Bottled Water in Thailand

Headlines

·         In 2008 bottled water registers total volume growth of 9% to reach 2,292 million litres

·         Bottled water companies strive to differentiate their offerings

·         Carbonated bottled water posts the highest growth in 2008 with total volume sales up 12%

·         Unit prices increase only marginally in 2008

·         Boon Rawd Brewery Co maintains its leadership position during 2008

·         Bottled water is anticipated to record a 7% total volume CAGR over the forecast period

Trends

·         Since bottled water manufacturers have little room to distinguish their brands from others, image building is gaining in importance. Major companies are increasingly using ‘emotional marketing’ for creating brand awareness in consumers’ minds. Still bottled water completely dominates sales in Thailand while carbonated bottled water remains insignificant. People in Thailand are consuming more bottled water since it is considered a viable substitute for other types of soft drinks, again thanks to the emerging health-consciousness trend.

·         The 2008 growth rate for total volume sales of bottled water at 9% was slightly faster than the review period average. Aggressive marketing activities and greater visibility for bottled water at both retail and foodservice outlets contributed to higher levels of consumption among the Thai population. Bottled water packaged in plastic PET bottles is gaining in popularity at the expense of glass bottles as these are easier to carry and look more sophisticated.

·         Carbonated bottled water saw the fastest growth within bottled water overall even though its sales base remains exceptionally  small. The product is rather a niche category, purchased mainly by expatriates and visiting foreigners since Thai consumers are actually not very familiar with carbonated bottled water and tend not to consume it as part of their daily lives.

·         Both the on- and the off-trade are important distribution channels for bottled water. Some large manufacturers tend to focus on either one or the other in order to create a competitive advantage in terms of distribution. Glass bottles are a popular packaging format via foodservice although the penetration of PET bottles within this channel is gathering pace. PET bottles are very prominent in the retail channel thanks to their image of on-the-go lifestyles. As Thai consumers become more health conscious they tend to buy increasing amounts of bottled water through retailers for home consumption.

·         The rise in sales of bottled water is evident via both the off-trade channel and the on-trade, with the former showing a slightly higher increase during 2008. The number of local brands of bottled water available via on-trade outlets such as restaurants, hotels, pubs and bars is increasing. Additionally, water refill stations are growing in popularity; these can now be found in many locations thanks to their lower prices for drinking water as compared to branded varieties of bottled water.

·         Average unit prices for bottled water largely remained stagnant in 2008, showing only a marginal increase. Bottled water is a very price-driven category, and manufacturers have to keep their prices competitive. Most of the marginal upward movement in unit prices was brought about by the increase in drinking bottled water on the go, which led to an increase in the consumption of the smallest pack sizes, namely 500ml and 600ml.

·         Still bottled water accounts for almost 100% of total bottled water sales in Thailand, with carbonated bottled water holding only a miniscule share. Manufacturers of still bottled water position their products as being hygienic, convenient and portable. Widespread availability nationwide also helps to generate increases in consumption. Moreover, manufacturers tend to conduct aggressive promotional activities and campaigns, with the majority using emotional marketing in order to create brand loyalty.

·         Direct selling is another method of distributing bottled water in Thailand, the only category where this plays a role. Usually this takes the form of large-size, 20-litre plastic containers, and is prominent in both urban and rural areas. The containers are normally distributed by pick-up trucks for delivery to consumers’ homes and  are returnable for refilling, usually in exchange for a full one. Direct selling has benefitted to some extent from the growing popularity of PET bottles due to their perception as offering higher quality and greater convenience.

·         Flavoured bottled water and functional bottled water have yet to be introduced within Thailand. Although soft drinks such as water with added minerals, amino acid drinks and soy peptide drinks are available these are considered to be functional drinks for the purposes of reinvigorating health and boosting energy.

Competitive Landscape

·         Boon Rawd Brewery Co Ltd with its Singha brand maintained the leadership position within bottled water during 2008, accounting for 17% of retail value sales. The second biggest player was Nestlé (Thailand) Ltd with 16% followed by Serm Suk PCL with the Crystal brand. Generally speaking the choice of distribution channel significantly determines the availability of bottled water products to the end-user whereas the product itself has only limited potential for differentiation between competing brands. The Singha brand from Boon Rawd Brewery Co has achieved the leading position largely thanks to its widespread distribution via both the on- and the off-trade channels.

·         Nestlé (Thailand) Ltd saw the biggest increase in retail value sales during 2008. This was largely as a result of the company’s bottled water products having very widespread distribution via supermarkets/hypermarkets and convenience stores, both of which are rapidly expanding across Thailand. Nestlé (Thailand) is increasingly using emotional marketing to communicate effectively with its target customers. Given its success within bottled water the company has plans to expand production capacity so as to address anticipated increases in demand.

·         Domestic brands are able to compete effectively against international brands particularly in still bottled water, by far the largest category. International brands dominate sales of carbonated bottled water since these products are mostly imported and sold at considerably higher prices.

·         There were no significant new product innovations within bottled water during 2008. However, there were developments in terms of packaging design and the labelling of PET bottles to make these more attractive and modern-looking.

·         A number of marketing campaigns and activities were launched by key manufacturers of still bottled water in 2008, although carbonated bottled water continued to suffer from limited awareness. Boon Rawd Brewery Co Ltd organised the Singha Hot Summer Party campaign as well as mini-concerts to strengthen its brand recognition. Advertising via mass media such as TVC and other publications was also used to create greater awareness and visibility among consumers nationwide.

·         Bottled water continued to be packaged in PET bottles, HDPE bottles and glass bottles during 2008. However, consumers are increasingly favouring PET bottles over HDPE and glass alternatives. There has been some development in terms of packaging design, for example PET bottles used for the Nestlé Pure Life and Crystal brands are now easier to handle and have a more modern, distinctive and eye-catching look.

·         Standard brands predominate in bottled water within Thailand and are widely consumed throughout both retail and foodservice outlets while premium products occupy a stronger position through the on-trade, particularly hotels, restaurants and catering. Premium brands remain a niche whereas economy varieties are growing in prominence.

·         Private label is gaining significance within still bottled water thanks to its slightly lower retail price position  as well as growing availability through supermarkets/hypermarkets and convenience stores nationwide.

Prospects

·         The continuing trend towards increased health and beauty consciousness among Thai consumers will lead to better, more informed selection of food and drinks. Due to its ‘good-for-your-health’ image, still bottled water is likely to benefit from this trend over the forecast period.

·         The growth in total volume sales of bottled water is expected to slow down marginally between 2008-2013. That said it will nevertheless remain quite impressive, at a CAGR of 7%. Bottled water in Thailand is likely to become even more competitive given intense activity on the part of the major players as well as the emergence of smaller newcomers. Aggressive pricing strategies are likely to be seen as well as significant efforts by manufacturers to create better prospects for bottled water as a whole.

·         Few if any forecast threats to potential growth can be identified. On the contrary positive factors in support of further growth are likely since there will be an increase in demand over the forecast period. The key challenge for manufacturers will rather be to maintain volume share and compete successfully in a more aggressive environment where consumers might not be able to differentiate among brands solely on the basis of product content.

·         Carbonated bottled water is anticipated to show a faster rate of growth in volume terms compared to still bottled water, albeit from a much smaller sales base. Still bottled water is likely to represent significant competition for carbonated varieties during the forecast period since this is the category where aggressive marketing campaigns will be concentrated; in contrast, manufacturer activity is expected to be muted at best within carbonated bottled water.

·         Overall, bottled water is expected to see intense activity over the forecast period, with low pricing policies continuing to be a prominent feature alongside other core strategies such as emotional marketing. Retail pricing for different brands of still bottled water is likely to be very competitive, with manufacturers closely watching each other. Discounting is unlikely to be used as a primary tactic but may well be kept in reserve for use during specific periods of time and via certain retail distribution channels. It is not likely to be seen within foodservice since on-trade prices vary according to location.

·         There were no significant new product launches in 2007-2008, although there were developments in terms of more attractive and easier-to-handle packaging. Such developments have enabled the Nestlé Pure Life and Crystal brands to achieve greater consumer acceptance.

·         Branding is likely to remain a constant focus among the major manufacturers. Strong brand loyalty will enable them to retain their customer bases and differentiate their products in the consumer’s mind. Companies can be expected to engage in point-of-sale promotional activities regarding the health benefits of drinking bottled water. In addition, marketing partnerships with on-trade agencies are likely to be established in order to boost foodservice volumes over the forecast period.

Also Read  Report on In home Consumer Electronics Market.  Contact Mahasagar Publications.