Intensely competitive

The bottled water category is increasingly crowded and suppliers are having to come up with new ideas simply to get on the shelf.

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By  David Ingham Published  October 6, 2005

|~|masafibig.jpg|~|Behemoth: Masafi is the clear leader in the UAE's retail water market.|~|In the hot, often humid, climates of the Middle East it’s little wonder that the bottled water market is a boom segment. Regular water intake is essential for maintaining health, but many consumers just don’t trust tap water. It is to bottled water, therefore, that they turn for refreshment. This demand is reflected in figures supplied by AC Nielsen, which tracks sales through retail outlets. In 2004, bottled water sales in the UAE were worth AED 327 million (US $89.1 million), a massive rise of 34.8% over the previous year. The new year started at a similar pace: In January 2005, sales of bottled water at retail outlets were worth AED 52.6 million, a rise of 32.6% over the same period a year ago. The figures include five gallon units. This hasn’t, of course, gone unnoticed by suppliers and the bottled water segment is one of the most fiercely contested in the FMCG sector. Although there are already dozens of brands, both local and international, on sale, recent months have seen a number of new players come into the market. One of the UAE’s largest foodstuff suppliers, Abu Dhabi National Foodstuff Company (Foodco), launched its own bottled water brand as recently as this year. The company says that it has big plans for its Hafeet label, and that it is looking for a 1.5% value share of a market that was worth around US $90 million in 2004. “To raise its visibility in this competitive marketplace, Foodco will invest heavily during 2005 on radio, print, sampling, banded offers, event sponsorships, gifts, outdoors, listing and shelf rentals,” explains Hagop Kassabian, marketing manager of Foodco. Another new local entrant is Spinneys Home Choice, the supermarket’s private label offering. The water is produced for Spinneys by Gulfa and carries an aggressive price of just AED 0.75 for the 1.5 litre unit. The cheapest branded product costs AED1.25. Whilst there is no shortage of new players, however, it appears that not all of them are going to succeed. “There’s a very clear brand distinction, especially in the crowded supermarkets,” says Maxwell Carvalho, head of retail measurement services (UAE) with AC Nielsen. “You see many new entrants come in and they die down within a year. Shelf space is getting costlier and we are predicting that most supermarkets will eventually not have more than five or six brands on the shelf. They’ll have the market leader, number two, one cheapie and one private label.” That therefore leaves space for two brands and if recent activity is anything to go by, imported designer waters are keen to grab those slots on the shelf. One of the most recent arrivals is Contrex, a Nestle brand that will be distributed by GulfCo. The product is positioned as an aid to dieting and Nestle and GulfCo hope this will make it stand out and gain that all important listing. According to Nestle Waters, Contrex is rich in calcium and magnesium, elements that are often missing in low calorie diets. With higher pricing than local brands, Contrex is the kind of product that can provide retailers with nice margins if it takes off. Another brand expected to appear soon in the market is VodaVoda, a designer water from Arteska International Company, based in Serbia & Montenegro. As well coming from somewhere slightly unusual, this product’s selling point is its trendy image and unusual packaging. At trade events, its booths look more like arts exhibit than show stands. Momir Bjelica, the company’s assistant marketing manager, told Retail News Middle East that the company has won several prizes for its branding of VodaVoda and that it has been listed in Asda, the UK supermarket owned by Wal-Mart. It’s not just new players, however, that are looking to shake things up. Even established players are freshening up their brands and looking to innovate. Evian’s latest initiative is its ‘On-the-Go Essential bottle’, a 500ml unit that mirrors that of the current 1 litre bottle. The unusual design allows the bottle to be grasped easily, making it easier for those on the go to carry around. Evian, a Danone brand, has always been positioned as a healthy drink that provides essential minerals and now the message is that this is more easily accessible. The potential of the region’s bottled water market hasn’t gone unnoticed by the world’s largest supplier, Nestlé Waters. Its brands are on sale all over the Middle East and it has also gone as far as to make equity investments in regional players. Its most recent move was the formation of a partnership with Algeria’s tieup with Boissons Gazeuses des Frères Zahaf (BGFZ) Group (formerly Boissons Sidi El Kebir). The two companies have created a new entity called Société Source de Taberkachent, in which Nestle Waters will hold 51% of the shares. Société Source will take over the running of the BGFZ Group’s bottled water business, which includes the popular Sidi El Kebir bottled water brand. According to Nestle, Algerians drank 550 million litres of bottled water in 2004, a consumption level of more than 16 litres per person. Consumption has been growing at over 20% annually in recent years. “In addition to our two pillars, Europe and North America, we hope to continue to take advantage of every opportunity to consolidate our position in other regions of the world without lowering our performance,” says Carlo Donati, chairman, Nestlé Waters. “North Africa offers real development opportunities for our brands.” Even with a strong message, innovation and investment, success is still far from guaranteed in the bottled water segment. “It’s definitely getting harder to come in with a new label,” says AC Nielsen’s Carvalho. “The competition is absolutely cutthroat. "There’s a lot of below the line competition, promotions and manufacturers are buying space. The question I’m increasingly asked by clients is whether or not they get return on their merchandising activity — the labels, the stickers, the shelving.” Even if they can get the listing they want, newcomers in the market and niche brands have to face up to the ascendancy of existing players. In the UAE market, for example, there is a clear, entrenched market leader. Masafi has around 41% value share of the market for units between 330ml and 2 litres (the company does not sell five gallon containers.) Despite its ascendancy, the company cannot be accused of resting on its laurels. Zeina Mouhawej, marketing manager, Masafi Mineral Water Co, says that the company has stayed ahead by trying to emphasise quality and, “enhancing our in-store presence, continuing to innovate and introducing new marketing campaigns and activities. We are in a competitive market, but our brand is known for its quality, safety and credibility and competition for us doesn’t come from all water brands, but only from the credible brands.” Like many other categories, the bottled water market is increasingly competitive. Although there is no shortage of players looking for a piece of the action, not everyone is going to be successful.||**||

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