No.8873   2004. 8. 18

Summary Report on Suntory Mineral Water
- The growing and expanding mineral water market in the record summer heat -

1. Mineral Water Market

- The excellent sales in the mineral water market as the result of the record summer heat -
Since its release of mineral water in the market targeting business sectors in the early 1970s, there have been “nature and health” booms, the sense of insecurity towards tap water, leading to high consumer interests towards mineral water. This report aims to examine drinking water markets today, both in Japan and globally, as well as the prospects of expansion in the future.

2. Trend in Mineral Water Consumption Investigation

The following provides the 2004 report on tendencies in beverage consumption based on the investigation Suntory has been practicing since 1991.

1-1. Mineral Water Market in Japan

- Excellent sales of mineral water due to the record summer heat -

• The largest sales quantity in a single month

Due to the record summer heat wave, the sales of mineral water in July 2004 were in an excellent condition. In a single month of July, more than 15million cases of mineral water was sold (an increase of 36% over last year), and this is estimated to be the record sales in a single month. Moreover, “Suntory Tennensui” attained the record-breaking sales of 3.6 million cases (an increase of 59% over last year).

• Extended ranges in the market

Another primary factor for the excellent sales performance, besides the sweltering summer heat, was the extended ranges in mineral water markets. Compared to the sales in July 2003, which also witnessed heat waves, mineral water sold in the markets marked an immense growth this year. This is understood as the result of diversities in mineral water sold in the market to meet various consumer needs as well as mineral water becoming a vital part of consumers' everyday lives.

- The soaring growth of the mineral water market for three consecutive years The increase of 9% over last year despite cold summer -

The history of mineral water market in Japan goes back to the early 1970s when bottled mineral water was released to target business sectors. Since then, mineral water has gradually become an important part of Japanese people's everyday lives, reflecting the changes in times.

• The late 1980s: spreading into the households

In addition with the “nature and health' boom, the increased number of travelers overseas has brought mineral water closer to consumers. It has facilitated the spread of mineral water from business use to domestic use.

• The 1990s: the soaring growth in the market for domestic use

In the 1990s, there was an increased awareness regarding dirt and substances found in water storage tanks and tap water in households. As a response to these problems, domestically produced mineral water became important substitutes for tap water in many households. The imported mineral water also became hugely popular in 1993, and has expanded its sales, as well.
The 1994 summer heat and short supplies of water resulted in the demand increase and growing awareness to store water for times of emergency. Through such awareness, mineral water had consolidated its status as the vital part of everyday lives.
However, due to the findings of alien substances in imported mineral water in autumn 1995, the sales of mineral water started to drop drastically. In 1996, mineral water markets targeting households faced the falling sales below the previous year, which was the first fall in the 1990s. On the other hand, this incident made consumers to look upon safety and quality as the deciding factors in purchasing mineral water.
In April 1996, the ban on the sales of domestic small capacity PET bottle products was removed. As a result, it became more frequent and convenient for consumers to acquire mineral water, and domestically produced mineral water consumption has soared immensely.

• Year 2000 onwards:

- Passing the “Y2K” problem; soaring markets -
In 1999, there was a phenomenon that many households purchase mineral water for storage purpose, fearing the so-called “Y2K” problem. Its market sales increased 30 percent over last year.
In 2003, despite the cold summer, 1,464 thousand kiloliters of mineral water was consumed (an increase of 9 % over last year), demonstrating the soaring mineral water market despite the times of economic depressions (As reported by Japan Mineral Water Association).

- Diversified consumption and consciousness among consumers: “choice and occasions” -
In recent years, many new types of mineral water have been released in the market. In addition to this, there have been various new ways of distributions, including delivery services to households and pay services of mineral water at restaurants.
In such times, consumers seem to make choice of mineral water to suit their individual standards and situations.

• The trend in imported mineral water

Compared to 2003, the imported mineral water marked an increase of 25.3 % over last year. Among the exporting countries, France dominates more than 70% while America, Italy and Canada take up 20%, 2% and 2% respectively.

• The sales performance of “Suntory Tennensui”

The sales performance of “Suntory Tennensui *” marked the10% increase over last year, making up 21.3million cases of sales.

*The 2003 sales performance denotes the total sales performance of “Suntory Tennensui (Southern Alp's)” and “Suntory Tennensui (Aso)”.

• The annual per capita of mineral consumption in Japan

The per capita amount of annual mineral water consumption among Japanese people, along with the soaring mineral water consumption, increased almost doubly in five-year time; it increased from 6.9 liters in 1998 to 11.5 liters in 2003. (As reported by Japan Mineral Water Association.)

1-2. Mineral Water Market around the World

Around the world, mineral water consumption increases each year. In Europe, the most consumed area marked the 40.2% increase in five-year time; it increased from 36,074 thousand kiloliters in 1998 to 50,562 thousand kiloliters in 2003. Asia, including Japan, also marked the increase in their consumption from 14,820 thousand kiloliters in 1998 to 33,103 thousand kiloliters in 2003 which demonstrates the 123.4% increase in five-year time. (As reported by Beverage Marketing Cooperation of New York.)

• The annual per capita of mineral consumption around the world

Suntory compared the per capita amount of annual mineral water consumption around the world. The result shows quite large differences, reflecting the water situations and cultures of each country. With Italy consuming the most (182.3 liters), followed by France (148.0 liters) and Germany (125.4 liters), it shows that mineral water consumption was the largest in European countries. North and South Americas and Middle Eastern countries also present large per capita amounts. In addition, the world average is estimated to be 22.9 liters. In Japan today, the number of the per capita is 11.5% but it is anticipated to grow even larger. (The 2003 estimates reported by Beverage Marketing Cooperation of New York, Japan Mineral Water Association and Suntory).

<The Summary Report of the Poll>

• What they consumed as drinking water this year

“Mineral water (purchased at shops and vending machines)” accounts for 90.6 %, followed by “water from water purifiers at home” (52.2 %).

• Consuming mineral water and other types of water together

It is roughly divided into half between those who “drink only mineral water” and those who “drink mineral water and water from water purifiers together”.

• Different categories of mineral water consumed:

Among the consumers who drink certain brands of mineral water, “home-produced products” consumers take up 51.5 % while “imported products” accounts for 29.4%.

• Why they switched to mineral water

Those who “want to drink tasteful water” accounts for 49.7 %, while some “fear tap water” (34.2%)
- “Taste” and “credibility” is the key point.

• Why they drink mineral water

Many answered “because it tastes nice” (58.7%), “because it is safe” (40.4 %) and “because tap water is not trustworthy” (23.4%).
- Again, “taste” and “credibility” holds the key points.

• When they drink mineral water

“After taking baths” holds 37.7%, “during leisure” 32.5% and “during sports and exercises” 23.8 %.
- The majority of consumption takes places while the human bodies require water, but mineral water is consumed also at other various occasions.

• The use of mineral water today and tomorrow

Overwhelming answer was “as drinking water' (both now and in the future). There seems to be some trends to use for making teas, mixing with spirits and cooking.

• What they plan to drink as drinking water in the future

Most of them chose “mineral water (purchased at shops)” (56.0%) and “water from water purifiers at home” (49.4%) while only 10.4% chose “tap water”.

• The recognition towards “hard water” and “soft water”

Three out of four people (76%) recognize differences between 'hard water” and “soft water”.

• Understanding the standard to differentiate the contents of mineral water

Many people (47.2%) do not know the standard that differentiates “natural mineral water” and “bottled water”. The recognition is still slow.

As mineral water market has expanded its scale remarkably in recent years, mineral water has become the vital part of everyday lives.
In such a trend, Suntory investigates mineral water trends every year since 1991 in order to examine how mineral water is consumed, how often it is consumed, when it is consumed and how it is purchased. Moreover, from this year Suntory do not only limit its investigation on mineral water consumers at homes, but also more general consumers and how they think towards and consume mineral water as well as other types of beverages.