1. Thirsty Thoughts Bottled Water Annual Market Quantification April 2011

2. Setting the scene 2 The bottled water market is fairly well represented by both smaller, regional players as well as larger, established suppliers. In addition to local players, there is an element of imported volumes, where these brands are seen predominantly within on-consumption outlets. The industry is regulated by the South African National Bottled Water Association (SANBWA). This is a voluntary association that sets standards and regulations in terms of the quality of the water sold to consumers. Bottled water is available in a variety of formats, including still, sparkling, flavoured and enhanced water variants. Still water maintains the lion’s share of the market volumes. Glass and plastic bottles are the dominant forms of packaging for the bottled water trade. There is limited use of sachets and bulk water containers, but these do not fall within the ambit of the report. Bottled water is a fairly new category compared to most other food and beverage products on the market and, given this dynamic, the category has shown tremendous growth year on year as it gained a foothold in the market. Now that it has become more established, it is expected that volume growth will start to taper off somewhat.

3. 2010 Category Shares 3

4. Annual Growth Rates 4

5. Category growth plummets after boom 5 From 1998 through to 2007, the bottled water market averaged a volume growth rate of 27.0% per annum. This was a function of the category being fairly new and becoming established within the South African market. The growth in popularity of bottled water was exceptional. However, following this boom, category growth plummeted. From an exceptional growth of 30.4% in 2007, the volume increase recorded for 2008 was a limited 4.9%. The years to follow were much the same, with increases of 3.3% and 4.2% recorded for 2009 and 2010 respectively. It is believed that the tapering off of the growth rate was a function of a few collective issues. Firstly, the recession translated into a decline in demand for bottled water as it is generally viewed as a non-essential item. Secondly, a few players who had entered the market were forced to close as the market became more competitive. The low barriers to entry to this market resulted in a plethora of suppliers who could not all maintain their turnover targets. Thirdly, with the growth in variant offerings to the market coupled with the saturation level, the user-pool stagnated. Lastly, it is believed that the extreme growth rates could not be maintained once the category became established and, with bottled water volumes reaching market saturation, volume growth naturally leveled off.

6. Category growth plummets after boom (Cont.) 6 Value growth has outstripped volume growth for many years, with cost-pull inflation pushing up bottled water prices. While per capita consumption grew steadily per annum throughout the historical analysis, this has come to a halt in recent years. The new, stringent regulations set out by SANBWA are expected to make market entry more difficult and raise the bar for the industry. It is believed that the market will remain fairly competitive with more share movement between players rather than an overall growth in market size. The volume increase for 2011 is limited to 4.6% for the year, this being more in line with alternative food and beverage category increases.

7. Thirsty Thoughts Bottled Water For more information, contact: Jan Wegelin Research Manager Tel: (011) 615 7000 Mobile: 082 938 0744 www.bmi.co.za