On May 15, Hungary became the first Central European country where Nestle started selling Aquarel, a product already available in Portugal, Spain and Belgium.
"Our plan is to turn it into an all-European brand," said Victor Espirito Santo, managing director of Kekkuti Mineral Water Rt, a member of Nestle Waters, Nestle’s mineral water unit. "The Nestle brand contains guarantees for Hungarian consumers in terms of quality and image. We are taking advantage of that," he added.
Danone’s new product goes under the name Vitalinea.
"Danone is a well-known and respected brand on the market. Using this is part of the group’s strategy," said Francois Puls, managing director of Magyar Viz Kft, a joint venture of the France-based Danone SA and Italy’s San Benedetto SpA.
"Danone’s Vitalinea brand is already known to local customers from biscuits and dairy products," he added.
Danone, which has not produced mineral water locally so far, started a greenfield investment this April, building a plant with San Benedetto in Lajosmizse, southeast of Budapest. Production there will kick off later this year. Vitalinea is currently imported from Poland.
"Even though we are losing money at the moment, we wanted to introduce the new brand before the [summer] season started," Puls said, adding that Magyar Viz is investing a total of Ft 2 billion (E8.2 million) in the Lajosmizse plant.
Meanwhile, according to Espirito Santo, Kekkuti is using economies of scale in Hungary by distributing Aquarel through the same channels as the firm’s other mineral water brand, Theodora Quelle.
Local consumption of mineral water is really bubbling, according to Puls.
"Hungary is one of the most dynamically developing countries of the region, even though it is a small market compared to Poland," he said. "The double-digit growth in mineral water consumption in the last five years indicates outstanding perspectives for the sector."
Espirito Santo agreed. "In the coming five to six years, I expect local consumption to increase to over 70 liters [per person per year]," he said.
Espirito Santo said Hungarian consumption of mineral water doubled over the last four years to an annual figure exceeding 40 liters per person, and is closing in on West European levels.
However, the market remains price-driven, as indicated by the growth in the market share of private-label mineral water products, Espirito Santo argued.
"Own brands might account for the largest share of the growth in the coming years," he said.
Puls, on the other hand, said he believes the market is getting less price-oriented.
"It is getting to be a marketed market, which means the products are better positioned and consumers have started to pick brands by their characteristics," he said.
He observed that some consumers ignore price differences to buy their preferred premium imported waters or splash out on the traditional gyogyviz — "medicinal water" with a strong mineral content, bought mainly for curative purposes.
How much can you swallow?
Espirito Santo said Kekkuti expects a total turnover of Ft 600 million—Ft 700 million from the sale of 10 million liters of Aquarel this year. This corresponds to a market share of about 2%.
Nestle Waters, which holds a 97% stake in Kekkuti, is the legal successor of Perrier Vittel, which ceased operations last year. Nestle’s international mineral water brands include top names such as Perrier, Vittel and San Pellegrino.
While Danone’s flagship global water brand is Evian, Puls said it is difficult to define a market share target for a new product in a rapidly expanding market, but that he expects Danone to be one of the four largest players.
"Magyar Viz is a startup, so our target is to get it to work and fill in the production lines," Puls said.
Source: Financial Times
