The region's bottled water market is exploding
Lee Jamieson discovers the vast potential of the Middle East’s bottled water market
The bottled-water market is exploding across the Middle East on an unprecedented scale. Whilst growth is reported in all countries, it is key GCC markets like the United Arab Emirates, Saudi Arabia and Bahrain that are blazing the trail — an increase of more than a third in bottled-water consumption over the past five years has been reported in these markets by Euromonitor International.
Saudi Arabia alone consumes 1337.4 million litres of bottled water, which is forecast to rise to 1998.7 million litres by 2015. Similarly, consumption in the UAE is forecast to rise from 514.5 million litres of bottled water to 768.1 million litres in the same period.
Both home-grown bottled water producers and international brands are positioning themselves to profit from the region’s high-volume markets in 2015. On top of the consumption generated in the UAE and Saudi Arabia, Iran is forecast to reach 2421.1 million litres, Algeria 1333.6 million and Syria 1066.3 million, according to figures by Euromonitor International.
Unsurprisingly, competition to become the market leader is stiff in the region.
“In a very short space of time, the bottled water market has become the most competitive market in the Middle East,” explains Fine Waters CEO, Ahmed Ghaly.
“The underlying reason for this is the extraordinary water consumption per person. In the UAE, which is one of the highest in the world, more than 250 litres of bottled water are consumed per person per year.”
A number of contributory factors are behind the region’s phenomenal growth in bottled water: an exploding population, high disposable income, easy market access for suppliers, a rise in health awareness thus shifting consumers from tap to mineral water, a thriving expatriate community and a fast-expanding hotel and F&B scene. These factors have converged to create a “perfect storm” for the region’s water suppliers.
This translates into a valuable market — in Saudi Arabia alone, the constant value sales of bottled water are projected to reach SR 3.2 billion by 2014, according to Euromonitor International.
“Naturally, we’ve seen a plethora of companies enter the market,” continues Ghaly. “Many of them prematurely — and many lacking a basic understanding of local market dynamics.
In Dubai alone, there are over 1500 different brands inclusive of different sizes registered with the Dubai Municipality. This figure does not include local water companies.
“The F&B market is therefore spoilt for choice and the offers being made are the most competitive in the Middle East.”
Less is more
Premium branded waters have found a natural home in the region perhaps driven by the aggressive expansion of high-end branded hotels and F&B brands. It is in this sector, where margins are at their highest, that competition is most fierce.
“We’ve experienced 100% growth since we first launched Antipodes Water in the region in 2008,” recalls Antipodes managing director for the Middle East region, Matthew King. “Back then, F&B managers were hesitant when implementing new premium water products.
“I now believe that F&B managers are becoming more selective when it comes to water products and brand alignment. A brand’s unique point of difference can differentiate the hospitality experience and add to the overall dining experience.”
Interestingly, Antipodes has experienced growth in the region by not mass distributing its products through retail channels — perhaps to protect the exclusivity of the Antipodes brand and its margin. Antipodes is only available through F&B outlets and via the company’s home-delivery service.
“For the F&B industry, it’s no longer simply a matter of finding the cheapest water which can return the highest profit margin,” continues King. “It’s about the quality of the offering.”
Similarly, Classic Fine Foods Emirates, distributor of Italian water brand San Benedetto, is pursuing growth by focusing on sole distribution through F&B channels and restricting availability elsewhere.
“We have found that imported mineral water is more popular in places like Dubai and Abu Dhabi where there is a high concentration of business travellers and expatriates,” says Classic Fine Foods Emirates managing director, Thomas Leroy.
“The UAE is a very dynamic market, especially in the hospitality industry, so our strategy is to stay dedicated to food service in order to offer our customers an exclusive product that is not available in retail.”
As the water market proliferates, brand exclusivity is becoming more important to F&B outlets.
“Without a doubt, the strongest change in demand is coming from the region’s fine dining restaurants and five-star deluxe hotels — accounting for 50% of the demand increase,” says Oana Vremes, marketing and brand manager, International Hotel Supplies — the firm behind Hildon Natural Mineral Water in the Middle East.
“I think that the demand for exclusivity will continue to grow because the F&B market here will always be seeking out new and innovative ways of fulfilling its consumers’ needs. The GCC has huge tourism potential — both leisure and business — so I think the Middle East will be an unstoppable engine for luxury and exclusivity. Water itself stands at the base of this evolution.”
Price hikes
The high mark up on bottled water products has been a long-standing story in the international media and July saw Dubai and Abu Dhabi in the spotlight when The National revealed that many restaurateurs are vastly inflating the price of local bottled water beyond the local supermarket price.
The retail price of these products is regulated by the Ministry of Economy, prompting fears over the legality of what has become a very common practice.
According to data released by The National, the outlets inflating the price by more than 2000% include Indego by Vineet at Grosvenor House Dubai Marina (2140%), The Yacht Club at InterContinental Al Bateen (2300%) and Rhodes Mezzanine at Grosvenor House Dubai Marina (2460%).
“Many of the UAE’s restaurant diners are exposed to water brands that are also available via retail outlets and are very aware of the stark price difference that can reach,” explains Fine Waters’ Ghaly.
“Following complaints, the municipality responsible for pricing has launched a campaign highlighting these issues and is working towards mitigating such contrasts via pricing and strategy development through government intervention and penalisation.
“It seems this is what might guide the trend in the five-star segment of the market in the near future.”
Education
The emergence of water sommeliers is still in its infancy in the Middle East and the region is arguably lagging behind other markets in this respect.
Despite the fact that water menus are popping up in outlets across the region, there are concerns that insufficient experience runs deep into the market from F&B procurement down to the end consumer.
For the water market to fully flourish, manufacturers and suppliers need to take responsibility and support the F&B industry with effective education programmes.
Being able to match a water to a dish is likely to become an essential skill for chefs, managers and waiters over the coming years and this presents an ideal opportunity for suppliers to establish meaningful partnerships with the region’s F&B operators.
Nestle Waters Italy — the company behind San Pellegrino and Acqua Panna — has reported strong growth from across the region with Saudi Arabia and Qatar performing above expectation. As part of its successful strategy, the company has devised a sommelier education scheme for F&B managers in the region.
“In cooperation with a former president of the Association de la Sommellerie International, we’ve developed the Water Codex: a trilogy of books dedicated to the F&B community,” says Nestle Waters Italy business development manager, Middle East, Luciano Novena. “This teaches the rules for water tasting and the proper way to match water, food and other beverages.”
Whilst some companies are investing in water sommelier education, this is not supported throughout the industry. Without more effective pan-regional education, the strong growth forecasts for the Middle East’s bottled water market mean nothing. Suppliers and F&B operators need to work more closely together to unlock the market’s full potential by 2015.
In truth, the strategy for success in the region’s bottled water market is still undecided — but fostering consumer understanding is likely essential. So, who will dive in first?
On the Market: Bottled Waters
Hildon Natural Mineral Water
Hildon Natural Mineral Water originates from the Hampshire countryside in the South of England. Prestigious UK clients have included The Savoy, The Royal Opera House and the House of Commons.
Distributed in the region by International Hotel Supplies LLC
www.ihs-uae.com
Waterbar Collection
Supplies a portfolio of premium waters to the region’s F&B industry. Brands include Iskilde, Te Waihou, Monadriz, Tasmanian Rain and Ice Age.
Fine Waters LLC
www.waterbar.ae
Acqua Panna
These Italian-sourced waters are popular with F&B managers both in the region and in other international markets.
Nestle Waters Italy
www.nestle-waters.com
Antipodes
This premium water from New Zealand is sourced 327 metres below the surface and is known for its purity.
Distributed in the region by Intelligent
Foods LLC
www.antipodes.co.nz
San Benedetto
San Benedetto comes from Venice and is Italy’s most popular bottled water.
Classic Fine Foods Emirates LLC
www.classicfinefoods.com
Oasis Water
The Oasis Water Company was founded in 1984, as the bottled water division of National Food product Company (NFPC). Now, more than 1 million litres of water are bottled and distributed every day.
NFPC Group
www.oasiscome2life.com