

Sparkling Wine

Straight Whiskey

Sports Drinks

Tequila

Projections

-43-


2016 and 2017 Liquid Refreshment Beverage Projections

LRB Category 2016(P) 2017(P)

Value Added Water +14.0% +15.9%

RTD Coffee +11.5% +11.0%

Bottled Water +7.8% +7.3%

Energy Drinks +7.5% +7.0%

RTD Tea +3.7% +4.1%

Sports Drinks +2.5% +3.2%

Carbonated Soft Drinks -1.7% -1.5%

Fruit Beverages -2.5% -0.9%

TOTAL LRBs +2.7% +3.0%

Projections

P: ProjectedSource: Beverage Marketing Corporation


The timeline for bottled water to become the #1 beverage category continues to contract, with late 2016 or early 2017 becoming a target date

• Bottled water’s solid steady growth coupled with the continued slide of carbonated soft drink sales are responsible for the shift in consumption patterns

Projected Water & CSD GrowthMillions of Gallons

2010 – 2020P

-45-

Projections

P: Projected Source: Beverage Marketing Corporation

0

3000

6000

9000

12000

15000

18000

2010 2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P 2020(P)

Bulk, HOD, Vended, Sparkling, Imported Waters

Premium Retail PET Waters

CSDs10-Yr CAGR: -1.6%

Enhanced Water

Flavored Water


Thank You

• Consulting

Beverage Marketing Corporation• Research • Advisory Services

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U.S. Bottled Water Market - Beverage Marketing Corporation · 2017. 12. 28. · 2010 2015 1H 16...

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Transcript of U.S. Bottled Water Market - Beverage Marketing Corporation · 2017. 12. 28. · 2010 2015 1H 16...