The recent failed European launch of Coca-Cola's purified water brand, Dasani, would suggest that consumers are unwilling to pay a premium for what is essentially mains tap water. Yet numerous companies are successfully selling that product to offices and institutions throughout the region, nowhere more so than in the UK, where Coke's plans for Dasani came so spectacularly undone.
But while Dasani was competing with other bottled water brands, pitched at a comparatively high price, successful purified water marketers have taken a different route - targeting the burgeoning water cooler sector.
Water coolers accounted for 22 per cent of total UK bottled water consumption in 2003, according to market analysts Zenith International, and have become an increasingly regular site in offices across the country. But last year's summer heatwave highlighted one major drawback with traditional bottle-filled coolers - the challenge of meeting short-term increases in demand.
As a result, an alternative system has become increasingly popular, point-of-use (POU) or mains-fed coolers. The latest figures from Zenith show that the number of POU units installed across western Europe last year surged 35 per cent to 207,000 - more than three times the growth for the more established bottled water cooler industry.
POU systems purify and chill mains tap water - essentially the same service as Coke was offering with Dasani - but unlike the bottled water product, this concept has been broadly accepted by sceptical European consumers, particularly in larger offices, where competition with bottled water coolers is most intense, as well as hospitals, schools and other sites. Many units can provide, hot, cold and sparkling water from one single source.
"In 2003, while the bottled cooler industry prioritised deliveries to parched offices during the summer heatwave, POU operators were concentrating on new accounts. As a consequence, 52% of new POU installations were converted from bottled cooler contracts," said Zenith research director Gary Roethenbaugh, hinting at the reason why purified water coolers have been successful where bottled water varieties have not - cost effectiveness.
Zenith's data show that 62 per cent of POU units are based in offices, with factories the second most popular location, but 2003 saw a marked swing towards intensified activity in hospitals, schools and sites run by public authorities.
"Often under tight budgetary pressures, they have appreciated the long term cost savings that POU can offer," said Roethenbaugh.
One recent development, for example, saw the installation of POU machines from Waterlogic in council offices throughout the city of Plymouth, in south west England. Waterlogic claimed that the move would save the council as much as £50,000 a year by switching from bottled water coolers. It had previously cost up to £70,000 a year to keep the council workers supplied with fresh water.
Waterlogic declined to comment on the cost of its units when contacted by FoodandDrinkEurope.com, but another leading UK supplier, Ridgemont, claims to provide savings of up to 80 per cent when compared to bottled water coolers.
Waterlogic, which claims to be Europe's leading distributor of mains-fed drinking water dispensers, would also not be drawn on how it managed to successfully sell its units to the same British public which so resoundingly rejected Dasani.
It is perhaps ironic, given the level of opposition to the Dasani launch there, that the UK is in fact the biggest European market for POU coolers, accounting for 41 per cent of all units, with more than 60 companies operating in this field according to Zenith - a far cry from the increasingly consolidated bottled water cooler sector.
France and Ireland are the other two most significant markets, each with slightly above a 10 per cent share.
POU dispensers are still relatively rare compared to their bottled water counterparts - around 11 per cent of the European cooler market comes from mains-fed units, according to Zenith - and both POU and bottled water coolers face a real challenge if they are to steal market share from bottled water in the all-important home market.
Nonetheless, Zenith predicts annual growth in POU unit installations of over 20 per cent up to 2008, driven by sustained marketing investments focusing on the cost-effectiveness (and, increasingly, on the safety element of purified water) of such units.
But breaking into the home market could prove very difficult, with UK consumers at least much less likely to be persuaded of the merits of paying extra cash for tap water, no matter how chilled or pure it might be. Moreover, home consumers have less need for hot water dispensers - since they have kettles - and there are numerous water purifiers already available for home use.
There may be better opportunities in countries where the quality of tap water has traditionally been lower, although these countries also tend to have the greatest penetrations of bottled water sales as a result, putting the POU producers in direct competition with the water industry giants such as Danone and Nestlé.
For more details of how to order your copy of Zenith International's West Europe Point of Use Coolers 2004 report, click here.