Water coolers accounted for 22 per cent of total bottled water consumption in 2003, according to a new report from analysts Zenith International, accounting for 460 million litres. The hot summer weather was, of course, the principal driver of growth last year, but the growing availability of water coolers, and an awareness of the health benefits of regular hydration, also contributed.
Nonetheless, coolers still accounted for just 24 per cent of the bottled water market growth last year, showing that retail bottled water sales continue to dominate as consumers stock up for domestic use or 'on-the-go' consumption.
But the heatwave also had a negative effect on new installations - companies had less time to seek new customers as they were too busy trying to meet increased demand from their existing clients - and growth from new coolers accounted for just 7 per cent of the total.
Growth has been helped by the water cooler market settling down after a period of fierce consolidation, according to Zenith. Market leaders Nestlé and Danone have largely reconfigured their recently acquired portfolios, resulting in the creation of Nestlé Waters Powwow and Eden Springs UK, respectively, and these two players now account for 52 per cent of the entire market.
But there are other players vying for the office space: Well Well Well, Culligan and newly formed Angel Springs occupy have a combined 18 per cent volume share and will look for further opportunities to close the gap on the market leaders, especially as consolidation has not been without its problems, in particular for the two top companies.
"The new market leaders have suffered a degree of indigestion," said Zenith research director Gary Roethenbaugh. "New unit placements lagged behind record summer volumes partly because distributors had to focus all their resources on meeting the heightened demand for water at the expense of finding new business."
But smaller companies were not the only competition for the big guns. "Another key factor was increased competition from mains fed point of use coolers," said Roethenbaugh. "This resulted in a marked rise in cancellation rates, particularly amongst larger accounts."
Indeed, point of use coolers are now surfacing as a serious alternative to bottled water coolers, with more and more distributors adding them to their ranges, if only as a defensive measure, he added.
The combination of hot weather and consolidation may have caused a temporary blip in unit growth, but Zenith's report makes it clear that this slowdown will be just that - temporary.
"The cooler industry is expected to regain some of its previous momentum once the top two companies have completed their rebranding and focus is renewed on organic expansion," the report concludes, predicting that the market will reach 850,000 units by 2008, with consumption approaching 700 million litres.
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