Market saturation hinders bottled water’s growth in China, reaching 27 billion litres in retail volume sales in 2017

March 22, 2018

While China remains one of the biggest bottled water markets globally, the latest research from global market intelligence agency Mintel reveals that retail volume sales are on the decline. In 2017, China’s bottled water market was forecast to reach sales volume of 27 billion litres*, up from 25 billion litres in 2015. However, sales volume growth has dipped from 5% in 2015 to 4.2% in 2017, and is predicted to fall further to 2.8% by 2021.

In what is the world’s most populous country, the expansion of bottled water has been relatively fast, with per capita consumption rocketing from just 5 litres in 2007 to 20 litres in 2017. This is relatively low compared to more developed markets like Mexico (222 litres per capita) and the US (120 litres per capita).

“Due to trends in premiumisation, China’s bottled water industry has seen rapid growth over the past decade. However, it was only a matter of time before market saturation started inhibiting growth potential for bottled water brands, especially amidst intensified competition in the wider beverage market. With more Chinese consumers drinking bottled water, brands are under pressure to differentiate themselves from rivals. Despite a saturated market, innovation opportunities still exist, and premiumisation remains key for value market growth,” said Loris Li, Associate Director, Food and Drink, at Mintel.

50% of Chinese consumers aged 20-49 drank unflavoured sparkling water in 2016.
Due, in part, to more premium options, Mintel research shows that half (50%) of Chinese consumers aged 20-49 drank unflavoured sparkling water in 2016, up from 29% in 2015**. Furthermore, three in five (60%) drank flavoured sparkling water in 2016, an impressive increase from 30% in 2015**.

Bottled water remains one of the strongest performing sectors of the global non-alcoholic drinks market, with retail sales volume in key global markets climbing by 6.5% between 2016 and 2017 to reach an estimated 203 billion litres. The US is currently the largest bottled water market, with volumes forecast to reach 39 billion litres in 2017. The US is followed by Mexico (28.7 billion litres), China (27 billion litres), Indonesia (16 billion litres), and finally Germany (12 billion litres)—rounding out the list of top five bottled water markets globally.

India’s bottled water sector outpaced growth of any of the other major global markets between 2016 and 2017, recording an impressive 19% growth, although from a low base***. Also among the top five fastest growing bottled water markets are Indonesia (13.2%), Vietnam (11%), the Philippines (10.6%), and finally South Korea (9.9%).

“Recognising that India’s population is among the largest in the world, it remains a sleeping giant in the global market. However, India’s bottled water retail sales have climbed significantly in the last year. This growth is being driven by rising incomes, consumer concerns over hygiene, and convenience needs, particularly when out of home. India has a fragmented and comparatively unregulated bottled water market, but big, global companies appear to be keen to expand their presence in the country,” commented Alex Beckett, Associate Director, Food and Drink, at Mintel.

When it comes to concerns about sugar in beverages, carbonated soft drinks’ (CSDs) loss is bottled water’s gain. Mintel research reveals that 25% of Americans claim to be drinking more water. Among this group, 76% say they are drinking fewer CSDs, and 70% claim to be increasing their water intake to reduce their sugar intake. In the UK, as many as 48% of bottled water drinkers/buyers have switched to bottled water from other drinks such as CSDs, rising to a huge 55% of consumers under the age of 34.

Further, Mintel Global New Products Database (GNPD) reveals that there was an increase in the number and share of flavoured water launches bearing a low/no/reduced (L/N/R) sugar claim in 2017****. Of all the flavoured waters launched globally in 2017, those bearing a L/N/R sugar claim accounted for 32% of launches, up from 23% in 2016.

“The growth that the global water market is experiencing reflects consumers’ preference for less sugary drinks, lively levels of innovation, and uncertainty about the safety of domestic water supplies. Growth is also benefiting from an increased willingness among consumers in certain markets to pay for premium bottled water. Flavoured waters with the low/no/reduced sugar claim can appeal to consumers who are switching off of sugary drinks, but still want flavour, adding momentum to growth in the wider bottled water market,” continued Beckett.

Beckett went on to say: “World Water Day (22 March) is about focusing attention on the preciousness of water. The United Nations estimates that nearly a third of people, residing in 50 countries, will face major water shortages by 2025. Water resources for agriculture, as well as drinking water, are dwindling and it’s inevitable that the bottled water market will be affected, and its practises scrutinised. While current desalination production processes are expensive, energy intensive and, in some cases, linked with having a damaging effect on the marine environment, the magnitude of the demand means that this technology will develop quickly, with new, more cost-effective solutions entering the market. Purified sea water also promises to continue rising in profile as a natural, nutrient-rich ingredient, and already sells in bottles in some parts of the world. Rain harvesting is a thousand-year-old practice, but promises to have added relevance in future, as precious fresh water supplies struggle to match our demand.”

**Six months to December 2016 v six months to December 2015
***4.8 billion litres in 2016 to 5.7 billion litres in 2017 (estimated)
****January to December 2017

Interviews with Loris Li, Associate Director, Food and Drink, at Mintel, and Alex Beckett, Associate Director, Food and Drink, at Mintel, are available on request from the press office.

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For the latest in consumer and industry news, top trends and market perspectives, stay tuned to Mintel News featuring commentary from Mintel’s team of global category analysts.

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