Middle East and Africa: An Optimistic Stance for Non-Alcoholic Beer

Euromonitor International highlights that globally, low/non-alcoholic beer is the fastest growing category of the past five years, with a 7% volume CAGR, although off a low base. This category is driven by its key markets that are predominantly present in the MEA region, with a 35% volume share. Growth rates declined in 2013, but the category potential remains strong and two distinct strategies for development have emerged.

A Soft Drink Option: Saudi Arabia’s Case

When it comes to non-alcoholic beer in the Middle East and North Africa (MENA) region product positioning and consumer perception of this category have a uniquely dissimilar dynamic to the rest of the world. The cultural context in this region is the key determinant of product positioning and consumer perception of non-alcoholic beer. In predominantly Muslim countries such as Iran and Saudi Arabia, in order to avoid the alcohol connotation, ‘non-alcoholic beers’ are not positioned as such. Any reference to these products’ alcohol content, even if miniscule, can deter consumers from buying them and even retailers from selling them, as they would be considered non-halal, or non-abiding to Islamic law. So the actions of companies in the MENA region in recent years have pushed a promotional campaign that is changing the identity of this category.

To illustrate this phenomenon, Aujan Industries in Saudi Arabia has extensively promoted its Barbican brand as a malt-based soft drink. In addition, it had taken steps to remove the foam element in order to provide a ‘soft drink’ look. Systematically, Aujan has been attempting to justify its non-alcoholic products with a halal label. The Barbican brand pushed this campaign in the mid-2000s, and has managed to more than double its Saudi Arabia sales, from 18 million litres in 2004 to 37 million litres in 2013.

A Vitality Tipple: Nigeria’s Case

In contrast, if we were to take the sub-Saharan context, in the case of Nigeria, the cultural context here encourages the alcohol connotation of non-alcoholic beers.

Diageo’s non-alcoholic Malta-Guinness brand in Nigeria has taken a different approach by riding on the promotional bandwagon of its alcoholised stout variety, and successfully gaining sales in a total of six sub-Saharan African markets. Malta-Guinness had seen resurgence between 2008 and 2011, growth slowed in 2012, but remained positive at 6%; however, this performance is not symbiotic to the Guinness stout, which has seen only marginal growth for the past five years. The two brands might have mutual brand recognition but that is as far as this relationship goes, indicating that non-alcoholic beer varieties will not be restricted by the same market lethargy that alcoholic beer faces.

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Malta-Guinness operates in a unique position, where it is sold as a pseudo-energy drink, and even operating as a health-conscious brand with its better-for-you low-sugar alternative. When compared to Barbican’s performance, it has outstripped it, with quadrupled growth from 2004 to 2013, to reach 161 million litres.

Brewing Potential for Growth

Companies should consider that the region has potential, deriving from its populations’ demographic shift, with a Saudi Arabian median age of 33 years-old and a regionally-relative longer life expectancy, at 77 years-old. This is further supported by the tendency for consumers to maintain brand loyalty to non-alcoholic drinks throughout their young adult lives. In the sub-Saharan context, Nigeria has a lower median age of 18 years-old. As young African adults grow and develop their familial ties and social responsibilities, their spending power and demand for alcoholic drinks can potentially diminish and they will seek substitutes. Many will opt for imbibing more lower-priced, non-alcohol drinks and even seek a health-conscious variety.

New entrants will face difficulties from well-established market players but there is potential to take advantage of the current expansion in the sub-Saharan Africa retailing sector. Companies can target retailers especially with the expansion and entrance of modern supermarkets that are creating selling space, which can act as a launching platform for new products. By doing this, they will expose their products to a growing number of middle and high-income consumers. In the case of Nigeria, it is expected to be the fastest growing market in retailing outlets globally, with a forecast 12% CAGR rise in supermarket between 2013 and 2017. However, there is a short window of opportunity for new entrants to utilise the retailing sector in order to gain a foothold in non-alcoholic beer market, so companies must act fast in establishing their brands in these markets.

Launching a non-alcoholic brand in the MEA region has its limitations due to the volatile socio-political situation of these emerging markets, and the extent of gain that new entrants will obtain in such a relatively small category. The total beer category in the MEA totals 13.5 billion litres in 2012, of which low/non-alcoholic beer makes up 10%, at 1.4 billion litres. It is not a key driver in beer, but a significant enough segment to make an impression in the region and offers an opportunity for established players, or potentially new entrants to gain a foothold in the market. In the case of sub-Saharan Africa, loyalty to alcoholic drinks brands can support loyalty for the non-alcoholic equivalents, a key driver that can be observed with Malta-Guinness. This could see further cross-pollination across categories and even the development of hybrids between non-alcoholic beers and soft drinks.