IWSR mulls Saudi Arabia could be the next big opportunity for the no-alcohol category

SAUDI ARABIA – As Saudi Arabia becomes more international in its outlook, IWSR says this could create opportunities for no-alcohol products to thrive as there is no immediate prospect of the alcohol ban being lifted.

Saudi Arabia is already a top 10 market for no-alcohol beer, which is supplemented in the country by the large-scale consumption of malt beverages–malt-based soft drinks, as opposed to de-alcoholized beer.

According to IWSR, there is also a small but growing market for zero-alcohol wines and spirits, as well as a well-established demand for sparkling grape juice, often sold in Champagne-like packaging and with a similar consumption ritual.

“Non-alcoholic wine has gained some traction in the Saudi Arabian market, in part due to an increasingly well-traveled consumer base,” says Russell Menezes, Research Director Middle East for IWSR.

The Travels to other countries have exposed Saudis to alcohol, especially the on-premise like the surrounding countries in the MENA region, most of which (only Kuwait excluded) allow alcohol to vary degrees.

The impact has led to the springing up of style bars with a western feel and level of sophistication in urban centers, although some of these have faced crackdowns from the authorities, worried about perceived violations of public morals and religious concerns.

There are also reports of embryonic ventures from non-alcoholic bar chains and e-commerce platforms in the country.

Thorsten Hartmann, Director of Custom Analytics at IWSR, cautions that the competitive landscape for zero alcohol in Saudi Arabia contrasts strongly with western norms.

“Any non-alcoholic product will be competing for a share of the throat with more mainstream offerings, such as carbonated soft drinks, energy drinks, juice products, and hot beverages,” says Hartmann.

As such, he noted that brands will be looking to recruit consumers primarily from soft drinks categories, and the typically western appeal of no-alcohol versions of established full-strength products will not translate easily to the market – simply because they are not sold there.

While this may appear to offer greater opportunities for ‘pure-play’ no-alcohol brands that have no alcoholic equivalent, a bigger challenge is on distribution, the analysts said.

In this country that is currently looking to transform global perceptions of the country, and move beyond its historical reliance on oil revenues, through its Vision 2030 economic development and diversification plan, there are few high-end on-premise distributors, and the channel is still largely served by wholesalers.

Route-to-market is, therefore, the main challenge for zero-alcohol in Saudi Arabia, especially if the products in question involve concepts requiring activation and merchandising to introduce them to consumers.

Furthermore, grocery retailing remains highly fragmented, with thousands of small neighborhood shops that are hard to reach.

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