Review of Russian Market of Bottled Mineral and Drinking Water

According to various estimations, only 2.5-3% of the Earth’s water is freshwater, and major part of that water is in ice. Thus, Earth has not too much drinking water. Reports on natural water resources going exhausted are coming every year. This trend underpins vibrant development of the market of bottled mineral and drinking water.

According to findings of UNESCO’s International Hydrological Program held in 2008, Russia was one of ten countries in the world with the purest water. Finland was heading that list. However purity of water resources in Russia is disputable. Entering top-ten countries with the purest water is related just to great volume of water resources in Russia, so industrial wastes are dissolved still keeping low level of pollution in comparison to other countries. Meanwhile just 1% of water consumed by Russians corresponds to international quality standards.

Purchase of bottled mineral/drinking water turned into obligatory item of expenditure for many Russians. In 2010 sales of soft drinks where bottled mineral and drinking water provides a quarter almost reached RUR 150 billion. In general sales of soft drinks are growing during a year though some decline is observed in Q1 due to reduced consumption of soft drinks in winter. In January–March 2011 retail sales constituted RUR 36.2 billion – minus 24% against October–December 2010. In H1 2011 retail sales constituted RUR 90.4 billion – plus 41% over the same time of 2010.

In 2010 sales of soft drinks were mainly driven by the Central Federal District – more than one third of all-Russia sales value. Sales in Privolzhsky FD were by 2 times less. In 2010 Southern FD was the third important region in sales of soft drinks with earning of RUR 19.4 billion rubles in the review category.

In terms of federal subjects the leader of soft drinks sales in 2010 was Moscow with RUR 24.1 billion of sales value. Same index in Moscow Region was almost by RUR 10 billion less. Krasnodar Territory closes top-three of federal subjects with the largest retail sales value in soft drinks category. Decline of sales value in the review category was observed in 2010 only in three federal subjects of Russia – Zabaikalye Territory, Altai Republic and Kabardino-Balkaria. Other federal subjects reported increase of sales value. For instance, in the Republic of Bashkortostan sales increased almost by 3.2 times in value, in Leningrad Region – by 2.8 times.

On the average Russian market of bottled mineral and drinking water is growing by 14-15% in volume annually. Year 2009 was the exclusion with 4% decline. According to “Intesco Research Group”, in 2010 market volume recovered positive dynamics and reached 465.3 million decaliters – year-to-year increase constituted 15.5% or 62 million decaliters. In H1 2011 the market saw 9% growth in volume over the same period previous year. Therefore market volume demonstrates continued ascending trend.

Share of import on Russian market of bottled mineral/drinking water is insignificant: in 2010 foreign manufacturers controlled just 0.2% of the market. In August 2011 media informed that “Borjomi” water could return to Russia – for many consumers in our country this brand associates with high quality product and “good old Soviet days” when fraud products just didn’t exist. In 2006 import of mineral water from Georgia was banned due to non-compliance with quality standards, so if manufacturers can guarantee safety of their products then water from Georgia would re-appear on Russian market.

Bottled mineral and drinking water are rarely referred to as separate segments because of significant overlaps in applications and consumer properties. As a rule drinking water implies bottled water purified and sometimes artificially mineralized. Water can be taken from various sources: natural spring/well, lake or even a tap. Mineral content in this kind of water is rather low being limited to 0.5 g/l.

Mineral table water is also suitable for everyday consumption. Unlike regular drinking water it originates only from natural sources. If the water is called mineral it means it was bottled right after it was drawn from the spring/well and never was processed in any way. Examples of this category are well-known “Yessentuki #17” and “Borjomi” with salinity level up to 14 g/l of various minerals, or Belgium “Spa” offered both with low and high mineral content.

Natural mineral water splits into 3 groups. The first group comprises table water containing less than 1 g of mineral salts per liter. Second group is constituted by universal kinds of mineral water with salinity level 1 to 10 g/l, and the third group includes healing mineral water with mineral content 10 g/l and higher.

Artificially mineralized water is a separate group comprising regular drinking water enriched with mineral salts or carbonated in accord with salinity/carbonation level of some natural mineral waters.

Aggregate production volume of all kinds of bottled drinking and mineral water in Russia constituted 459.8 million decaliters in 2010 – plus 15.3% over 2009. In Russia production of bottled mineral/drinking water is seasonal with peak of production in summer. As a rule, peak is followed by significant decline continued up to November. Some upswing of production is observed in December as consumption increases during New Year holidays. The lowest production volumes are seen by the market of bottled mineral/drinking water in January.

Share of the Central FD in total production volume of bottled mineral/drinking water in Russia constituted 22% in 2010. Same share was provided by manufacturers of the North Caucasian FD. The leader among federal subjects was Karachay-Cherkess Republic with one tenth of total production volume on the review market. Second important region in production of bottled drinking/mineral water was Stavropol Territory with 8.6% of production volume.

Natural mineral waters – table, universal, healing – provide about 52% of total production volume, while natural drinking water, mineralized drinking water including carbonated varieties have the rest of production volume.

In mineral water segment the most important category in terms of production volume is table mineral water – in 2010 Russian manufacturers bottled 92.7 million decaliters of it. Share of this category in segment of mineral water constituted 38%, and on the review market in general – 20%. Production is mainly driven by Karachay-Cherkess Republic – 21.1 million decaliters.

Non-carbonated universal and healing mineral waters provided 18.1% of production volume in 2010, while carbonated universal water – 13.7%. It should be mentioned that mineral water can be naturally carbonated.

In Russia mineral waters are classified according to location of springs/wells, which determines kind and level of salinity peculiar to each type of water. The following types are well-known among naturally carbonated waters:

• Narzan type (health resort Kislovodsk);
• Pyatigorsk type (health resorts Pyatigorsk, Zheleznovodsk);
• Borjomi type (used by many health resorts of Russia);
• Yessentuki type (health resort Yessentuki);
• Obukhovo type (health resort Obukhovo).

In 2010 Russia bottled 1.9 million decaliters of naturally carbonated healing mineral water – this category provides just 0.4% of total production volume. Production volume of carbonated universal mineral water constituted 62.9 million decaliters.

More than one third of Russian production of universal mineral water in 2009 was provided by 5 large manufacturers. The largest share in production volume – 8.4% – was provided by “Volzhanka” PO UZMV (Ulyanovsk Region). Share of “Firma (Firm) “Mercury” LLC (Karachay-Cherkess Republic) constituted 7%, “Ayan” OJSV (Republic of Khakassia) is standing close with 6.8%. “Yessentuksky Zavod Minearlnykh Vod Na KMV (Yessentuki Bottling Plant of Caucasian Mineral Waters)” LLC (Yessentuki, Stavropol Territory) and “Edelweiss L” LLC (Lipetsk) provided 6.1% of production volume each.

The largest importer of bottled mineral/drinking water to Russia in 2010 was France controlling about 43% of import on the review market. Total volume of French bottled water presented on Russian market constituted 3.3 million decaliters.

In the category of bottled mineral and pure carbonated water important foreign suppliers in 2010 were Armenia and Italy aggregately providing almost one fourth of import volume. Import of bottled water to Russia is seasonal with significant increase observed in H1 until June-July and followed by some decline of supplies. Total import volume of bottled mineral/drinking water to Russia in 2010 constituted 7.7 million decaliters.

Export of Russian bottled mineral/drinking water in 2010 constituted 2.2 million decaliters. Major destination country was Ukraine where 812 thousand decaliters of bottled water was supplied. It should be mentioned that Kazakhstan used to be major destination for export of Russian bottled mineral/drinking water until entrance to Customs Union; volume of bottled water export to this country was exceeding volumes of export to other countries by dozens of times. In the frames of Customs Union supplies to Kazakhstan are no longer considered as export.

Imported bottled mineral/drinking water as a rule is offered in premium segment of Russian market and its average price is far above the lowest border of this segment (27 RUR/l). Most important foreign brands of bottled mineral/drinking water in Russia are “Evian” (“Danone”), “Perrier”, “San Pellegrino” and “Vittel” (“Nestle Waters”). Price of such water can exceed 100 RUR/l. A number of Russian manufacturers offer premium bottled mineral/drinking water under TM “Yessentuki” and “Narzan”, but this category is smaller in comparison to imported products.

In 2010 the average manufacturer price for bottled mineral water increased by 5% over previous year to constitute RUR 3.8 thousand per 1000 0.5 l bottles. In July 2011 the highest manufacturer price was registered in the North Caucasian FD – RUR 5.8 thousand per 1000 0.5 l bottles.

Retail price for bottled mineral water also increased insignificantly in 2010 – just by 3%, far less than it used to during recent years. For instance, the average retail price per liter of bottled mineral water increased in 2008 by 10%, in 2009 – by 14%. In 2010 price of 1 liter of bottled mineral water was RUR 23 on the average. Retail prices for bottled mineral/drinking water have no seasonal fluctuations; prices grow at moderate rate all through the year.

The highest average retail price for bottled mineral water in July 2011 – 69.8 RUR/l –was registered in Chukotsky Autonomous Okrug. High prices were also observed in Moscow (67.1 RUR/l) and Murmansk Region (56.1 RUR/l).

Russian market of bottled mineral/drinking water is currently at the stage of vibrant development. Almost every year new players enter the market and new production facilities are being launched. Increasing demand for the review products is also stimulated by growing incomes of consumers. According to “Intesco Research Group”, the market is forecasted to see 9-10% increase of volume annually.

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Russian Food & Drinks Market Magazine - is a full-colour, illustrated informative and analytical magazine that is devoted to the food market in Russia. It has been in existence since 1993, appears 6 times a year, has up to 144 pages and has a circulation of 45,000 copies. It is the acknowledged leader in the field of specialized information about the Russian food market.