Trend watchers can't decide between 'healthier' or good, old-fashioned sugary colas when it comes to the future of CSDs in the current market.
A young population and an extreme climate that demands frequent refreshment have allowed CSD makers operating in the region to remain bubbly over the future of the industry in the Middle East. But a global trend favouring healthy alternatives such as bottled water and juice has taken some of the fizz out of future growth projections.
In addition, cultural and religious mores forbidding the consumption of alcohol have contributed to the growing popularity of malt and energy drinks - considered to be slightly more exciting alternatives to traditional colas and sparkling fruit juices.
Sales of carbonated drinks are therefore expected to slow in the region over the next few years. According to Euromonitor International, in Saudi Arabia carbonates are projected to record a total volume CAGR of 4 per cent between 2008 and 2012 in contrast to 5 per cent for bottled water.
Focus on "healthier" options
Obesity fears and a trend towards healthy eating are expected to prompt increased investment in "healthier" product offerings such as diet colas and fruit carbonates. Already both PepsiCo International and The Coca-Cola Company have changed the way they pitch their products in the Middle East.
Pepsi launched a GCC-wide campaign earlier this year rebranding its popular fruit beverage Mirinda, which emphasised the fruitiness of the four available Mirinda flavours (Please see GMR xxxx). The new logo clearly depicts the fruit associated with each flavour - orange, citrus, apple and strawberry - on the packaging, and the rebranding effort involved a heavy instore presence supported by TV, print and online advertising.
In August, Coca-Cola set in motion the regional leg of a global campaign to promote the revamped Sprite brand. Again, fruitiness was given added emphasis, with the trademark "Lymon" (lime and lemon) symbol growing in size on the packaging. To appeal to the health conscious, the packaging also included product information stating "100 per cent refreshment, no caffeine." (Please see GMR November, p 62.)
Apart from emphasising fruitiness, both Mirinda and Sprite's rebranding played up their power to quench and refresh, thus positioning themselves against juice offerings that compete along the same lines.
To tap into the healthy trend, both the companies' zero-sugar product offerings were introduced in the region (Pepsi Max in 2007; Coca-Cola Zero in 2008). However, industry watchers question how well this attempt to appear "healthier" can work and whether cola makers are alienating a core customer base that primarily views these beverages as a refreshing treat.
Nostalgia dominates the global ad space; local pop stars the regional
In the recession consumers have taken to comfort food and drinks - a category that sweet carbonates slot in to very nicely - so pundits say there is wisdom in refocusing interest on the indulgence aspect of standard carbonates and playing up the pleasant nostalgia associated with these drinks in advertising and promotions. There is less wisdom, detractors say, in trying to tap into the "healthy" aspects - where there are obviously more suitable contenders.
In the Americas, Pepsi and Coke have reintroduced vintage jingles and slogans to remind consumers of cheerier times past, but the tactic is unlikely to have much resonance in the Middle East, where the two brands are perceived differently because of their American roots.
According to a report by Euromonitor International released earlier this year, marketing tactics designed to "connect" to the region that will continue to enjoy success are sponsoring of popular local music competitions, ads featuring famous regional pop stars or their music, and entertainment-led promotional activity rooted in the region - such as the Pepsi Sea of Stars and the Coke Light "Very Important Apartment" campaigns.
However, the multinationals are unlikely to see their category dominance challenged in the region in the short to medium term, the report said. Domestic manufacturers still lead in the fruit and vegetable juice, and bottled water categories; multinationals dominate within carbonates, concentrates, functional drinks, RTD tea and RTD coffee. PepsiCo and The Coca-Cola Company account for nearly 40 per cent of soft drinks retail volume sales in the Middle East, with Saudi Arabia remaining the two companies' main geographical focus.
Energy drinks stay ahead of the game
Anyone who has downed one too many Red Bulls will know that everything-is-possible feeling that envelops you (albeit accompanied by a fluttery heartbeat and free-floating anxiety).
And while the brand promises to "give you wings", Red Bull and energy drinks like it are not targeted at health and fitness fanatics - which has enabled this category to largely escape censure as the wave of health consciousness erodes the popularity of other CSDs.
These drinks offer value of another kind - a boost in energy - that in turn pushes it slightly ahead of other CSD options among those looking for something extra. According to Zenith International's Global Energy Drinks Report (2009), the global energy drinks market grew by 2 per cent in 2008 to reach 3.9 billion litres, up from 2 billion in 2003. The CAGR in the 2003-2008 period was 14 per cent.
The fast-paced growth in the total energy drinks market volume was matched by a rapid rise in consumption per person, reaching 0.8 litres in 2008, up from 0.4 litres in 2003. North America is the leading region, with a 37 per cent share of global volume, followed by Asia Pacific, with a 30 per cent share, and West Europe, with 15 per cent. Asia Pacific was the only region to witness a decline, with volumes falling in 2008 due to a large decline in Thailand.
In the GCC beverages market, the CAGR for 2008 in the energy drinks category was the highest, at 8.3, compared to 6.7 for bottled water, 7.2 for RTD tea products, 6.2 for liquid milk, 5.5 for juice products, 5.2 for carbonated soft drinks, 4.1 for laban and 1.7 for tea, according to figures released by the organisers of the Dubai Drinks Technology Expo 2009, to be held this month.
Heady times for near beer in Saudi Arabia
According to a report published by Euromonitor International this year, non-alcoholic beer in Saudi Arabia witnessed double-digit growth in value and volume sales, driven by aggressive advertising and promotional campaigns of leading brands like Barbican, Moussy Classic, Holsten and Fayrouz.
Both domestic producers such as Aujan Industries Co Ltd and multinational companies such as Feldschlössen Getränke AG, Holsten-Brauerei AG and Al Ahram Beverages Co (owned by Heineken NV) have a strong presence in the market. Competition continues to increase, with many new brands, both from local suppliers such as Mahmood Saeed Beverage Industry Co and foreign players like Dutch Export Breweries Co.
The report added that other factors driving growth in 2008 were new product launches, such as Amstel Zero and Hillsburg, and successful product diversification in terms of flavours, such as Holsten Pomegranate. Sales of multipack options of brands like Moussy Classic and Barbican increased.
Although growth is expected to slow as the category approaches maturity, the picture will be improved by flavour diversification and launches of premium products, accompanied by a steady increase in advertising expenditure.
© Gulf Marketing Review 2009
