Rising consumption and corresponding scarcity has left both regional and global water companies with a tricky equation.
The scarcity of water resources in the GCC is something that bottled water companies are all too aware of. But as they continue to increase production to meet consumers' thirst, they say the cost of their products will remain low.
Bottled water in the UAE accounts for 17 per cent of total Liquid Refreshment Beverages (LRB) segment, with Masafi producing 320 million litres a year from natural resources; and international companies such as PepsiCo, with its brand Aquafina, purifying desalinated sea water. A survey published in March by Procter and Gamble and YouGov Siraj, found that concerns for water shortages in the region are higher than ever.
"In the UAE alone, water consumption tops 550 litres daily per capita, three times the global average, resulting in massive fears for the future of fresh water for the next generation," the report read.
The research found that 25 per cent of married couples with children in the UAE worry that there will not be enough fresh water available for their children; 28 per cent of Emiratis worry that limited natural resources will be an issue for the next generation; and 57 per cent of Dubai residents take an active role in monitoring their water consumption to use only what is necessary.
However, 24 per cent of residents across Abu Dhabi and Dubai don't believe their personal actions can make a difference to water consumption.
"The water category in general is very competitive in the UAE as the vast majority of the population recognise that tap water is not acceptable for drinking and cooking," says Mike Henderson, customer development partner at consultancy firm Kantar Retail.
The bottled water category is divided into two main segments: PET bottled water, for on-the-go consumption, and five gallon containers.
"The market for all segments is sustainable in the short to medium term, however the water sources and their sustainability will, in the medium to long term, become a significant factor," he says.
"The debate between ground water and desalinated water will also become a key battle ground and as the market and regulations within the industry matures, stricter label and product definition data will force a more transparent market place.
"Consumers need to have safe healthy water to drink and its composition is of major importance and will become increasingly important as the consumer becomes more aware of the various composition differences between brands."
Masafi, which has been in the industry for 30 years, has diversified into juices, hygiene and food products in the past six years - just last month it launched its Masafi Select Premium Basmati Rice - but during the past five years has doubled its production of bottled water.
The company owns eight wells in the foothills of Hajar Mountains in Ras Al Khaimah, the UAE, and says its capacity is limited to the natural flow of water.
"We have a set production schedule in place with the market demands and consumer trends from time to time. So naturally, we take into account all of these specifics before initiating any production batch," says Natascha Edelmann, head of marketing, Masafi.
"We are constantly measuring the water tables and levels of the different Masafi wells, ensuring that none of the wells are depleted before it has time to re-generate itself.
"We continuously consult with international hydrologists. We take this very seriously. We are dependent on nature; thus working in a sustainable manner is non-negotiable."
But on the subject of increasing the cost of water as a way of limiting waste, Edelmann says: "This is too premature to talk about."
On the international level bottled water companies such as Evian also produce fresh water from a natural source in the French Alps, but because of their limits are considered a premium brand, both in Europe and the Middle East.
"Evian is a natural flowing source, and thus has a natural cap. Evian is not a brand that can provide bottled water to the masses," says Dirk Holzapfel, international marketing and sales development director at Evian.
"As a response to the increased consumer awareness to the issues challenging the region, and their demand for higher levels of sustainability, Evian now enters into dialogue with interested consumers and customers on what has always been part of our DNA: being a sustainable business and our respect for nature. Concretely, this means that we continue to do what we have always done and see it as our responsibility to respect nature to the best of our means."
Beverage giants PepsiCo and Coca-Cola have their own bottled water companies - Aquafina and Arwa respectively - and purify desalinated water for consumption in the Gulf.
According to the UAE government the country spends nearly AED11.8bn ($3.2bn) a year producing desalinated water to meet the growing needs for drinking water and offset its dwindling reserves.
"At the regional level, the crisis of water is the biggest challenge, not only for us, but for the region as a whole," says Omar Farid - GCC Business Unit, GM-PepsiCo MEA.
"We can overcome this crisis only through concerted efforts with all parties concerned and through the development of a long-term strategy and plans to ensure adequate investment in water resources and maintaining consumption within the framework of systematic science in order to avoid crises.
"Aquafina continuously works with all environmental bodies, including those responsible for water resources in the UAE, such as the Ministry of Environment and Water to ensure we do not exploit resources. PepsiCo invests in this to ensure a state of stability concerning water resources within the region is achieved, as we believe it is the basis for social and political stability, as well as health.
"We do not have, at present, any intention to raise the prices of Aquafina water.
A strategic pricing strategy has been designed carefully to suit the physical ability of consumers to purchase clean drinking water and compete effectively with competition."
So for now, as the Gulf's bottled water market grows ever larger (it has doubled in size in the past five years), the cost to consumers will remain low.
But with more awareness the argument about which source is more sustainable will rage on and the tide may begin to turn.© Gulf Marketing Review 2011
