Operations

Logistics

According to a market report published last year by Euromonitor International, the Middle East and Africa region’s bottled water sector was set to reach 50.5 billion litres in 2016, with the UAE’s market size predicted to reach 1.2 billion litres. Limited infrastructure and harsh climate conditions in the region pose major logistical challenges to the regional bottled water industry.     Companies must have the capacity to move large shipments quickly and efficiently as exposure to the elements can negatively affect the product. AKI Head of Food Service Solutions Doreen Smith explains: “As the water industry is high volume it requires the related infrastructure to support the distribution.”

Cost

In other industries an importer’s two biggest costs are storage and labour. However, this is not the case for most bottled water companies in the region.

According to Lanjarón Arabia Distributors president Jason Moore: “Our pricing is topped by our shipping costs, which is done in chilled ‘reefer’ containers, and has gone up a lot this summer due to more demand for goods being transported from Europe.” Moore adds: “Additionally, our storage costs have gone up due to high demand and low availability of clean, chilled warehouses in the UAE.”

It’s no secret that imported products tend to cost more than local ones. The general perception is that premium waters are usually imported. However, according to Fresh Express LLC brand manager — beverage Omar Al Sharif: “Many operators are very cost-oriented and sometimes prefer simply offering local water than imported ones.” Al Sharif continues: “However, with imported water, consumers are usually more willing to pay higher price which can increase the profit margins of an outlet or operator.

Competition

With several local and international brands in the market, the industry is highly competitive.

Smith says: “It is challenging to maintain operational costs due to the flexibility available in the market with several players trying to compete in the same category.”

Horeca marketing executive — UAE Monica Lamaa adds: “There are many new local water brands and this is a threat to global brands as they are able to charge less whilst still making a good margin. Rising import costs mean global brands are unable to compete in terms of price thus losing market share.”

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