Italian Water Market Far From Saturation Point

Aug. 20, 2004

Italy is western Europe's biggest bottled water market, with both the highest overall volumes and the largest per capita intake. But despite this flood of water, the market is far from reaching saturation as Italians turn increasingly to bottled water as a healthy alternative to carbonates or tap water, the reported.

The Italian bottled water volumes totaled 10.2 billion litters (2.24 billion gallons) in 2003, leaving per capita consumption at a whopping 177 litters (39 gallons), according to a market analysts Euromonitor. Analysts reported a volume growth between 1998 and 2003 of 22 percent, reflecting the trend towards bottled water consumption as a health product.

According to Euromonitor however, while this trend has been largely responsible for most of the growth, the key contributing factor to the overall success of bottled water in Italy is the low unit price, making it a regular part of every Italian's staple diet.

"As one of the largest bottled water producers in the world, Italy boasts 175 mineral water sources which package and sell 280 brands of bottled water," said Euromonitor analyst Hope Lee. "Natural mineral water accounts for around 98 percent of total bottled water consumption in Italy. Unlike some countries where mineral water remains a luxury, mineral water is an everyday drink for most Italians. However, the low price of bottled water carries with it attendant problems of profitability for the water industry."

Non-carbonated water accounts for 65 percent of total bottled water consumption in Italy, growing by over 30 percent in volume terms between 1998 and 2003, compared with just 8 percent growth for carbonated water over the same period. "Still [non-carbonated] water benefited the most from the general increase in demand for healthy drinks as it is perceived as a healthy alternative to other soft drinks and more thirst-quenching than sparkling water," said Lee. "There is also a tendency for Italian consumers to use still water for cooking at home."

Non-carbonated water was also the beneficiary of the increasing segmentation of functional or "enhanced" waters, fortified with various health benefits, Euromonitor reported and suggested that fortified bottled water is likely to grow in popularity amongst consumers whose health awareness is rapidly growing.

However, while there are opportunities for growth, the Italian market already has so many competing brands, and carving a niche for a new product is a costly affair with producers having to spend considerable amounts on advertising and promotions to make their new brand strand out.

As a result, manufacturers tend to refresh their image by introducing brand extensions rather than totally new brands, according to Lee, the reported.

Spring water is another bright spot in the Italian water industry, although the segment is still very small, accounting for around 1 percent of volume sales in 2003, according to Euromonitor. Spring water is increasingly employed in the water cooler segment, however, and its home consumption has also been increasing in recent years.

Spring water's main point of differentiation with the plethora of mineral water brands comes in packaging. Large size packaging formats are not permitted for mineral water in Italy, which can legally only be bottled in packages containing no more than two litters.

Sparkling water, meanwhile, remains a comparatively small sector in the Italian water industry. Between 1997 and 1999, artificially carbonated bottled water suffered from negative publicity regarding high levels of sodium, but in the ensuing years, sales recovered slightly, with volume growing at 4 percent, helped primarily by the introduction of lightly carbonated water, which consists of artificially carbonated and naturally sparkling water.

However, Euromonitor's research shows that carbonated water is unlikely to exhibit fast growth in the future, the reported.