The Middle East – an untapped market for beverage alcohol innovators?

The Middle East has potential to become a critical driver for the low- and no-alcohol movement

 

The Middle East may not be an obvious market to focus drinks innovation within the beverage alcohol industry, but it has potential to become a critical driver for the on-trend low- and certainly no-alcohol movement. IWSR looks at a region that may have missed out on the recent focus on moderation across the globe, however it would still require a very different strategy for success compared to other markets.

Due to its religious, social, and political outlook, the Middle East is often overlooked by drinks brands. Alcohol is completely banned in some parts of the region, such as Saudi Arabia, Iran, Kuwait, Yemen and the Emirate of Sharjah, and consumption remains low even in those countries where consumption (and in some cases production) of alcohol is allowed. As such, the Middle East has historically not been a priority target market for the beverage alcohol industry – with the very notable exception of brewers.

For many decades, brewers have invested in domestic brewing of beer where they were allowed to, devising a parallel offering of locally-made non-alcohol beers and have created product portfolios for export, aimed particularly at those countries where alcohol is completely banned. Local soft drinks companies have followed suit, launching ‘malt beverages’ – a parallel offering to non-alcohol beers.

Dedicated low- and no-alcohol spirits and wines have much more recently been developed in the Western markets, spurred by health and wellness cues, but crucially these are yet to gain traction in a part of the world that should – in theory – provide most fertile ground for growth. Unlike brewers, spirits and wine companies have never enjoyed much footprint in Middle Eastern markets, but their new low/no alcohol products should certainly see some success – if governed by completely different market dynamics.

Dry markets

Alcohol-free iterations of beer, wine and spirits offer a premium trade-up alternative for consumers in Middle Eastern markets where alcohol is banned. Such innovations may also suit markets where alcohol consumption is restricted.

In cosmopolitan cities across the region, there is an unsatisfied demand for premium drinks experiences as consumers become increasingly disillusioned by soft drinks – a category that has not witnessed great innovation or disruption in recent years. Alcohol-free drinks from wine and spirits brands could play particularly well in markets that have a strong culture of out-of-home socialising, for instance in coffee shops and shisha bars, as well as the more traditional bars and restaurants. Saudi Arabia, until recently one of the most conservative markets, has recently seen a spate of openings of innovative bar concepts, in look and ambience undiscernible from any metropolitan bar in the world but, crucially, stocked with only non-alcohol drinks offerings.

“As consumers grow fatigued by soft drinks, there’s an untapped opportunity for no-alcohol drinks brands to offer trade-up alternatives,” says Thorsten Hartmann, director at IWSR. “Most of the Middle East already has a familiarity with alcohol-free beer, which has the potential to translate to other types of 0% beverages that replicate the ritual of enjoying an alcohol beverage. Another example is sparkling grape juice in faux-Champagne bottles that is already a feature, especially in contract catering in many countries, but not true de-alcoholised wines.”

Saudi Arabia was the sixth largest market for alcohol-free beer consumption in the world in 2019, and IWSR analysis indicates that it will remain in this position until 2024 – and crucially, this excludes malt beverages that may not be counted as non-alcohol beers. Volume consumption of non-alcohol beer doubled in the country between 2015 and 2019, and is expected to grow by 20% between 2019 and 2024. Depending on whether one counts malt beverages, which are not true de-alcoholised beers, Iran would rank very high on the list too.

Factors to bear in mind

There are, however, a number of factors for low/no drinks producers to bear in mind when targeting the Middle East.

Drinkers will need to be converted from different categories than those targeted in Western markets. They will need to recruit mainly from the soft drinks (and possibly hot drinks) categories as opposed to the alcohol segment, which will require a different strategy to other markets. They also will face competition from established 0% ABV beer brands, as well as their malt beverage counterparts, that have operated in the region for many years and have established channels of distribution.

While in markets such as Europe and the US, the appeal of alcohol-free beers, wines, gins and other beverages lies in their similarity to the full-strength originals, this perceived value will not necessarily translate to the dry markets of the Middle East, perhaps with the notable exception of drinking rituals that are gleaned from television, streaming services and, of course, international travel. But consumers here will not be looking for their drinks to replicate flavours of alcoholic beverages since they will likely not have that frame of reference – having largely grown up with carbonated soft drinks, energy drinks, cordials and juices. Brands will, therefore, need to radically alter their approach in the Middle East, and communicate the value of their products in a different way.

Such products may also not be suitable for all parts of the Middle East. In Turkey, for instance, alcohol-free beer has not taken off due to the particular social dynamics at play in the market. Secular Turkish consumers often drink beer to reaffirm their secular identities, while religious Turks are often morally opposed to even non-alcoholic varieties. As such, the alcohol-free beer produced in Turkey is almost wholly reserved for export.

Another factor is pricing. In dry markets, consumers cannot use the pricing of full-strength alcoholic beverages as a yardstick for low/no expressions. Instead, they may compare prices to premium soft drinks, meaning brands will need to be even more thoughtful about how they communicate the value of their products.

Crucially, regardless of where in the Middle East low/no products target, these beverages will need to be positioned as aspirational. Bottle design, cocktail serve and social media visibility will all need to be key considerations.

 

You may also be interested in reading:

How is alcohol legislation changing in the wake of the ecommerce boom?
Why will beer prove resilient in the aftermath of Covid-19?
Will current shifts in consumer behaviour permanently disrupt the beverage alcohol industry?

Stay in the front

Get report updates, latest news and industry insights straight into your inbox