Water resistant

The demand is growing, the margins are generous.  So what’s stopping restaurants from making more of mineral water? Storage space, that’s what, says Patrick Schmitt

NEXT TIME a sommelier asks you if you’d like something fizzy, or maybe refreshing, possibly even crisp, don’t assume it will be alcoholic – it could be water.  The days of lazy lunches, beginning with a bottle of bubbly, followed by white, then red wine, and if you’re still upright, brandy, are over.

Busy, or more likely stressed, as well as health-conscious diners are demanding ever more mineral water to swill with repasts, and restaurateurs are having to react.  The only problem is where to put the bottles – oh, and then there’s the issue of taste.

Selling something that’s almost identical to the free stuff from the tap in the lavatory isn’t always easy unless, of course, it’s beautifully packaged.  However, believe it or not, water is the fastest growing category in the soft drinks market.

Ian Hall, chairman of the Natural Mineral Water Information Service and general manager of Spadel UK, owner of the Spa brand, says natural mineral water is currently growing in all channels at around 13% to 15%.

This is impressive, especially when compared not only to the slow growth of the economy as a whole, but also other non-alcoholic liquids that show only a 3% rise (AC Nielsen GB Ons Mat to July 2003).

And growth in bottled water has been rising steadily over the last decade – apart from this year’s blip when war with Iraq was announced, which induced a massive surge in sales.

Overall, since 1992, the total UK bottled-water market, now nudging £1bn in value, has tripled, leaping from just 520m litres to over 1.7bn litres (by the way, bottled water includes spring, with 82% of the market, mineral, 13%, and table, with 5%).

On-trade performance However, the on-trade tells a slightly different story.  For a start, it is a much smaller market without the water coolers and supermarket sales.

In fact, bars, restaurants, hotels and pubs shift 54m litres of bottled water a year, with a total value of £179m – almost small change compared to the mighty volume driven through the major retailers.

And interestingly, while sparkling makes up only 17% of water sales in the off-trade, in the on-premise it takes 47%. As for growth, well, there isn’t any.  Sales were static in both volume and value in 2002.

But this hides much activity, in particular by the on-trade brand leader – and by some margin – Strathmore (the bottled water’s volume and value is nearly double that of nearest rival, Abbeywell).

Called the Water into Wine promotion, Strathmore has created a 5-point serve plan to be used to train staff to firstly identify opportunities to sell water, secondly to serve it correctly and lastly to encourage increased purchases.  And the result?

"The outlets which complied with the 5-point serve plan saw an average increase in water sales of over 23% while the top 10 performing outlets saw an increase of over 40%," says Ray Kemish, national account manager for Strathmore.

The scheme’s name – Water into Wine is, of course, a clue to the aims of major mineral water brands.  They want water to be treated in a similar way to wine, ie as an accompaniment to food, and something to be automatically offered by staff when customers place an order.  It should also be properly stored and carefully served. 

 A list too far?

The extreme is, of course, the water list.  This, many think, is perhaps taking the situation a little far, but Hall is in favour of the idea, citing the popularity of cartes des eaux in France, because they help customers "choose water which will actually match a meal".

Certainly The Capital Group’s sommelier, Matt Wilkins comments that clientele in the company’s two-star restaurant "are expecting to have a variety of water; they expect Badoit, Evian, Panna, San Pelligrino and a good house water."

However, there isn’t a water list in the restaurant, although, supporting Hall’s argument, Wilkins does see the need for different types, for instance the slightly sparkling style of Hildon, the minerality of Badoit, the softness of Evian, as well as Panna, which is apparently even softer.

But what about tap water? It has recently been proved to vary very little in chemical composition compared to bottled water by the UK’s Drinking Water Inspectorate (DWI), while many suggest tap water is fresher – it is after all straight from the tap.

Well, Wilkins believes that, although there is "nothing wrong with tap water, it does have a hard edge and with subtle food or wine it would break up the flavours". Similarly, Hall says water as a partner with fine food should, in essence, "have almost no taste at all" to prevent it destroying the flavours of the food.

Cut above

Obviously, however, the real reason for selling bottled water is revenue, and the margins, although not as high as for wine, are extremely useful.  In fact, even at the lowest mark-up there is still 75% to 80% profitability but many warn against greed in this sector.

"Charging over £5 a bottle is going too far," says Hall, for example.  "We would like people to be realistic, then customers would probably order two bottles."  Furthermore, unlike wines in the on-trade, water tends to be branded and the same names are widely available in supermarkets.

For this reason people know the real cost, and may well be aggravated by excessive mark-ups.  But not all bottled-water companies are trying to replace wine as the preferred accompaniment to food.

As a spokesman for Strathmore says: "It is not a case of water instead of wine in a restaurant but water as an incremental sale."  The margins may be lower on water, but water and wine are unlikely to clash.

However, Giovanni Molli, the sommelier at Teca, has noticed the increased importance of bottled-water sales at lunchtimes.  "People are concentrating more on business," he says, "and we are selling more water than wine."

This, he adds, is not particularly good for business, especially in the current economic climate.  "People are not spending as much," he admits – and that’s not good news for a restaurant.

Furthermore, the increased interest in bottled water is causing problems when it comes to storage in restaurants.  This precludes most places from stocking a choice of brands.

"The problem is space," says Molli, "to keep different waters you need plenty of storage space.  You need a minimum of three or four cases of each water for every day.  We would need a whole room only for water."

Wine will, of course, always win the storage battle, not just because of the higher margins but also because of the greater need for a range of styles.  Nevertheless, Hall would like to see as a minimum "one interesting local water and an international one, for instance Badoit or Evian in a French restaurant and a British water equivalent".

Looking the part

But the competition’s currently running high for space on the table or even in the back bar.  And as such, packaging is key to getting your product noticed.  "It’s important to have a bottle that looks smart," says Wilkins.

"You don’t want collapsible plastic bottles or anything too elaborate," citing Speyside Glenlivet as an example, which although an excellent water, was first issued with a rather garish tartan label. It has since undergone a radical redesign.

At this point a comparison with vodka springs to mind.  Purity is key to its positioning, as is the impact of packaging. Furthermore, both water and vodka are bringing out a proliferation of flavoured versions – although these are rare in the on-trade for the former.

However, for Hall, it is the most famous Italian wine that is evoked by current trends in bottled water.  "Fancy bottles like Ty Nant’s [famed for its blue glass] are today’s equivalent of the Chianti bottle with raffia – people are buying the bottle so they can keep it and put a candle in it," he remarks.

However, whether it’s like Chianti in the 70s or vodka today, bottled water is here to stay. In fact, it’s a sector experiencing much innovation, both in the purity of the product and the power of the packaging.

Furthermore, it’s fashionable – Hildon even has its own style magazine – and this means potential profits. 

So, whatever a restaurant does, when it comes to making the most of its mineral water it shouldn’t just stick its head in the sand – or should one say under the tap?