Bottled Water
Headlines
·
In 2008, sales increase by 18%
in total current value terms and 8% in total volume terms, to reach AZN84
million and 76 million litres
·
Tap water shortages and poor
quality drinking water in much of Baku positively impacts the demand for
bottled water in 2008
·
Flavoured bottled water registers
the highest sales growth in 2008: by 12% in total volume terms and 27% in total
current value terms
·
Total value growth is almost
two and half times faster than total volume growth in 2008, due to the high
inflation rate in Azerbaijan
·
Although bottled water is
mainly controlled by local brands, Turkish still, carbonated and flavoured
bottled water penetrates further in 2008
·
Over the forecast period,
bottled water is expected to increase by a 5% total volume CAGR and by a 7%
total constant value CAGR
Trends
·
In 2008, bottled water
developed further due to increased consumption for drinking and cooking
purposes. As a result of ongoing construction projects in Baku in the form of
bridges, underground water pipeline changes, and the reconstruction of motorways
and main roads, the population suffered tap water shortages. Therefore, the
lack of tap water was a significant problem in Baku and surrounding areas. This
boosted the demand for bottled water, especially 2- and 5-litre containers.
·
Compared to the 6% total volume
CAGR over the review period, sales grew faster in 2008, due to the increased
consumption of still bottled water, especially in 5-litre containers. Moreover,
the increased interest in flavoured bottled water, such as the Turkkizilayi,
Sok, and Nigde Gazozu brands boosted the growth of this category.
·
In addition to increased
consumption, boosted by the rising consumer need for purified water, Mars
Overseas Baku Ltd TSAZ introduced Aquafina Sparkling Lemon and Aquafina
Sparkling Mandarin flavoured bottled water, which stimulated interest and sales
growth.
·
In 2008, the off-trade channel
accounted for a 74% share of total volume sales, following a 10% increase in
sales. 5-litre containers of still bottled water, which had previously been
sold only in supermarkets, became available through independent small grocers
and other grocery retailers. In addition, small 200-250ml glass bottles of
flavoured bottled water widely entered the country. Customers have become more
demanding about the quality and health benefits of bottled water.
·
In 2008, the on-trade channel
grew by 3% in volume sales terms. This growth was mainly derived from the
development of restaurants, cafés/bars, pubs, and wedding houses. In the
on-trade channel, the bottled water assortment generally consists of leading
brands such as Bonaqua and Aqua Vita, in both still, and carbonated formats.
However, Zolotaya Mineralka (Essentukskiy Pivzavod OOO), Sirab (Babek Sirab
Ltd), and Borjomi (GG & MW) carbonated bottled water and the newly-launched
Turkkizilayi flavoured bottled water brand by Kizilay Turkiye Dernegi also
feature strongly in full-service restaurants.
·
Fountain on-trade volume sales
of bottled water continued to expand, growing by 14% in 2008 to reach one
million litres. The main distribution of fountain sales of bottled water is
bakeries, the Chudo Pechka bakery chain and some small stores and street
vendors. Bottled water fountain sales attract consumers who prefer to drink
plain water without the addition of syrup.
·
In bottled water, retail value
growth outpaced retail volume growth in 2008. In current value terms, the
average unit price increased by 9% in total value terms, by 15% in off-trade
value terms and by 8% in on-trade value terms.
·
The consumers of bottled water
in Azerbaijan are not limited by age or socioeconomic group. All types of
consumers drink bottled water. Some more affluent consumers use still bottled
water all year round to make soup or other liquid meals due to the lack of
purified potable water.
·
Bottled water is most commonly
consumed during the summer, between May and October. Therefore, sales are high
during these months. In urban areas, consumption is generally high, whereas in
rural areas, due to the abundance of natural springs and water wells, sales are
low compared to big cities.
·
In general, bottled water
refill stations, where consumers take usually 10- and 20-litre containers to be
filled, had a negligible presence in Azerbaijan. However, specially assigned
officials from companies, such as Aqua Vita-TAC, and Shollar, depending which
company a dispenser’s owner has signed a contract with, come to the office,
take the empty container and fix a replacement onto the water distiller.
·
The standard pack type/sizes
for home and on-the-go purchases are 0.5-litre, 1-litre and 1.5-litre PET
bottles. Smaller plastic and glass bottles are convenient for on-the-go
consumption. 1.5-litre, 2-litre and 5-litre plastic bottles of still products
are the preferred choice for home cooking, however, such packaging is affordable
to higher-income consumers only. Recent trends demonstrate that most urban
educated consumers view bottled water as a “healthier” alternative to other
soft drinks, especially carbonates.
Competitive Landscape
·
Aqua Vita-TAC (Aqua, Aqua Vita,
Aqua Minerale, and Shaghdag brands) was the leading player in 2008 with a 21%
share of off-trade volume sales. The company’s leading position is mainly
attributable to constant advertising campaigns to support its main brands.
Moreover, Aqua Vita has long been recognised by consumers as a quality
producer. Bonaqua (Baku Coca-Cola Bottlers Ltd) was the leading brand in 2008
with a 19% share of off-trade volume sales. This brand also benefits from high
recognition from consumers over many years.
·
Nestle registered the largest
increase, sales in volume terms, by some 50%, however this was from a low base
amongst the larger players Mars saw the fastest growth with 33% in 2008.
·
This growth was largely due to
the Aqua Sparkling flavours launched by the company in flavoured bottled water
at the end of 2007. Aquafina Sparkling Lemon and Aquafina Sparkling Mandarin
quickly became favourites among children and teenagers and young adults. The
biggest sales decreases were experienced by Khayal Holding and Premium Springs
OOO.
·
Bottled water in Azerbaijan
remained largely dominated by domestic manufacturers, which accounted for
almost a 60% share of off-trade volume sales. Among the key domestic
manufacturers are Aqua Vita-TAC, Babek
Sirab Ltd, Badamli Mineral Sular Zavodu.
Major internationals with local production include Mars Overseas Baku
Ltd TSAZ and Baku Coca-Cola Bottlers Ltd. The main international manufacturers
are Turkish, Russian, Georgian, Ukrainian companies. Other imported bottled
water brands such as Vittel, Volvic, S Pellegrino, Perrier, and Schweppes,
recorded relatively low sales in Azerbaijan despite the rising popularity of
these brands. They are less competitive in terms of price compared to the most
popular domestic brands, which account for the majority of shares.
·
The key new product launches in
2008 were recorded by Mars’s Aquafina Sparkling brand. In addition, flavoured
bottled water experienced the inflow of new brands, which had an important
impact on the category. The new flavoured bottled water brands are: Turkkizilayi
(Kizilay Turkiye Dernegi), Sok (Migros Turk AS), and Nigde Gazozu (Nigde
Mesrubat ve Gida San Tic Ltd Sti). The main still bottled water launch
concerned Damla (Damla Ltd MMC), which offered plastic bottles in various sizes
on entry. Carbonated bottled water also welcomed new brands and products:
Zanavi (Borjomi produkt OOO); Alasehir Sarikiz (Ciftci kardesler Gida Ins Pet
Oto Nak Taah San); and Essentuki (Essentuksky Zavod Mineralnykh Vod OAO).
Alasehir Sarikiz was distributed through both the off- and on-trade channels.
·
Overall, the advertising of
bottled water was very limited. The only brands advertised on TV in 2008 were
Aqua and Shaghdag (Aqua Vita-TAC) and Borjomi (GG & MW).
·
Bottled water packaging did not
experience noteworthy development at the end of the review period. Plastic and
glass bottles remained the only pack types used. 0.5-litre, 1-litre, 1.5-litre,
2-litre PET packaging led, followed by glass bottle versions. Moreover, more
local manufacturers, especially established ones, offered still bottled water
in 5- and 10-litre containers alongside existing small and medium-sized
bottles. However, the majority of imported brands, mainly from Russia and
Turkey, are packed in glass bottles.
·
Standard brands are the most
competitive since they are widely available and satisfy consumers through a
good price and quality balance. The average purchaser chooses standard brands,
as there is little trust in the water source of the cheapest brands. Premium
brands are normally distributed through supermarkets. The key consumers of
premium brands are mainly affluent locals, short-term visitors or long-stay
foreigners. In general, price, quality, the origins of the water source, label
image and packaging design remained the main competitive tools among premium,
standard and economy brands.
Prospects
·
The domestic manufacture of
flavoured carbonated bottled water, which occurred at the end of the review
period, is predicted to trigger the further development of and demand for
flavoured bottled water by foreign producers, mainly Turkish companies.
·
The 2008 forecast on the
development of flavoured bottled water was partially justified. However, the
domestic production of flavoured carbonated bottled water stabilised unit
prices, which boosted volume sales.
·
Compared to the review period,
total volume sales are expected to register slightly slower growth over the
forecast period. The main reason for the predicted slowdown is the increasing
maturity of bottled water in Azerbaijan. However, the consumer base will continue
to expand over the forecast period, due to the growing health concerns of
Azerbaijan consumers and improving standards of living.
·
No potential threats to
forecast growth are expected over the forecast period. In general, bottled
water will register strong volume and value sales growth, largely due to the
developing health and wellness trend.
·
Flavoured bottled water is
expected to grow by a 14% total volume CAGR over the forecast period. This
product type will enjoy higher demand, as it offers a combination of plain
water with fruit flavours. This will stimulate the demand from consumers
looking for interesting and healthier beverages.
·
The competitive landscape will
intensify through the launch of new bottled water enriched with vitamins,
minerals, and fruit flavours. The appearance of new brands positioned in the
mid-priced segment will balance price movements, providing strong conditions
for discounting and price competition.
·
The new products launched in
2007-2008 are expected to perform well in the short term. The prospects for the
new Aquafina Sparkling products, in lemon and mandarin flavours, are quite
promising. All new launches of flavoured bottled water will remain popular
throughout the forecast period. Damla is expected to maintain its presence in
still bottled water over the long term, since the brand is appealing and it
offers plastic bottles in various sizes with an attractive bottle design. In
response, other manufacturers are likely to introduce more brands/products,
stimulating the interest of consumers through products enriched with minerals
and vitamins or new bottle designs.
·
In 2008, direct selling
off-trade volume sales reached nine million litres. Although the prospects for
direct selling are quite promising, sales of smaller bottled water products are
likely to be higher, since they are bought both for family and individual
on-the-go consumption.
·
Over the forecast period, there
is no company activity expected in bottled water.
