From Saudi Arabia’s zero tolerance to Beiruth buzzing's nightlife, the Middle East poses challenges and opportunities for alcohol producers. And as the region realigns itself after the global financial crisis, the trends in drinks consumption also paint a picture of a region in flux.
Dubai may still be the party capital of the Arabian Peninsula, as witnessed by the string of events over the new year period, but it is only just starting to reverse a steep drop in alcohol consumption that saw the recession of 2009 shave off up to 30 per cent of sales for Diageo, the world’s biggest producer of spirits.
“The UAE was growing at 26 per cent a year between the boom years of 2006-08; it was hard just to keep up with the demand,” says Hugo Mills, Diageo’s regional general manager.
Abu Dhabi, the United Arab Emirates’ capital, is leading the federation out of recession, with Diageo sales there growing at 28 per cent a year.
New hotels are opening as the capital develops its own tourism and entertainment industry, with pop concerts and global sports events beginning to shed the city’s sleepy reputation.
“Now we are seeing huge growth in Abu Dhabi. And with the World Cup in Qatar in 2022 as well, this should keep the region buoyant in the future,” says Mr Mills.
Qatar, which in recent years introduced tougher regulations on bars, is set for a construction-fuelled boom, especially in hotels, as it prepares for the football tournament.
Lebanon, too, with its famous nightlife and looser advertising regulation, is capturing the attention of alcohol producers.
“Lebanon is very premium-market – customers are trading up, they want expensive bottles,” says Jane Ewing, managing director for Diageo’s Global Travel and Middle East businesses.
Lebanon also exports its own brands, from the wines of the Beqaa Valley to Almaza beer, but they remain a niche market compared to the grip of global products.
Arabia’s beer industry is dominated by a joint venture between Heineken International and Emirates, Dubai’s government-owned airline. With a two-thirds market share of beer consumption in the UAE, its products include Heineken, Amstel and Sol, making it the market leader in the other Gulf states that permit alcohol: Bahrain, Oman and Qatar.
For Diageo, owner of the Johnnie Walker and Smirnoff labels, Dubai has yet to recover to 2008 levels, but the city’s duty-free sales at the world’s fifth busiest airport reached a record $1.3bn in 2010, a 14 per cent increase on the previous year.
With the region earmarking up to $86bn for airport infrastructure, Diageo expects to double its sales as Qatar and Abu Dhabi proceed with aviation expansion plans.
By the end of the next decade, the Middle East should have doubled its share of global travel retail business to 14 per cent, according to Sweden’s Generation Research.
But, industry insiders say, higher margins are found in the black-market sales into “dry” countries such as Saudi Arabia, where a standard bottle of whisky costs $150.
Northern emirates of the UAE – Ajman, Umm al-Quwain, Fujairah and Ras al-Khaimah – allow alcohol stores that undercut the licensed outlets in Dubai and Abu Dhabi.
Industry insiders estimate that more than a half of the alcohol sold to traders in these emirates ends up being smuggled into Saudi Arabia and elsewhere.
Dubai may still be the party capital of the Arabian Peninsula, as witnessed by the string of events over the new year period, but it is only just starting to reverse a steep drop in alcohol consumption that saw the recession of 2009 shave off up to 30 per cent of sales for Diageo, the world’s biggest producer of spirits.
“The UAE was growing at 26 per cent a year between the boom years of 2006-08; it was hard just to keep up with the demand,” says Hugo Mills, Diageo’s regional general manager.
Abu Dhabi, the United Arab Emirates’ capital, is leading the federation out of recession, with Diageo sales there growing at 28 per cent a year.
New hotels are opening as the capital develops its own tourism and entertainment industry, with pop concerts and global sports events beginning to shed the city’s sleepy reputation.
“Now we are seeing huge growth in Abu Dhabi. And with the World Cup in Qatar in 2022 as well, this should keep the region buoyant in the future,” says Mr Mills.
Qatar, which in recent years introduced tougher regulations on bars, is set for a construction-fuelled boom, especially in hotels, as it prepares for the football tournament.
Lebanon, too, with its famous nightlife and looser advertising regulation, is capturing the attention of alcohol producers.
“Lebanon is very premium-market – customers are trading up, they want expensive bottles,” says Jane Ewing, managing director for Diageo’s Global Travel and Middle East businesses.
Lebanon also exports its own brands, from the wines of the Beqaa Valley to Almaza beer, but they remain a niche market compared to the grip of global products.
Arabia’s beer industry is dominated by a joint venture between Heineken International and Emirates, Dubai’s government-owned airline. With a two-thirds market share of beer consumption in the UAE, its products include Heineken, Amstel and Sol, making it the market leader in the other Gulf states that permit alcohol: Bahrain, Oman and Qatar.
For Diageo, owner of the Johnnie Walker and Smirnoff labels, Dubai has yet to recover to 2008 levels, but the city’s duty-free sales at the world’s fifth busiest airport reached a record $1.3bn in 2010, a 14 per cent increase on the previous year.
With the region earmarking up to $86bn for airport infrastructure, Diageo expects to double its sales as Qatar and Abu Dhabi proceed with aviation expansion plans.
By the end of the next decade, the Middle East should have doubled its share of global travel retail business to 14 per cent, according to Sweden’s Generation Research.
But, industry insiders say, higher margins are found in the black-market sales into “dry” countries such as Saudi Arabia, where a standard bottle of whisky costs $150.
Northern emirates of the UAE – Ajman, Umm al-Quwain, Fujairah and Ras al-Khaimah – allow alcohol stores that undercut the licensed outlets in Dubai and Abu Dhabi.
Industry insiders estimate that more than a half of the alcohol sold to traders in these emirates ends up being smuggled into Saudi Arabia and elsewhere.
The Financial Time
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