Although there is no immediate prospect of the ban being lifted, a more open attitude from the Saudi government, as well as a more sophisticated and well-traveled consumer base, could open up opportunities for no-alcohol products, according to the IWSR.
Saudi Arabia 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. The country recently unveiled a multi-billion-dollar Global Supply Chain Resilience Initiative, and sporting investments have included the LIV Golf tour, the acquisition of Premier League football club Newcastle United, and motorsport ventures such as the Saudi Arabian Grand Prix, first held in 2021. The country is also funding a joint bid for the 2030 football World Cup with Egypt and Greece.
As Saudi Arabia becomes more international in its outlook, this could create opportunities for no-alcohol products – with the important caveat that products containing even trace alcohol are currently banned in the country.
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.
A GROWING MARKET FOR ZERO-ALCOHOL
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. Recipes for ‘Saudi Champagne’ – a mix of fruit and soda water that can easily be made at home – are now trending in the country.
Style bars with a western feel and level of sophistication are also beginning to spring up 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.
“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.
Travel to other countries has exposed Saudis to alcohol, especially on-premise. Many lower-income Saudis have also started to travel to surrounding countries in the MENA region, most of which (only Kuwait excluded) allow alcohol to varying degrees.
“There are already plans to allow the sale of alcoholic drinks in a resort opening as part of the Neom urban development in north-western Saudi Arabia, so there may be a gradual shift in attitudes towards these products as things open up more,” Menezes says.
FUTURE OPPORTUNITIES
Thorsten Hartmann, Director of Custom Analytics at IWSR, sees opportunities in Saudi Arabia’s increasingly sophisticated, young, and well-traveled consumer base and its evolving on-premise, as well as the country’s population growth and general affluence.
But he 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, 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, the importance of this factor could be overstated.
“The main challenge is to have the no-alcohol discussion without taking that discussion too far into the territory of alcohol,” Menezes says. “But there are plenty of beer examples – such as Budweiser – where the juxtaposition with the counterpart alcoholic variant has worked well.”
A bigger challenge is distribution. Although supermarket chains are gaining strength in Saudi Arabia, grocery retailing remains highly fragmented, with thousands of small neighborhood shops that are hard to reach. Meanwhile, 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. Distributor arrangements are notoriously difficult to unravel, so a lot of homework is required from brand owners in terms of choosing the right representation on the ground.