whats selling a view from the customers part ii

CSD conducts exit polls and consumer surveys at the point of sale to find out what customers want when it comes to bottled water.

Retailers concerned about slow sales growth or stagnant fuel margins can expect a boost from bottled water as analysts and consumers alike expect water sales to continue flowing for at least the next three years.

Statistics from Beverage Marketing Corp. indicate that U.S. bottled water sales and consumption continue to rise as consumers increasingly choose bottled water over other commercial beverages. The trend was reflected in 2005, when total bottled water volume exceeded 7.5 billion gallons, a 10.7% increase over the previous year. Bottled water sales also climbed, by 9.2% from $9.18 billion in 2004 to $10 billion this past year, according to the research firm.

In the convenience channel, bottled water sales for the 52 weeks ending July 2 totaled $2.16 billion, a strong 15% increase from the $1.88 billion reported in the previous year, according to Information Resources Inc. (IRI).

Stephen Kay, a spokesman for the International Bottled Water Association, said consumers “are gravitating toward bottled water because it’s a refreshing, hydrating beverage that provides an alternative to drinks that contain calories, caffeine, sugar, artificial colors and flavors or alcohol.”

Beverage Marketing Corp. backs that claim reporting total carbonated soft drinkvolume declined from 10.24 billion cases (15.4 billion gallons) in 2004 to 10.18billion cases (15.3 billion gallons) in 2005. The 0.6% decline followed growthof 0.7% in 2004 and 0.4% in 2003. The overall soft drink market in the U.S.has not seen annual volume growth greater than 1% since the late 1990s.

The slow growth leading up to 2005’s decline resulted in steady erosion of the average intake. Per capita consumption declined every year since 1998, when it stood at 54.9 gallons. By 2005, per capita carbonated soft drink consumption was two gallons lower at 52.9 gallons, according to the marketing group.

While Coke and Pepsi are having a difficult time with soft drinks, they are more than making up for it with bottled water. According to IRI, Pepsi’s Aquafina reported convenience store sales of $405 million for the 52 weeks ending July 2, up 8.6% from $373 million in the previous 52 weeks. The water brand also owns a healthy 18.8% of the channel’s sales. Pepsi’s Propel and Flavorsplash (see chart) also registered in the top 10 c-store brands.

Coke’s Dasani finished a close second in the same timeframe reporting $378million in sales, up 17.6% from $322 million in the 52 weeks ending July 2,2005. Nestle Waters is also a strong player in the market with three of thetop 10 brands totaling more $259.9 million in the period, up from $224.8 millionin the previous 52 weeks.

Consumer Feedback
In the second part of our consumer feedback series, Convenience StoreDecisions conducted exit polls and consumer surveys to find out what factorsinfluenced consumers’ bottled water purchases. Exit polls and surveys were conductedin Colorado, Los Angeles, New Jersey, New York and Pennsylvania.

As industry numbers indicate, beverage customers in all five markets showeda propensity for bottled water. At a 7-Eleven in the Philadelphia market, BeverlyWalder considered herself a regular bottled water customer. She bought two DeerPark sport bottles because she said she prefers the taste to Evian, a brandprominently featured at the store.

Walder also claimed to be loyal to sport bottles and proved it by eschewing 7-Eleven’s “two bottles for $2″ deal because it didn’t include the sport size. Walder emphasized that price wasn’t a factor, she just preferred the Deer Park brand.

Michele Issel, also a bottled water consumer at a Philadelphia area 7-Eleven, prefers 16-oz. Deer Park bottles. She said she buys the Deer Park over other brands because it tastes “exactly the same, it just costs less.”

Incidentally, Issel also didn’t take advantage of the Deer Park promotion in purchasing a single bottle. When asked why, she said she didn’t see the signs, which were only posted above the cooler doors and difficult to see. She further chastised the clerk for not mentioning the special as she paid for the single bottle.

At a Colorado Diamond Shamrock, husband and wife Anthony and Beverly Nelson both purchased bottled water. He Dasani, her Aquafina. Though both retailed for $1.49, the big question, of course, was “Why the different brands?” In a word: taste.

“I find Dasani to be smoother and crisper,” Anthony Nelson said, though his wife disagreed. “Aquafina has a much smoother, fresher taste,” Beverly Nelson said, adding that she remains brand loyal with her bottled water. “If the store doesn’t have Aquafina, I will pass (on bottled water).”

Anthony Nelson, on the other hand, said while he has a brand preference, Dasani, he would buy a competitive brand that is similarly priced “without thinking twice about it,” if Dasani was not available.

Generation Gap
Marion Kelly, a 60-something customer from Stony Point,N.Y., considers herself a regular bottled water consumer, but said the biggestfactor in determining what to buy is price and value. Brand, bottle type (regularbottle vs. sports bottle) and water type (spring vs. purified) were not consideredwhen making a bottled water purchase. Another factor for her was convenienceand need.

“I try to avoid soda and juice so I buy a bottled water, but if it’s overpriced,I will go without,” said Kelly, at a Hess Express in West Haverstraw, N.Y. “Butwhen it’s really hot, I don’t mind paying a little extra.” That was the caseduring the July heat wave in New York when she purchased two 1-liter bottlesof Aquafina at the convenience store. Kelly estimates she has purchased “threeor four” different brands over the past few months based on price. She was alsosomewhat of a skeptic when it came to buying bottled water and didn’t understandthe difference between spring water and purified water, a trend found more inconsumers in her age group. “I assumed it was all tap water,” she said.

Barbara Kieffer, another customer in her 60s, was aware of the difference between purified and spring water, but said it didn’t play into her purchasing decision. Neither did brand. She made her purchasing decisions based on price and convenience as she shopped at a Mobil Mart in Suffern, N.Y.

“If bottled water is at a price I agree with [no more than $1.50 for a 1/2 liter bottle] and it’s near the checkout counter, I tend to buy it as an impulse item,” Kieffer said.

However, Kieffer, who gravitates toward gas stations that offer full-service, said bottled water tends to be more of a planned purchase for her and is the one item that will get her out of her car and into the convenience store. The items she is most likely to buy with water are candy and salty snacks.

What’s more interesting, is that both Kieffer and Kelly said they prefer to buy bottled water in bulk sizes, either gallon bottles or by the case—either at a supermarket or Wal-Mart—and said they would consider buying in bulk at their local convenience store if it was competitively priced.

Kelly went on to say that bulk purchases at a convenience store would be appealingif clerks offered to carry the item to her car. “At (the supermarket), I havea shopping cart that I can wheel right out to the car,” making the decisionto purchase bigger packages much more attractive, she said.

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Dollar Share of Category for 52 weeks ending 7/2/2006:

TOP TEN BRANDS OF BOTTLED WATER

 
52 weeks ending 7/2/2006: (in Millions)
52 weeks ending 7/2/2005: in Millions)
% Change:
Aquafina, PepsiCo Inc.
$405.1
$373.0
8.6%
18.8%
Dasani, Coca-Cola Co.
378.9
322.3
17.6
17.5
Propel, PepsiCo Inc.
167.2
163.7
2.2
7.7
Poland Spring, Nestle S.A.
110.8
88.4
25.3
5.1
Glaceau Vitamin Water, Energy Brands Inc.
88.1
35.2
150.3
4.1
Arrowhead, Nestle S.A.
81.6
86.2
-5.3
3.8
Ozarka, Nestle S.A.
67.4
50.2
34.3
3.1
Private Label Brands
60.3
49.3
22.1
2.8
Fiji, Natural Waters of Viti Ltd.
59.1
36.3
62.8
2.7
Flavorsplash, PepsiCo Inc.
55.1
20.2
172.6
2.6
Source: Information Resources, Inc., Total US ConvenienceLatest 52 Weeks Ending April 30, 2006

Editor’s Note: This is the second of a two-part series on packaged beverages.In this month’s issue, CSD examines the factors influencing bottled water sales.Last month, we featured isotonics/sports beverages and energy drinks.

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