Suntory Water Report

― Flavored Water Gaining Consumers and Wider Recognition Consumption Expected to Grow ―

■ Water market in Japan
Since launching on the commercial market in the early 1970s, increasing demand for clean, delicious water and interest in the beauty and health benefits of water has propelled the mineral water market to continuous growth to a point where it is now a part of peoples’ everyday lives. The Japanese market, which grew following the Great East Japan Earthquake, saw more growth in 2015 that pushed it to record levels.
Recent years have seen sparkling water and flavored water permeate into the casual lifestyle scene. This year has seen a particular increase in flavored water consumers. Since 2010, the flavored water and sparkling water segments have seen dramatic seven and five-fold growth, respectively. Even comparing 2015 against 2014, the flavored water market approximately doubled in scale. In addition to growth of the mineral water market, the rapid growth of the flavored water and sparkling water markets demonstrate the overall vitality of the drinking water market.

■ Results for 2016 consumption trends
<Mineral water>
◆Like last year, mineral water usage rates remain highest among drinking waters. Safety and quality increased as points of concern related to consumption.
◆Mineral water is being consumed in a variety of occasions, from mornings just after waking up to nights before bed.
<Flavored water>
◆Compared to last year, flavored water consumption rates increased significantly. Consumption increased broadly among both men and women, and growth is projected to continue.
<Sparkling water>
◆Like last year, the majority of people consumed sparkling water. Consumption included not only straight consumption, but also the number of people consumed sparkling water as a mixer with alcohol, fruit juice, dark vinegar, and fruit vinegar is also increasing.

I. Consumer trends survey
This is the 2016 edition of the consumer drinking water trends survey that Suntory Beverage & Food Limited (SBF) has conducted since 1991. The following is a report on the current state and future outlook on consumer trends for mineral water as well as sparkling water and flavored water.

II. Reference: About transitions in the Japanese water market

I. Consumer trends survey

1. Survey overview

Today, mineral water has become a vital part of our daily lives.
Suntory Beverage & Food Limited (SBF) has conducted market trend surveys annually since 1991 for the purpose of analyzing how mineral water is consumed as well as consumption frequency, motivation, and preferences. Since 2003, the scope of this survey has no longer been limited to people who drink mineral water at home. The survey scope includes all consumers and covers consumer mentality and style of use for all drinking waters, which includes mineral water. Furthermore, since 2010, the survey method was changed from direct interviews to internet-based surveys.

Drinking water market trend survey
1. Survey target
Targeted individual men and women age 20 – 69 living in the Metropolitan region (Tokyo, and Kanagawa, Chiba, Saitama prefectures) and Kansai region (Osaka, Kyoto, Hyogo, and Nara prefectures) who have purchased one of the following six types of waters or who used tap water as “drinking water” since May of last year.
a) Mineral water (non-carbonated, non-sweetened water sold in PET bottles, cans, or bottles)
b) Carbonated water or sparkling water
c) Flavored water
d) Mineral water home delivery services (in-home water server)
e) Supermarket and other self-service water filling stations
f) In-home water purification (water from alkaline ion water purifiers installed directly on the water pipe)

2. Survey size
500 people (253 men, 247 women)

3. Survey method
Internet questionnaire

4. Survey period
May 21 – May 25, 2016

An overview of survey results is as follows.

2. Major survey results

(1) Drinking water consumption rates over the past one year
- Rate of mineral water consumption was highest at 88.2%.Flavored water consumption rates increased.

(2) Concerns when drinking/using mineral water
- Concerns when drinking/using mineral water included price, taste, safety, and quality. Compared to last year, the number of people concerned about quality, manufacturer, brand (product) name, and water source increased.

(3) Mineral water consumption occasions
- Mineral water is consumed right after waking up, during work/school, after bathing, etc. It is consumed in various daily situations.

(4) Perceived places/ideal images of source for mineral water
- Place thought of as source for mineral water is the Minami-Alps. Preferred location is a place with a vast forest protecting the water source.

(5) Rate of consumption and gender and age-based changes in flavored water consumption
- 46% reported consuming flavored water. Rate of recognition was approximately 73%.Consumption growing broadly among both men and women.

(6) Reasons for drinking flavored water
- Reasons for drinking flavored water were because it tastes good, because it is easy to drink, and because it is refreshing.

(7) Rate of consumption of sparkling water
- The rate of consumption for sparkling water was 51.8%. Like last year, sparkling water was consumed by a majority of consumers.

(8) Sparkling water consumption occasions
- Occasions for drinking sparkling water include while relaxing, when drinking alcohol, etc. Consumption occasions continue to expand.

(9) Interest in freezer-safe PET bottles
- 61.8% indicated an interest in using freezer-safe PET bottles this summer. Occasions for using freezer-safe PET bottles involve outdoor situations such as when going for a drive or excursions, walking or jogging, outdoor events, etc.

(10) Reasons for using mineral water home delivery services (water servers)
- Reasons for use of mineral water home delivery services include peace of mind, taste, and convenience. Compared to last year, peace of mind, taste, easy to drink, and quality increased.

(11) Future interest in consuming drinking water
- Regarding future interest in consuming drinking water, mineral water was highest.Interested in flavored water grew and is expected to grow moving forward.

3. Detailed survey results

(1) Drinking water consumption rates over the past one year

Regarding the seven types of drinking water – mineral water (non-carbonated, non-sweetened water sold in PET bottles, cans, or bottles), carbonated water or sparkling water, flavored water, mineral water home delivery services, supermarket and other self-service water filling stations, in-home water purification, and tap water – we researched consumption rates (rate of consumption/use) for the past one year.  Results showed that mineral water had the highest rate of use at 88.2%.
Also, compared to last year, flavored water increased significantly (5.6 points). It appears that the number of flavored water consumers increased. (Figure 1) 

(2) Concerns when drinking/using mineral water

We asked about consumer concerns when drinking/using mineral water.
The largest number of people were concerned about price (60.9%). This was followed by taste (43.7%), safety (41.8%), and quality (39.1%). Compared to results from last year, there was no change in the ranking order but the number of people concerned about price declined slightly while the number of people concerned about quality, manufacturer, brand (product) name, and water source increased. (Figure 2) 

(3) Mineral water consumption occasions

The most common occasions for drinking mineral water were right after waking up, (33.2%), during work/school (30.1%), after bathing (28.4%), and before going to bed (25.1%). Mineral water is consumed in a variety of lifestyle situations from the time people wake up until the go to bed at night. (Figure 3)

(4) Perceived places/ideal images of source for mineral water

We asked survey participants the place that comes to mind when they imagine location from which mineral water is sourced. The Minami-Alps (Yamanashi Prefecture) was No. 1 in 2016. Over 90% of survey participants envision the Minami-Alps as the location from which mineral water is drawn. (Figure 4) This marks the fourth consecutive year at No. 1 since we began conducting this survey in 2013.
As for the preferred location for drawing mineral water, approximately 70% responded “a place with a vast forest protecting the water source”, and nearly half responded “the forest protecting the water source is protected”. With responses like “a vast forest” and the “forest that protects water source is protected”, there appears to be importance placed on the forests near the water source. (Figure 5)

(5) Rate of consumption and gender and age-based changes in flavored water consumption

During the past year, the percentage of people who consumed/used flavored water was 46.0%. Flavored water recognition, including “aware of but haven’t consumed in the past year”, was 72.8%. Compared to last year, both consumption and recognition have increased significantly. (Figure 6)
Looking at people who consumed flavored water in the past year based on gender and age, among both men and women consumption increased significantly across all age groups. In particular, consumption among men in the 20s and 40s as well as women in the 30s, 40s, and 60s increased significantly. This shows that over the past year consumption is increasing among a broad range of consumers. (Figure 7)

(6) Reasons for drinking flavored water

Reasons for consuming flavored water included because it tastes good (43.5%), because it is easy to drink (42.6%), and because it is refreshing (42.2%).
It appears that consumers like flavored water because it is easy to drink and tastes good. (Figure 8)

(7) Rate of consumption of sparkling water

During the past year, the percentage of people who consumed/used sparkling water was at 51.8%. Similar to last year (50.4%), the majority of consumers are consuming sparkling water. (Figure 9)

We asked people who consumed sparkling water (225 people) how they consume sparkling water (multiple responses allowed). The most common response was drink as it (79.1%) but nearly half (49.8%) use it as a mixer with substances such as alcohol, fruit juice, dark vinegar, and fruit vinegar. Compared to last year, the number of people who use it as a mixer is increasing. (Figure 10)

(8) Sparkling water consumption occasions

We asked people who consumed sparkling water about the types of situations in which they drank sparkling water. The most common response was while relaxing (35.6%) followed by when drinking alcohol (27.1%) and after bathing (24.9%). Compared to last year, the number of consumers across all consumption occasions increased and, as seen with responses such as during dinner (20.9%), upon returning home (16.9%), and during leisure times (11.1%), the situations involving consumption are growing more diverse. (Figure 11)

(9) Interest in freezer-safe PET bottles

Recently, we have seen more freezer-safe PET bottles being offered for flavored water, etc. We ask survey participants if they would like to try freezing flavored water, etc. for consumption this summer. The number of participants who responded favorably exceeded 60%, responses split between they would like to try (18.2%) or would like to try if they have the opportunity (43.6%). (Figure 12)

We also asked in what situations people would like to try using freezer-safe PET bottles. The most common response was when out driving, on an excursion, or when traveling (34.0%) followed by when walking or jogging (28.2%), during camping or barbeques or other outdoor leisure activities, outdoor events, or after bathing (23.9%). It appears that use of freezer-safe PET bottles will expand in a variety of situations. (Figure 13) 

(10) Reasons for using mineral water home delivery services (water servers)

We asked respondents using mineral water home delivery services their reasons for use.
The top two reasons were for peace of mind (49.3%) and because it tastes good (46.5%).
Not surprisingly, reasons for use related to convenience such as because they deliver to my home increased, but compared to last year, reasons related to delivery service mineral water quality and taste also increased. (Figure 14)

(11) Future interest in consuming drinking water

In response to the question of which drinking water you are interested in consuming, the top response this year was again mineral water. Like last year, nearly 80% of people want to consume mineral water as drinking water. Aside from mineral water, top responses were tap water (50.8%), carbonated water or sparkling water (36.6%), and flavored water (34.6%).
Among those, flavored water interest grew compared to last year, suggesting that flavored water will continue to grow as a type of drinking water. (Figure 15)

II. Reference: About transitions in the Japanese water market

The history of mineral water in Japan dates back to the early 1970s when bottled mineral water was first sold on the commercial market. While reflecting the various elements of the times, mineral water has gradually permeated into the Japanese lifestyle over the years.

● Late 1980s: Growth of the general consumer market
Increased familiarity of mineral water driven by the natural and healthy living trends as well as increase overseas travel by Japanese people and growing concerns related to the quality of tap water caused a transition in growth from the commercial to the general consumer market.

● 1990s: Major growth in general consumer market
Entering the 1990s, news media began to report on the cleanliness of apartment building water tanks and issues with tap water. These reports sparked an increase in the consumption of mineral water among general consumers. Domestic mineral water grew as an alternative to tap water and a boom in 1993 also saw import volume grow.
An extremely hot summer and water shortage in 1994 resulted in increased demand and increased awareness about the need for emergency reserves. These factors helped establish mineral water’s position as a household product. However, imported mineral water decreased dramatically following a contamination scandal in autumn 1995 and in 1996 the consumer mineral water market sales underperformed previous year sales for the first time in the 1990s. However, this incident created a higher level of consumer awareness regarding mineral water safety as quality reliability became the key impetus for consumer purchases.
In April 1996, Japan allowed the sale of domestically produced small-volume PET bottle products. This increased occasions for mineral water consumption and resulted in a significant increase in volumes of domestic mineral water.
The so-called “Y2K Problem” caused many people to stock mineral water in their homes out of concerns about power outages and mineral water sales in 1999 increased by 30% compared to the previous year.

● 2000s: Market growth with increase in health consciousness, market achieves record growth in 2015
From 2000 to 2006, increase health consciousness drove the growth in the mineral water market but from 2007 the market was stagnant due in part to consumer pessimism. In 2011, the sudden demand for reserves seen following the Great East Japan Earthquake with sales jumping from 3,172,000 kiloliters (year on year increase from 126.0%). This was represented an 11-fold increase over twenty years ago and a 2.5-fold increase compared to 10 years ago. (Figure 16: according to Mineral Water Association of Japan research)
In 2015, both domestic mineral water production volume (domestically produced mineral water = 3,039,000 kiloliters, YoY 104.1%) and volume of imported mineral water increased (imported mineral water = 349,000 kiloliters, YoY 101.6%). As a market total, this was 3,387,000 kiloliters, which was a record high.

● Japanese domestic per capita annual consumption trends
From 2007, Japanese domestic per capital annual mineral water consumption held steady at around 19.7 liters. In 2011, due in part to the impact of the Great East Japan Earthquake, this grew significantly to 24.8 liters. In 2015, this further increased to 26.7 liters, the highest level thus far. (Figure 17: according to Mineral Water Association of Japan research).