USA POU and Bottled Coolers Report

zenithinternational enithinternational

2016

Bottled Water Coolers and Point of Use Report

USA

Š Zenith International Ltd 2016

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Table of contents Bottled water coolers and point of use Introduction

6

Methodology

7

Commentary Market overview - bottled water coolers (BWC) and point of use (POU) - BWC and POU in context - West Europe evolution 2010-2015e US Overview & Industry developments Market structure - bottled water coolers - Throughput - Cancellations - Contract lengths - Outlets - Machine types - Water types - Legislation - Maintenance and additional services - Unit split by distribution channel (HOD, Retail, online) - Brand market share (top 5 brands) overall and split by distribution channel (HOD, Retail, online) - Retailer market share (top 5 retailers) - Price points analysis of top 5 brands and differentials in online and retail - Category household penetration

8 8 10 18 20 20 20 21 22 22 23 23 24 25 26 28 28

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Table of contents Bottled water coolers and point of use (cont.)

Market structure - point of use - Conversion - Outlets - Machine types - Rented/ sold - Maintenance and additional services - Unit split by distribution channel (HOD, Retail, online) - Brand market share (top 5 brands) overall and split by distribution channel (HOD, Retail, online) - Retailer market share (top 5 retailers) - Price points analysis of top 5 brands and differentials in online and retail - Category household penetration Price structure and revenue indicators - bottled coolers and point of use Bottled coolers - companies Bottled coolers - brands Point of use - distributors Bottled coolers and POU forecasts

29 30 32 33 34 34 35 36 37 38 38 40 41 42 43 44

Charts Units in December - units/ million litres, % growth 2010-15e Bottled water cooler throughput, 2014-15 Bottled water cooler cancellations, 2014-15 Bottled water cooler outlets (household penetration), 2015 Bottled water cooler machine types, 2015 Bottled water cooler water types, 2015 Bottled water cooler units, by distribution channel (HOD, retail, online) 2010-2015 Bottled water cooler units, top 5 brands in HOD, 2015

18 20 20 21 22 22 24 25

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Table of contents Bottled water coolers and point of use Charts (cont.)

Bottled water cooler top 5 retailers, 2015 Bottled water cooler price points of top 5 brands in online and retail, 2015 Bottled water cooler household penetration, 2015

26 28 28

Point of use conversion rate, 2014-2015 Point of use outlets (household penetration), 2015 Point of use machine types, 2015 Point of use rented/sold, 2015 Point of use units, by distribution channel (HOD, retail, online), 2010-15 Point of use units, by top 5 brands in HOD, 2015 Point of use top 5 retailers, 2015 Point of use price points of top 5 brands, 2015 POU household penetration, 2015

30 32 33 34 35 36 37 38 38

Bottled water coolers and POU price structure, 2014-15 Bottled water coolers companies, machines, 2010-15 Bottled water coolers companies, volume, 2010-15 Bottled water coolers brands, volume, 2010-15 Top 5 brands, price evolution 2010-2015 (US$/unit) Point of use distributors, machines, 2010-15 Top 5 brands, price evolution 2010-2015 (US$/unit) Bottled coolers and POU forecasts, 2015-20f Bottled coolers and POU split forecasts, 2015-20f

40 41 41 42 42 43 43 44 45

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Table of contents Bottled water coolers and point of use (cont.)

Appendix Definitions Symbols US State abbreviations

46 47 48

Company profiles Key company profiles NestlĂŠ Waters North America DS Waters of America Culligan Quench Onesource Water Primo Vertex Waterlogic Other company profiles

49 50 51 52 53 54 55 56 57 58

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Introduction Bottled water coolers and point of use  Since 2010, the point of use (POU) concept has increasingly stolen territory from bottled water coolers in the US. This has been mainly on the back of its ‘green’ credentials and increased convenience. In addition, the POU segment benefitted from the popularity and ubiquitous nature of coolers, paving the way for the transition from bottled coolers to POU.  Nevertheless, the overall cooler market is highly competitive and presents a challenging environment in which to operate. On the bottled cooler side, the market is extremely consolidated in the USA with 3 major companies having significant national presence. On the POU side, the market remains highly fragmented with most companies having only regional presence.  Note: For the purpose of this report, the term 'POU' represents a free-standing unit which is not integrated into any other furniture or mounting. The unit may be either floor-standing or counter-top. Zenith excludes from this definition units which may include POU purification technology but are installed within a cupboard, termed under-the-counter or under sink units and generally feature a pipe connection from the unit to a separate tap which is generally located over a sink, alongside the standard mains water tap. To the contrary, many players within the US market will consider the whole gamut of units equipped with a filtration or reverse osmosis purifying device, whether free-standing or not, to be ‘point of use’. In its contacts with US distributors, Zenith has attempted to ensure that only free-standing POU units have been included in the total market estimates. 

Definitions: For the purpose of this report, the sales channels were defined as follows: HOD/Direct Sales represent the sales made directly by manufacturers or authorised distributors either by phone, email, website or through other methods. Includes online-only distributors, i.e. Bottless.com; Retail are the sales made by brick-and-mortar retailers either in-store, online, via phone, email or through other methods; Online are sales made using independent online websites, i.e. Alibaba, Amazon, eBay etc. Does not include company or retailer websites.

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Methodology Bottled water coolers and point of use  In undertaking its research, Zenith depends upon the goodwill and co-operation of firms in the marketplace to provide accurate figures on their activities. Every effort has been made to include as broad a range of players active in the industry as possible. However, as water delivery or POU are not a central or actively marketed product for certain players and thus finalised figures may not be available, Zenith has, in certain instances, had to produce a ‘best estimate’ from industry sources. This is certainly the case for all 2015 figures where finalised figures are not available yet. Since comparisons tend to be based on the size of cooler portfolios, overstatement of installation numbers is a risk inherent in a detailed analysis of the industry. Ultimately Zenith has had to make its own judgement and therefore all unit numbers should realistically be regarded as Zenith estimates.  In its contact with companies offering water purification, water delivery and POU services within the US market, in addition to suppliers to the industry and other organisations linked to water purification, Zenith is confident that it has identified and contacted the leading cooler players across the country. However, the US market is characterised by a high level of fragmentation and it is believed that there are more than 500 small players across the country. For the most part, however, these players service portfolios of just a handful of units, of as few as 50 or 100 in total. Zenith has adjusted its market totals for the collection of small operators with the inclusion of an ‘Others’ category.  The cooler unit totals presented in this report represent the cumulative number of units in place at the end of each given year, taking into account any drop-off of old units. The reason that cumulative totals are applied is that each active unit generates revenue, either through rental or servicing or water delivery. Generally, any growth expressed, either historic or forecast, applies to the growth of the cumulative total. Zenith would like to express its sincere gratitude for all help and assistance received from the cooler industry during this report’s research process.

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Market overview BWC and POU in context - West Europe evolution, 2011-2015 ď ˇ Commentary 2011

2012

2013

2014

2015

Bottled water coolers (BWC) Units % change Units per thousand people % share of total cooler market Point of Use (POU) water coolers Units % change Units per thousand people % share of total cooler market Total coolers Units % change Units per thousand people

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Market overview BWC and POU in context - West Europe evolution, 2011-2015 

Commentary

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Commentary

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Commentary

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Market overview US Overview & industry developments 

Commentary

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Commentary

Country: Cooler Market Evolution 2011-2015 15

Commentary

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10

4 5

1

Million USD



Thousand Units

7

0

2010

2011

2012

2013

2014

2015

Years

.

BWC units

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POU units

Coolers revenue (mUSD)

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Market overview US Overview & industry developments 2010

2011

2012

2013

2014

2015

Bottled water coolers Units % growth Units per '000 people Million litres % growth Point of Use Units % growth Units per '000 people Total coolers Units % growth POU % share BWC % share

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Market overview US Overview & industry developments

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Commentary

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Market overview US BWC and POU overview & industry developments

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Strengths

Weaknesses

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Commentary

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W

Opportunities

T

Threats

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Market overview US Overview & industry developments Industry developments  Commentary  Commentary  Commentary  Commentary

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Market overview US Overview & industry developments Industry consolidation 

Commentary.

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Commentary

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Buyer

Target

Type

Year

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Bottled water coolers market

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Market structure Bottled water coolers Bottled water cooler volume 2010-15

Bottled water cooler units 2010 -15 70

60000 50,000

50,000

50,000

50,000

50,000

40000 30000 20000

60

2010

2011

60

60

60

60

2014

2015

50 40 30 20

10000 0

60 60

Million litres

BWC Installed units

50,000

50000

10

0 2010

   

2011

2012 2013 Years

2014

2015

2012 2013 Years

Commentary Commentary Commentary Commentary

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Market structure Bottled water coolers Throughput  Commentary  Commentary

Throughput

2014

2015

2014

2015

Litres per cooler

Cancellations  Commentary  Commentary

18.9l bottles per cooler per month

Cancellations Quit rate %

Contract lengths  Commentary  Commentary.

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Market structure Bottled water coolers

Outlets, 2015

Outlets  Commentary  Commentary

Commercial

50.0%

50.0% Domestic

Machine types 

Commentary



Commentary

Machine types, 2015

Hot-cold 50.0%

50.0% Cold-ambient

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Market structure Bottled water coolers Water types, 2015

Water types 

Commentary



Commentary

25.0%

25.0%

Eau de boisson Mineral

Purified Spring Other water type 25.0%

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25.0%

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Market structure Bottled coolers Legislation  Commentary  Commentary Maintenance and additional services  Commentary  Commentary

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Point of use water coolers market

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Market structure Point of use water coolers 

Point of use cooler units 2011-16

POU Installed units

12,000 10,000 8,000 6,000

Units added 4,000 2,000 0

BWC to POU conversions

New POU

2014

2014

2015

2015

Replacement rate % 2011

2012

2013 Years

2014

Number of units

2015 

Conversion 

Commentary



Commentary

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Market structure Point of use water coolers Outlets  Commentary  Commentary  Commentary

Outlets, 2015 16.7% 16.7%

Offices 16.7%

Factories Institutions Shops Domestic

16.7%

Others

Machine types

16.7% 16.7%



Commentary Commentary Machine types, 2015 25.0%

25.0% Hot-cold Cold-ambient

Carbonated Others

25.0%

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25.0%

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Market structure Point of use water coolers Rented/sold

Rented vs. Sold units, 2015

 Commentary  Commentary

Rented Sold 50.0%

50.0%

Maintenance and additional services  Commentary  Commentary

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Bottled water coolers and Point of use market

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Price structure and revenue indicators Bottled water coolers and point of use Point of use

2014

2015

Bottled water coolers

Average monthly rental ($)

Average monthly rental ($)

Average sales price per unit ($)

Average sales price per unit ($)

Total revenue ($)

Total revenue ($)

- Revenue from rented units

- Revenue from rented units

- Revenue from sold units

- Revenue from sold units

2014

2015

 Commentary  Commentary  Commentary

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Bottled water coolers Companies Machines in December

2010

2011

2012

2013

2012

2013

2014

2015

% share 2015

% 15-14

2015

% share 2015

% 15-14

Company 1 Company 2 Company 3 ‌ Others Total Market

Million litres

2010

2011

2014

Company 1 Company 2 Company 3 ‌ Others Total market

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Bottled water coolers Brands

Million litres

2010

2011

2012

2013

2014

2015

% share 2015

% 15-14

Brand 1 Brand 2 Brand 3 …

Others Total market

 Commentary  Commentary

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Point of use Distributors Machines in December

2010

2011

2012

2013

2014

2015

% share 2015

% 15-14

Company 1 Company 2 Company 3

Others Total market

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Bottled water coolers and point of use Forecasts Units in December

2015

2016f

2017f

2018f

2019f

2020f

CAGR 2015-2020

% growth 2020 - 2015

Bottled water coolers Units % growth Million litres % growth Point of Use Units % growth Total coolers Units % growth POU % share BWC % share  

Commentary Commentart

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Bottled water coolers and point of use Forecasts 

Commentary



Commentary.



Commentary

50.0%

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50.0%

BWC/POU split, 2020

BWC/POU split, 2015

BWC/POU split, 2010

POU

POU

POU

BWC

BWC

BWC

50.0%

50.0%

32

50.0%

50.0%

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Appendix

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Bottled coolers and point of use Appendix Definitions Manufacturer: Company that manufactures and/or assembles POU units for sale to suppliers and/or distributors.

Supplier: Company that purchases POU units from manufacturers before reselling them to distributors and/or end-users.

Distributor: Company that sells or rents POU units direct to end-users.

Symbols e f BLWA BPA EPA HOD IBWA NRDC NSF OCS PET POU RO ROI UV WQA

Estimate Forecast Bottleless Water Association Bisphenol A Environmental Protection Agency Home and Office Delivery International Bottled Water Association Natural Resources Defense Council NSF International, known as National Sanitisation Foundation until 1990 Office coffee service Polyethylene terephthalate Point of use Reverse osmosis Return on investment Ultra violet Water Quality Association

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Bottled coolers and point of use Appendix US State abbreviations Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas

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AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS

Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina

KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC

35

North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming

ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

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Top company profiles

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COMPANY NAME Category: Address: Tel: Website:

Fax:

1-203-531-4100

Company Structure: Ownership: Senior management: Related activities:

Brand

Description

Pack type

Sizes (litres)

Marketing Analysis Sales Volume Million Litres

2010

2011

2012

2013

2014

2015

Production Poland Spring NestlĂŠ Pure Life Others Sales

Units Serviced Units placed on market by year end (total of units through current rental contracts, plus number sold directly)

Unit Numbers

2010

2011

2012

2013

2014

2015

Total units Total BWC units Total POU units

Marketing Analysis Packaging (2015) R Polycarb PET/PVC

Outlets (2015)

Advertising, 2015

Homes Offices

Unit type % Hot-cold Cold-ambient Cold

Commentary & Short company description .

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Other significant company profiles

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Company Name Category: Address: Tel: Website:

Fax:

Company Structure: Ownership: Senior management: Related activities: Non-related activities:

Marketing Analysis Unit type % Hot-cold Hot-cold-ambient Cold-ambient

Outlets (2015)

Advertising, 2015

Away from Home Offices Others Homes

Commentary:

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Research Note In undertaking its research for this report, Zenith has utilised its internal data library and global databases, alongside other third party sources and interviews with the industry. Throughout its on-going research, Zenith also depends upon the goodwill and co-operation of operators active in the marketplace, and, as such, seeks to achieve a high level of accuracy.

Liability This document contains information and may contain conclusions and recommendations. Every effort has been made to ensure that the information is accurate and that the opinions expressed are sound. However, Zenith International Ltd cannot be made liable for any errors or omissions or for any losses or consequential losses resulting from decisions based on the information.

Important notice on distribution This report should not be quoted, referred to or transmitted to another party, in whole or in part, with out the prior written consent of Zenith International Ltd. Should you desire to release a copy of this report to another party for information purposes, we request you and the requesting party to indemnify Zenith International from any liability related to the report distribution. Such readers however will not be considered “users� of this report.

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