Kevin Baker

12th June 2013

1

Packaged Water in the EU - Key Trends

Agenda

• Global and European Trends

• Market Roundup

• Strategic Challenges for Developed Water Markets

2

3

Global & EU

Packaged Water

Market Trends

Global Packaged Water continues to grow

4

Global Packaged Water Volume 2002-2012, ML

0%

2%

4%

6%

8%

10%

12%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Volume

Growth rate

With Growth picking up over past 2 years

In the EU*, this growth has plateaued

5 * EU as defined by EFBW as 24 markets in scope

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

0

10,000

20,000

30,000

40,000

50,000

60,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Volume

Growth rate

EU Packaged Water Volume 2002-2012, ML

However Water has out-performed the rest of Soft

6 * EU as defined by EFBW as 24 markets in scope

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EU Packaged Water Growth vs. Other Soft 2002-2012, ML Growth Rate Comparison EU Markets

0.2%

0.4%

0.5%

0.4%

-0.1%

-1.3%

-1.5% -1.0% -0.5% 0.0% 0.5% 1.0%

CAGR 07-12

CAGR 09-12

YOY 11-12

Packaged Water Other Soft

7 * EU as defined by EFBW as 24 markets in scope

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EU Packaged Water Growth vs. Other Soft 2002-2012, ML

0.2%

0.4%

0.5%

0.4%

-0.1%

-1.3%

-1.5% -1.0% -0.5% 0.0% 0.5% 1.0%

CAGR 07-12

CAGR 09-12

YOY 11-12

Packaged Water Other Soft

Growth Rate Comparison EU Markets

However Water has out-performed the rest of Soft

Packaged Water also has a much higher share of soft drink

consumption in the EU than the rest of the world

Packaged Water Share of Soft, EU Markets

Packaged

Water Litres

per Capita 16 111 87 30 44 41 25 24

44% 44% 44%

56% 56% 56%

0%

20%

40%

60%

80%

100%

2010 2011 2012

Other Soft

Packaged Water

26% 27% 28%

74% 73% 72%

0%

20%

40%

60%

80%

100%

2010 2011 2012

Rest of

World

Asia West

Europe North

America Latin

America East

Europe MENA Africa Australasia

Decreasing Regional Volume

8

In the EU Markets Still water has a 58% share

9

-

10,000

20,000

30,000

40,000

50,000

60,000

2012

Low

Regular

Still

Packaged Water Segmentation EU, ML

-1.3% -1.3% -0.5%

0.5% 0.9% 1.1%

CAGR 07-12 CAGR 09-12 YOY 11-12

1.4% 1.1% 0.1%

Sp

ark

ling

With sparkling suffering poor performance relative to still

10

-

10,000

20,000

30,000

40,000

50,000

60,000

2012

Low

Regular

Still

Packaged Water Segmentation EU, ML

-1.3% -1.3% -0.5%

0.5% 0.9% 1.1%

CAGR 07-12 CAGR 09-12 YOY 11-12

1.4% 1.1% 0.1%

Sp

ark

ling

The top 5 markets in the EU make up 78% of Packaged Water

Volume

11

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Germany Italy France Spain Poland Other

Top 5 Volume Water Markets, EU, ML

78%

They have a mixed performance compared to total EFBW

markets, with Poland showing the strongest growth

12

0.80

0.90

1.00

1.10

1.20

1.30

1.40

2007 2008 2009 2010 2011 2012

EFBW Markets

France

Germany

Italy

Poland

Spain

Growth Rates of Top 5 Markets, Indexed to 2007

Poland, Romania and Hungary have shown the highest

growth

13

Germany

Italy France

Spain

Poland

United Kingdom

Romania

Belgium

Portugal

Greece

Austria

Czech Republic

Lithuania

Netherlands

Sweden

Republic of Ireland

Latvia

Bulgaria Slovak Republic

Hungary

Denmark

Slovenia

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

- 20 40 60 80 100 120 140 160 180 200

Gro

wth

Ra

te 0

7-1

2

Litres per Capita

Romania and Poland have relatively low litres per capita, suggesting potential for

further positive growth

Overview of Packaged Water growth and Consumption in EU Markets

* Bubble size = volume Packaged Water 2012

And with the addition of Bulgaria are expected to continue

to out-pace the growth of the rest of soft drinks

14

Forecast growth of Packaged Water and other categories in EU Markets 2013-2018

* Bubble size = volume forecast Packaged Water 2018

Economic instability in some Southern European markets…

Central Athens

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

2009 2010 2011 2012 2013

Y on Y % change in GDP

0%

5%

10%

15%

20%

25%

30%

2009 2010 2011 2012 2013

Greece

Spain

Unemployment rate

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

0

500

1,000

1,500

2,000

2,500

2008 2009 2010 2011

Greece Spain Greece YOY Spain YOY

Y on Y % change in NARTD Consumption

15

…..is driving producers to look at value options from developing

markets

Unilever see “return to poverty” in Europe:

“If a consumer in Spain only spends €17 when they go shopping, then I’m not

going to be able to sell them washing powder for half of their budget”

In Spain, the company sells Surf

detergent in packages for as few

as five washes

“In Indonesia, we sell individual packs of shampoo for 2 or 3 cents and still

make decent money. We know how to do that, but in Europe we have

forgotten in the years before the crisis”

Jan Zijderveld, Head of Unilever’s European business

16

Across EU markets price per litre packaged water is

declining relative to other soft categories

17

Average Price Per Litre (EUR)

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

2007 2008 2009 2010 2011 2012

PPL PW

PPL Other Soft

Eastern EU markets have shown the best price per litre

growth, with the UK and Germany declining

18

Packaged Water Price per litre % Change per Market 2007- 2012

-

0.50

1.00

1.50

2.00

2.50

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2007 PPL 2012 PPL

% C

ha

ng

e

Pri

ce

Pe

r L

itre

(E

UR

)

19

Market

Roundup

Austria

Stable Consumption with sharp increase

in on-premise prices

Trend to lower carbonation and still water

Availability of free tap water in

restaurants could impact future growth

Growth 2011/12

+ 1.9%

Per Capita

85.3

Belgium

Flat growth in a mature market with

relatively little innovation

Local government promoting benefits of

tap water

Sparkling water growing at expense of

Still

Growth 2011/12

- 0.2%

Per Capita

123.5

Bulgaria

Leading brand volumes boosted by

marketing investment

Competitor advertising and government

policy put pressure on mineral water

Discount brands also expected to

continue to grow volume and share

Growth 2011/12

+ 2.9%

Per Capita

66.3

Czech Republic

Water market continues to be impacted

by low consumer confidence

Private Label table waters suffer the

sharpest setback as consumers switch to

tap water

Consumer switch to lower carbonation

products

Growth 2011/12

- 9.4%

Per Capita

50.1

Denmark

Poor weather and tax on flavoured water

hits volumes

Self-Carbonation machines could hurt

sparkling segment which also has a poor

image

Demise of convenience channel will

impact still water growth

Growth 2011/12

- 4.4%

Per Capita

22.2

Estonia

Water sales declined hit by inflation and

poor weather

Decline expected to be halted in 2013,

but price sensitivity and improving image

of tap water will keep any increase low

Sparkling volumes growing as

substitution by tap water not an issue

Growth 2011/12

- 3.5%

Per Capita

30.8

Finland

Poor summer weather impacted sales, with

the decline being magnified by exceptionally

good performance in the previous year

Packaged Water viewed as a luxury and

therefore very dependent on the economy

Spring water accounts for nearly 90% of the

market

Growth 2011/12

- 5.6%

Per Capita

17.2

France

Low pricing helped boost water sales

Category also benefited from concerns over

health risks of sweetened drinks and efforts

by water producers to negate the

environmental impact of packaged water

Still water accounts for 80% of the market

and continues to grow fastest

Growth 2011/12

+1.7%

Per Capita

113.8

Germany

Poor summer weather saw virtually no

growth in a very mature market

Mineral water accounts for 98% of the

market

Trend away from medicinal water

(Heilwasser) and from higher to lower

carbonation

Growth 2011/12

- 0.1%

Per Capita

171.1

Greece

Market hit by rising unemployment, salary

and pension cuts, and tax increases

Category expected to return to low growth

when the economy recovers

Horeca particularly hit as consumers spend

more time at home

Growth 2011/12

- 9.0%

Per Capita

98.2

Hungary

A long hot summer boosted consumption

which is already high

The category benefits from relatively low

prices

Consumers don’t tend to differentiate

between Mineral and Spring water

Growth 2011/12

+ 4.7%

Per Capita

117.8

Italy

Growth boosted by hot summer, but limited

by poor Autumn weather

Private Label volumes grow whilst on-

premise consumption has declined

Category faces competition from initiatives to

promote tap water

Growth 2011/12

+ 1.2%

Per Capita

180.5

Ireland

The water category recovered in 2012

despite poor weather and the economy,

partially driven by strong promotional activity

The carbonated segment outperformed the

overall market

Spring water is most popular source for both

the still and sparkling segments

Growth 2011/12

+ 0.5%

Per Capita

27.0

Latvia

Category benefits from perception as a

healthy alternative to other soft drinks

The launch of publicly funded “Riga Water”

will impact the category performance

Mineral water growing at expense of Spring

and Table water

Growth 2011/12

+ 2.0%

Per Capita

47.6

Lithuania

Main drivers behind the fall in consumption were

poor summer weather, a declining population,

and a large increase in tap water consumption

Consumers switch to lower carbonation

products which are perceived as healthier

Spring water volumes are very low and almost

entirely comprised of imported brands

Growth 2011/12

- 2.0%

Per Capita

36.8

Netherlands

Economic situation has seen consumers increasingly

turn to tap water, especially in On-Premise

Carbonated water volumes expected to remain stable

whilst still water declines

The market is almost entirely comprised of mineral

water although consumers don’t tend to differentiate,

basing purchase decisions mainly on price

Growth 2011/12

- 0.8%

Per Capita

21.2

Poland

Good summer reversed decline of 2011 (which

was a poor summer in Poland)

Still and low carbonation grow at expense of

carbonated brands

Growing awareness of positive impact of water

on health

Growth 2011/12

+ 5.4%

Per Capita

81.5

Portugal

Reduced purchasing power combined with a

big increase in VAT led to a fall in consumption

Multipacks have proliferated to offer better

value

Sparkling water expected to remain a niche

Spring water is taking some share from mineral

water

Growth 2011/12

- 6.4%

Per Capita

113.3

Romania

Good summer weather and packaging upsizing

led to a solid performance for the category

The share of sparkling water is being eroded

by still water

The abundance of mineral water sources

means that this category continues to

dominate

Growth 2011/12

+ 3.4%

Per Capita

69.5

Slovakia

Packaged Water was one of the few categories

to experience growth driven by a hot summer,

heath concerns and affordability

Growth driven by Private Labels which grew by

13% while branded products declined by 1%

Traditional sparkling water is slowly giving way

to still water

Growth 2011/12

+ 1.4%

Per Capita

67.1

Slovenia

Water volumes grew despite the unfavourable

economic climate helped by the hot summer

Both still and sparkling grew, with still water

experiencing slightly higher growth

Low priced imports are expected to drive

consumption, especially in discounters

Growth 2011/12

+ 3.5%

Per Capita

57.7

Spain

The category contracted by almost 1% due to

an increase in VAT and government austerity

measures

Consumption benefitted from hot weather and

drought in many parts of the country

Shift from on-premise to off-premise

consumption

Growth 2011/12

- 0.8%

Per Capita

116.9

Sweden

Home carbonation (Sodastream) remains an

issue with over a million machines present in

the market

High quality tap water remains a barrier to still

water development with “on the go”

consumption being the only real opportunity

Growth 2011/12

+ 0.4%

Per Capita

24.2

UK

The London Olympics and Diamond Jubilee

celebrations helped drive consumption despite

poor weather

Sparkling water is growing faster than still, but

from a smaller base

Private Label continues to grow although the

major brands were the biggest winners

Growth 2011/12

+ 2.7%

Per Capita

26.0

44

Strategic

Challenges for

Developed Water

Markets

Many water brands are competing on price – creating a

commoditised product

45

Companies are looking for distinct Value Added

positionings to drive growth and value

46

As well as added functional benefits and blurring with other

categories

Is this part of water’s competitive set?

47

Lots of water brands are also talking about sustainability

Sustainable

Messaging

Sustainable

Packaging

Plant Based Bottles

San Pellegrino’s

elementary-school

education initiative in

Italy

Less Plastic

48

Addressing these strategic challenges is the key to

maintaining growth in developed water markets of the EU

Just drink tap

water

Sustainability

agenda

Commoditised

water Value added water

Bottled water Competing with

other categories

49

Any Questions?

50