Near-Water: Profiling Growth Opportunities in Hydration Beverages

Strategy Briefing

About This Report

Feb 2017

Bottled water is expected to be the fastest growing category in global packaged beverages over the next five years. Meanwhile, functional waters and plant waters have emerged as two of the fastest growing ‘enhanced’ water categories. As consumers seek lighter, healthier, replenishing drinks, there is a need for the industry to expand and balance its portfolio of added value hydration drinks to suit occasions ranging from everyday consumption to post-athletic recovery.

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Near-Water: Profiling Growth Opportunities in Hydration Beverages

Water is driving volume growth in non-alcoholic drinks

Bottled water accounts for the vast majority of expected beverage volume growth across all regions. “Hydration” beverages – including lower volume but higher-priced enhanced waters, sports drinks and juice drinks/stills – also vastly outperform sparkling beverages and refreshment options.

Higher-value hydration products are needed

Hydration remains the most important need state in packaged drinks. Despite expected volume growth for the hydration category through to 2021, unit prices for “hydration” drinks are still low relative to sparkling options. There is a need to offer added-value waters and premium hydration products (particularly sports drinks and plant waters) to achieve value growth from consumers’ demand for hydration.

Changing consumer attitudes benefit “hydration” drinks

Across food and beverages, consumers are changing how they eat, drink, exercise and think about their daily nutrition. Encouragingly, hydration consistently ranks near the top of consumer health priorities, and may be poised to benefit from consumers’ interest in water and water-like options if operators can achieve the right mix of added-value hydration options.

Scope of the Report

Scope

The Size and Scope of Hydration

Summarising the opportunity: Building a better water
Hydration is one of global consumers’ top wellness priorities
Ability to meet multiple needs drives value in beverages
What exactly is a hydration beverage?
Hydration drinks represent about half of global beverages volume
But creating value in the water category is vital for growth
China, the US and Japan account for the majority of hydration spend
China illustrates the complexity of the hydration marketplace
What drives the hydration category?
Population trends and hydration
The income and price ladder for added-value hydration
The role of hydration beverages in the sugar debate
How is consumers’ attitude to hydration changing in 2017?
Three general hydration consumption groups
Key differences exist between hydration segments

Everyday Replenishment

Summary: Balancing flavour and hydration for everyday consumers
In reality, flavour, refreshment and indulgence are key drivers
Near water: Flavour innovation for the mainstream consumer
Hydrating children: Responsible products and marketing
Tea and juice can play a role in casual hydration
“Refreshing drinks” reshape the hydration product mix in China
“Rehydrating” drinks remain a growth area in Japan
Young, urban consumers drive casual hydration in Indonesia
Alternative sources of daily hydration outside of soft drinks

Active and Advanced Hydration

Summary: Sports drinks is growing, but strategies must adjust
Consumers are becoming more active and health-conscious
Active consumers will spend freely on products that deliver
Sports drinks have traditionally served active consumers
Natural and low-calorie demand forces sports drinks to diversify
But is functional water a viable alternative for active consumers?
Gatorade seeks to extend its brand and broaden its appeal

Lifestyle and Natural Hydration

Summary: Plant waters are a global value opportunity in hydration
Explaining the global growth of coconut water
Global coconut and other plant waters: The US and Brazil dominate
Lifestyle: Coconut water commands higher prices in hydration
Are other plant waters (or super premium waters) a threat?

Hydration in 2021

Satisfying demand across the hydration spectrum
Hydration in 2021: Blurring categories and changing consumers
A mixed portfolio of hydration beverages is driving growth
Two big hydration brands evolving in 2017
The blurring lines of isotonics and water could confuse consumers
Building a more balanced hydration portfolio for the long term
India: The future mega-market for hydration in the longer term
Summary: Marketing enhanced water brands to meet needs
Other keys to growth