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 * Retail & Consumer


BREWERS TAP GROWTH OF ZERO-ALCOHOL BEERS IN MIDDLE EAST

By Mohamed Ezz and Emma Rumney
August 15, 20241:29 PM GMT+2Updated 16 hours ago
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Item 1 of 3 Non-alcoholic drinks by Moussy are displayed at a supermarket in
Manama, Bahrain, August 15, 2024. REUTERS/Hamad I Mohammed
[1/3]Non-alcoholic drinks by Moussy are displayed at a supermarket in Manama,
Bahrain, August 15, 2024. REUTERS/Hamad I Mohammed Purchase Licensing Rights,
opens new tab

CAIRO/LONDON, Aug 15 (Reuters) - Egyptian Mohannad Abdelazeem, 35, doesn't drink
alcohol. But he does consume three or four cans per day of Moussy and Fayrouz -
alcohol-free beers.
Brewers including Carlsberg and Anheuser-Busch InBev (ABI.BR), opens new tab say
interest is growing in such booze-free brews across the Middle East and North
Africa, presenting opportunities in a region with some of the lowest alcohol
consumption rates globally.

Reuters Graphics
Reuters spoke to eight Egyptian consumers, shopkeepers or cafe owners -
including Abdelazeem - who said they or their customers have recently switched
to non-alcoholic beers, ditching U.S. soft drinks brands like Pepsi and
Coca-Cola because they see them as supportive of Israel following its
bombardment of Palestine.
Advertisement · Scroll to continue

PepsiCo (PEP.O), opens new tab, which acquired Israel-based SodaStream in 2018,
and Coca-Cola (KO.N), opens new tab did not respond to a request for comment.
There is also a broader shift in consumer tastes underway, some executives say.
AB InBev has seen demand for zero-alcohol brews rising among locals in some
Middle Eastern countries, including Saudi Arabia, according to Jason Warner, its
CEO for Europe and the Middle East. Sales to tourists and expatriates have also
grown.
Advertisement · Scroll to continue

AB InBev launched its flagship alcohol-free beer Corona Cero in Saudi Arabia in
the first quarter. Announcing the planned launch in September 2023, Brian
Perkins, AB InBev's head of Western Europe, said Corona Cero offered "new
frontiers of growth and brand building in expansion markets".
Abdelazeem, a genetics researcher, said he used to drink seven or eight cans of
Pepsi or Coca Cola every day, but worried about its health impacts. He sees
drinks like Carlsberg's Moussy as being good for digestive health and preventing
kidney stones, adding his whole family had now made the switch.

"Honestly, we like it even more given its health benefits," he said.
Moussy is made by avoiding alcoholic fermentation, instead of by removing
alcohol afterwards as is common with many non-alcoholic beers. Carlsberg refers
to Moussy as a non-alcoholic beer, though it is marketed as a malt beverage in
Egypt, where it has been sold for 30 years.
While Carlsberg said growing interest in zero-alcohol brews presented an
"opportunity" in the Middle East and North Africa, they were unlikely to make
any substantial contribution to revenues any time soon.

"Culturally it is going to take time for people to be comfortable with the
notion that it is a beer," CEO Jacob Aarup-Andersen told Reuters in an interview
earlier this year.
Carlsberg's teams were working to develop markets in the region, but this was a
long-term endeavour, he added.
AB InBev is focused on appealing to existing beer drinkers, who currently drive
zero-alcohol sales globally, executives told Reuters.

It sees demand for non-alcoholic beer in the Middle East mostly concentrated in
international venues like hotels and western restaurants. While trends in
cosmopolitan cities tend to spread over time, AB InBev had no plans to try to
drive uptake, Warner said.

Reuters Graphics
Heineken's (HEIN.AS), opens new tab net revenue grew by upwards of 40% in Egypt
in the first half of this year, in part thanks to sales of Fayrouz. The company
does not break down its results by country and declined to provide further
details.


"PIVOTAL PERIOD"

Non-alcoholic beers remain a small part of brewers' revenues, but are
increasingly central to strategy as they offer growth. So far, that has mostly
been driven by expanding the opportunities for existing drinkers to sip on beer
brands, such as during working lunches.
The executives' comments, however, indicate potential for zero-alcohol brews to
recruit new customers in nations with large populations that brewers have barely
penetrated to date.

Reuters Graphics
While all brewers operate in the Middle East and North Africa, their beer sales
in many countries are focused on a niche market of travellers and expatriates -
which is growing as tourism increases.
Brands like Carlsberg's Moussy and Heineken's Fayrouz, by contrast, have
targeted the local population.
Carlsberg commenced local production of Moussy in Egypt in 2023, and has also
built a local sourcing hub in Jeddah, Saudi Arabia, where it says Moussy and
another Carlsberg brand Holsten hold over 50% of the zero-alcohol beer market.
It has developed new flavours, including lemon and mint, a popular taste
locally.
"We are at a pivotal period in the Middle East where local preferences and
aspirations are changing rapidly," said Alexander Hauberg-Jensen, Carlsberg's
vice president for Middle East & Africa.
Carlsberg, which sells soft drinks as well as beers, plans to expand its
portfolio to include other non-alcoholic beverages, he said.
AB InBev's chief marketing officer Marcel Marcondes said the company was not
making any specific effort to grow in Middle Eastern markets, which are not a
priority and where it does not advertise.
The company works to ensure product is available to meet demand and provide
partners with tools to serve its drinks well, such as glassware, Warner added.

Reuters Graphics


CULTURAL BARRIERS

Even indirect promotion of alcohol is prohibited in Gulf nations, including the
United Arab Emirates, and it is unclear if advertising a zero-alcohol version of
an otherwise alcoholic brand would class as such, said David Yates, Partner and
Head of Digital & Data at corporate law firm Al Tamimi & Company.
Companies would have to consult carefully with authorities to understand what
marketing, if any, is permitted, and even then risk offending conservative
consumers, he added.
Any significant cultural shift is generations away, said Laurence Whyatt,
analyst at Barclays, adding the brand awareness and pursuit of moderation that
drive zero-alcohol sales elsewhere do not exist in regions where most do not
drink.
"I'm not holding my breath," he said.
In some countries, zero-alcohol brews are growing for different reasons, such as
in Egypt where they are perceived to be good for digestion, said Alexandra
Molokova, research analyst at market research firm Euromonitor International.

Reuters Graphics
This presents an opportunity for brewers but they need to adapt their strategies
and pricing to reflect these differing motivations, added Susie Goldspink, Head
of No- and Low-Alcohol Insights at beverage market research firm IWSR.
Most customers in the region would otherwise be drinking a soft or hot drinks -
far cheaper than the alcoholic beers brewers usually price in line with, she
said, adding well-known brands like Moussy have the upper hand.

Get the latest news and expert analysis about the state of the global economy
with the Reuters Econ World newsletter. Sign up here.

Reporting by Mohamed Ezz in Cairo and Emma Rumney in London;

Our Standards: The Thomson Reuters Trust Principles., opens new tab

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