New entrants VanaH and I LOHAS revive Japan's mineral water sector

For the 12 months ended in March, VanaH and I LOHAS were neck-and-neck with adspend of US$12 million each, according to research by McCann Erickson Japan. That gave the duo nearly a quarter of the category's total spend of $90 million.

Mineral water ATL spending has yet to regain the peak of $100 million registered in the 12 months ended March 2008, but it has recovered from the subsequent drop. Into this lull marched I LOHAS, debuting in May 2009 in a nifty new package that has ignited a packaging war (see sidebar) in Japan's water trade that Euromonitor valued at $5.1 billion last year.

A savvy, eco-friendly concept, low price and an effective marketing campaign are believed to have pushed I LOHAS into the top sales slot this year. This is a sweet victory for CCJC whose earlier brand, Mori-no-Mizu Dayori, trailed at number four by value, from 2006 through 2009, according Euromonitor.

Like I LOHAS, VanaH also appeared out of nowhere. The brand hadn't ranked among Euromonitor's top 10 for the past five years, nor had it even advertised in 2008, according to McCann. But last year, it became the top ATL spender, and even organised the VanaH KBC Augusta Golf Tournament 2009 as part of its marketing effort.

Selling mineral water in Japan is akin to selling sand in the Sahara. Quality water issues everywhere from the archipelago's alpine peaks and some springs are considered divine. In Tokyo and urban Japan, public waterworks deliver the safest water in Asia.

"Water here is drinkable from the tap, so mineral water is a luxury item," says Takeshi Oshima, consumer sector, TNS Infoplan.

Perhaps this is why annual per capita consumption of mineral water is a low 19.7 litres, compared to 101.4 litres in the US, according to the Japan Mineral Water Association.

Japan's current sales, however, mark a great leap forward. Per capita consumption was a mere 1.6 litres in 1990, but jumped eight-fold to 8.6 litres by 2000, before doubling yet again.

Mineral water is still growing, and remains a bright spot in a beverage industry where nearly all other categories are in decline.

Even so, water is problematic. Water cannot be improved, and attempts to do so, such as with flavoured water, are often rejected by consumers.

"The major brands launch several a year, but none last long," says Rika Fujiki, managing director of Synovate Japan. "Many years ago, Mom-no-Tennensui, a peach flavoured natural water, had big sales, but now it has almost disappeared. "

Functional waters have fared slightly better. The most notable fad in recent years has been oxygenated water, but the only constant with this category is product churn.

Instead, most branding builds upon the water's provenance, usually the pristine Japan Alps or nearby deep sea sources. Most foreign bottlers boast of local water and imported water accounts for a fifth of sales by volume.

Not to be left behind, Japan's public waterworks are bottling their tap water, as if the bottle somehow confers proof of tastiness.

"Until recently the perception of tap water was that it smelled of chlorine, even though the Tokyo Water Bureau installed an advanced purification process back in 1992," said Mayuko Watanabe, planning supervisor for Dentsu Japan's social projects planning division.

Dentsu surveys reveal that while 60 per cent of Toyko residents are satisfied with tap water, only 41.1 per cent drink it.
To overcome negative perceptions, Tokyo Waterworks is presenting its tap water in environmentally- friendly PET bottles.

Analyst comment

Kelvin Chan, research manager at Euromonitor International:
"Amid a global pushback against resource-depleting bottled water, Japanese beverage companies are turning to package design to express concern for the environment.

The launch of I LOHAS by Coca-Cola Japan in mid-2009 is a prime example. Recycling has long been a part of Japanese consumers' everyday lives, and I LOHAS' bottles were designed for easy and ethical disposal.

The bottles weigh only 12 grams, requiring 40 per cent less plastic than typical PET bottles. The water is sourced locally, reducing the carbon footprint. The brand co-opts the term LOHAS and the marketing message is 'drink, twist, dispose', which consumers gladly do. I LOHAS is a major hit.

Bottled water wasn't the first Japanese beverage to experiment with eco-friendly design. In early 2009, 7-Eleven revamped the package of its RTD coffee. Traditionally, RTD coffees, such as Mt Rainer, came in a plastic cup with snap-on cap. 7-Eleven got rid of the plastic lid, and placed instore displays explaining how this reduced carbon emissions. Mt. Rainer responded, but kept its caps on, while proclaiming its latest variant uses coffee beans approved by the Rainforest Alliance.

Other bottled waters are following I LOHAS' lead. Suntory debuted the lightest-ever two-litre PET bottle, and lightweight, environmentally friendly bottles will soon be the industry norm.

When that happens, the focus will return to water conversation programmes, such as those by Evian and Suntory, to convey their message of corporate social responsibility."

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This article was originally published in the 3 June 2010 issue of Media.