With the proposed sale of Serbian water bottler Knjaz Milos attracting the attention of major international players, the importance of this category is hard to ignore. The latest report from Zenith International backs this up, highlighting the fact that consumption is set to grow significantly as average consumption remains far behind that in Western Europe.
Considering current economic and political conditions in the region, Zenith's Agnieszka Banham says that the outlook for bottled water is 'very good'. With average consumption still more than five times lower than in Western Europe, he says forecasts og per capita consumption reaching 35.4 litres by 2008 are conservative, indicating that there should be plenty of activity in this category during the course of the next few years.
The global water industry is being driven by consumer demand for a healthier soft drink option, backed up by growing awareness of the importance of meeting the body's hydration needs. In the Central and Eastern European region this has led to a strong growth in bulk formats, such as water for coolers and bottled water sold in multi-packs. In turn this has led annual growth of 15.7 per cent during the course of the last five years leading to total consumption of 9.5 billion litres in 2003, accounting for 6.1 per cent of the total global market.
Although the four international players - Danone, Coca-Cola, Nestlé and PepsiCo are all present on the market, it still remains fragmented. This is particularly true in the largest market, Russia, where smaller local players still tend to dominate the market share.
Average consumption in the region is 23.3 litres per capita, but in the most dynamic markets, which include Russia, Poland, Romania and Hungary, there has been huge growth during the course of the last five years. The Zenith report says that the highest consumption per capita is currently found in Slovenia, with a per capita rate of 79 litres. People in both Poland and the Czech Republic get through 58 litres of bottled water a year, whereas in Hungary the figure is 57 litres. These figures compare favourably to the US, the world's largest market by volume, which in 2002 had a per capita consumption of 81 litres, and to the average consumption of 101 litres in Western Europe.
But the potential for further growth is great, says Banham. "All of these countries are rich in water resources and have brands that are part of national history; for example Narzan and Borjomi in Russia and Theodora in Hungary."
"In all of the countries major multinationals are present. These companies' investment into existing brands and creation of new ones, combined with fierce competition from local producers, growing customer affluence and hydration awareness are the major drivers behind the bottled water growth in the region."
Zenith's report also highlights that there are a number of distinct characteristics to the market in this region. One of the most distinct is a preference for naturally sparkling water, derived from an abundance of such sources being excavated over the centuries. Further to this still water has been more widely introduced in the course of the last ten years, largely in an attempt to avoid drinking poor quality tap water.