The report stated that the industry has seen a mixed bag of growth over the past five years, with adverse economic conditions mitigated to some extent by more consumers opting for healthy, convenient beverages.
IbisWorld estimates that industry revenue has remained relatively stagnant over the five-year period through to 2012-13, with an average annual increase of just 0.2% to a total of A$600.7m.
“In 2012-13 alone, bottled water manufacturing industry revenue is expected to be relatively flat, declining by 0.1%,” the report revealed.
Growth on the horizon
However, the report also predicted that over the next five years, the industry will return to the high growth rates of years past.
“Over the years through to 2017-18, revenue is forecast to increase at an annualised 2.5% to reach A$678.5m.”
The key drivers of this will include the recovering economy, rising average temperatures, growing health awareness and the ongoing need by consumers for convenience.
“Demand from supermarkets and convenience stores are expected to pick up again as consumer discretionary income increases. Opportunities for further growth lie in product innovation and the vertical integration of production lines.”
Another growing trend highlighted in the report was the adoption of in-house bottle production by big manufacturers like Coca-Cola Amatil (CCA) in order to increase economies of scale and reduce overheads.
“New production methodology has also reduced the amount of plastic resin required in the manufacture of bottles, both lowering costs and addressing environmental concerns.”
Green concerns a threat
The report reiterated that mounting environmental criticism, however, still remains a major threat to the bottled water industry.
IbisWorld said that rising public concerns over the contribution of PET plastic bottles to landfill and carbon emissions generated by the production and transportation of bottled water have had an impact on sales in recent years.
This threat was highlighted most recently in January last year, when the University of Canberra banned the sale of bottled water on campus, and in 2009 when Bundanoon, a town in New South Wales, banned the product in its municipality.
Soon afterwards, the NSW government ordered all government departments and agencies to stop providing bottled water to their employees, citing the product’s environmental impact.
“While the direct effect of these decisions is expected to be minimal, collectively they add to the negative publicity surrounding the product, which undermines marketing and promotion efforts by industry participants.”
Promoting green credentials
CCA, the industry’s largest player, responded to environmental criticism by investing millions of dollars to ensure fewer raw materials are used in the manufacture of PET plastic bottles.
The company invested A$45m in new blow-fill bottle technology, which it claims will produce the lightest PET plastic bottle in Australia. These bottles are fully recyclable and contain 20% recycled material.
CCA also invested in large-scale recycling projects and moved to improve its environmental image by emphasising that its water is sourced close to its bottling facilities and comes from underground springs and reservoirs.
“Producers have moved to counter this criticism by developing more environmentally friendly packaging and emphasising their green credentials in the extraction of ground water,” said the IbisWorld report.