Thursday, March 7, 2013
Competition Boiling Over For Mineral Water Sales
TOKYO (Nikkei)--The mineral water market has flourished since the March 2011 earthquake, but intensifying competition could push producers into a war of attrition.
Domestic shipments grew 3% on the year to a record 210 million cases in 2012, increasing for a second straight year, according to beverage market research firm Inryou Souken Inc.
Eager to quench consumers' thirst for mineral water, companies are ramping up production and expanding home delivery.
Convenience store operator FamilyMart Co. (8028) is investing 1.6 billion yen to build a plant in Niigata Prefecture to produce private-brand mineral water starting this December. The plant will complement an existing site operated by a Miyazaki Prefecture firm in which FamilyMart holds a stake.
With both plants, FamilyMart aims to increase sales in fiscal 2016 to the equivalent of 40 million bottles of 500ml each, more than double the tally for fiscal 2012.
The market for water deliveries in large-capacity containers for home water coolers has perked up as well. In 2012, production grew 2.3-fold in three years to an estimated 1.07 million kiloliters, according to the Japan Bottled Water Association.
Delivery prices typically work out to around 100 yen a liter, pricier than bottled water sold at stores. But delivery services "offer more convenience because they don't require a consumer to lug heavy bottles and also do not generate waste" since jugs are collected, says an official at a major beverage company, citing demand among senior citizens.
But retail prices of mineral water have tanked as competition intensifies.
The average price of a 2-liter bottle slid to 90 yen in 2012, down 8% on the year, according to Nikkei POS (point-of-sale) data. Major retailers' store brands continue to sell briskly, while higher-priced imports have struggled. Kirin Beverage Co.'s sales of Volvic brand water sank 17% on the year on a volume basis, while Ito En Ltd.'s (2593) Evian brand declined 7%.
(The Nikkei, March 7 morning edition)