Outlook for the bottled water and tea industries

Posted by Daniel Palmer on 6th July 2009

Bottled water has been a victim of the recession in some of the world’s hardest hit developed economies and the outlook for the product is clearly not as bright as it was just one year ago. Black tea sales have also taken a hit, as consumers change their consumption behaviour.

Bottled water

According to Simon Maddrell, Euromonitor’s industry manager of hot and soft drinks, the credit crunch is squeezing the still bottled water category in two ways, firstly, by encouraging a shift into tap water and, secondly, by inducing stronger demand for sweeter ‘comfort’ beverages. If this were not bad enough for the industry, bottled water has also fallen victim to environmental campaigners, resulting in highly damaging media exposure over much of 2008.

As economic growth declines in 2009, consumption of still bottled water is forecast to contract in North America for the first time in over a decade, while volume growth in Western Europe is projected to fall below 2%, according to the latest available data from Euromonitor International. In Australasia, the relatively robust economy has reportedly helped shield the impact of potential decline, with growth rates expected to fall from just under four per cent to 3.5 per cent.

Black tea

Western European consumption of black tea is forecast to decline in 2009, reflecting downward pressure from the global economic crisis.

“Black tea is vulnerable because cash-strapped consumers can save money by using, for example, two tea bags per pot instead of three or one bag to brew two cups. That type of consumption manipulation can have significant implications on volume sales at a national level,” Datamonitor advised. “An ageing population means, in reality, a shrinking consumer base. This is compounded by a growing rejection of black tea among younger consumers, who might aptly be described as the “Starbucks Generation”. This consumption shift is less to do with macro-economic conditions and much more to do with fashion.

“In short, the coffee sector has been far more innovative and dynamic in its on-trade development over the past decade, symbolised most visibly by the growth of coffee houses as day time social meeting places. Ironically, Starbucks might even be the one to rescue leaf tea, with its roll out of a new range of black tea choices this year.”

The research suggests an option to increase sales would be a further push toward ethical options such as Fairtrade. It can strengthen the supply chain by helping many vulnerable growers stay afloat, and also benefit the tea consumption culture going forward – encouraging greater knowledge about the different variants of leaf tea as well as countries of production.