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How Will Bottled Water Growth Shape Water Giants’ Global Market Shares in Soft Drinks in 2020?

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As bottled water is forecast to drive growth of the soft drinks market in many countries, it is time to assess the potential playing field and examine scenarios as to how Danone and Nestlé’s market shares will develop in 2020.

Using figures from Analytics we illustrated how the cola giants’ market shares will look in part one of a two-part series. This is the second part, illustrating the potential effect of water growth for the two water giants.

Here are the key findings for part two:

In figure 1, the bubble chart shows that overall, soft drinks remains a growth market, with no region expecting a decline. North America will be a sweet spot for Nestlé and it is likely to see a 0.5% share gain over 2015-2020, expanding its net sales by US$1 billion, benefiting from the water boom in the US. Nestlé has a plan to push the sales of premium bottled water in the US, and Perrier largely outperformed its sister brand Nestlé Pure Life consistently for the past several years. Nevertheless, Nestlé may see its overall soft drinks share dip or stagnate in Asia Pacific, although it may still see net sales gains of around US$500 million.

Danone SD scatter for upload

Note: Analytics

By contrast, Danone will continue to see good growth in Asia Pacific, to grow share by 0.4%, translating to a net value increase of around US$1.6 billion in 2015-2020, thanks to its strong position in Indonesia and the ownership of Mizone functional water brand. As US consumers’ spending confidence recovers or even grows, and the migration from carbonates to premium bottled water is expected, Danone may still have a chance to obtain share from rival brands in the US. Value growth opportunity for premium brands Evian and Volvic exists. In Latin America, Danone is expected to expand both sales and make share gains.

It is worth noting that Brazil is expected to offer significant potential, with sales of bottled water exceeding carbonates by 2020. Currently, Danone and Nestlé hold prominent positions in Brazil’s water category, with volume shares of 2%. They should look to strengthen their brands, or acquisitions given the fragmented nature of the market.

Figure 2

Danone <span class=TextHighLight><span class=TextHighLight>water</span></span> category for upload

Note: Analytics

In figure 2, the bar chart shows that both Danone and Nestlé will make a limited contribution to overall soft drinks growth globally in 2015-2020, as their offerings are highly concentrated in bottled water. Nestlé’s strong position in RTD coffee may help its share gain in overall soft drinks. Both companies’ latest corporate movements show that they do not seem keen to diversify into other soft drinks categories. Nestlé, for example, appears to be more inclined to develop sophisticated skin care products.

In terms of a bottled water specific growth scenario, Danone is strong in functional water in Asia while Nestlé will continue to benefit from its carbonated water. As Coca-Cola is active in marketing its Glaceau and SmartWater beyond the US or even China in years to come, Danone is likely to encounter greater challenge from rival brands. The US new concept of variety of functional water, such as caffeinated water, may become increasingly evident in other countries. Despite this, water giants are likely to be in a better position than cola players in 2020.

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