ECONOMICAL ANALYSIS

Economic Impact on the Bottled Water Industry

Economic Impact on the Bottled Water Industry

Introduction

In today's highly competitive and rapidly advancing business environment, every industry is thriving for success through cost effectiveness, innovations, or many other measures. Bottled water industry is one of the most rapidly boomed industries across the globe. There are several economic factors that affect the bottled water industry of the United Kingdom. This report focuses on the economic impact on the bottled water industry. The report is divided into two major sections: 1) economic environment of bottled water industry, and 2) analysis of economic concepts. Thus, this report provides a comprehensive analysis of economic environment within which the bottled water industry operates, and analysis of various economic concepts with relation to water bottle industry, including supply & demand, price elasticity, and government regulation impact on the industry.

Section 1: Economic Environment of Bottled Water Industry

Overview of Bottled Water Industry

The increasing awareness of healthier drinks and health conscious consumers have given rise to a bottled water industry that produces bottled water by filling drinking water into glass or plastic containers. The demand of bottled water has been on increasing trend across the world (see graph 1). Throughout 1990s and early 20th century, the consumption of bottled water has boomed and the proportion of UK adults drinking bottled water increased highly (Balmond, 2005, p.7). So, the industry experienced more than a decade of strong growth mainly due to increasing health awareness, supportive economic conditions, and societal trends. However, the booming bottled water industry faced adverse business conditions that have dried up the industry during past 5 years (see chart 1). This slump in industry was stemmed from unfavourable climate conditions, an increasing community backlash against the bottled water's environmental effect, and the most savage slump experienced in UK for half a century that took a great toll on profitability and revenues of the industry (IBIS World, 2013, p.2).

Graph 1: Global Bottled Water Volume 2006-11

(Source: Hall & Stage, 2012, p.8)

Chart 1: Annual Percentage Change in UK Soft Drink Sector

(Source: BSDA, 2012, p.4)

After enduring such a difficult period, the bottled water industry of UK is expected to fare better during next 5 years with the recovery of economy. But the favourable time of bottled water industry like in early 2000s is unlikely to be back, since it is expected that the opposition to bottled water on environmental grounds will continue and consumer spending will also remain restricted for a certain period. But the London Olympic Games are expected to provide an advantage to bottled water producers, while the changes in climate will have a considerable impact on industry's performance. According to IBIS World's report, the revenue of bottled water industry is estimated to grow by 2.8 percent per year over the next 5 years, to net approximately £595.5 in 2016-17 (2011, p.1).

Major Players

The major players in the bottled water industry of UK include Highland Spring, Nestle Waters, Princes Limited, Pepsi-Co, and Eden Springs UK Ltd (Report Linker, 2013, ...