Agthia Group: Water faces challenge to dethrone CSDs as UAE’s ‘natural rehydrator’


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Dubai by night: Fasahat Beg from Agthia Group noted a wide disparity between super-rich and poor consumers in UAE (Photo: Crazy Diamond/Flickr)
Dubai by night: Fasahat Beg from Agthia Group noted a wide disparity between super-rich and poor consumers in UAE (Photo: Crazy Diamond/Flickr)

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Abu Dhabi-based food and beverage giant Agthia Group says the bottled waters industry faces a challenge to persuade UAE consumers to swop soft drinks for water as a ‘natural rehydrator’.

Fasahat Beg, executive VP of Agthia’s consumer business made this remark while speaking at Zenith International's Premium Waters 2014 event at Dubai Marina (pictured below) on Monday.

The wider Agthia group turned over circa. AED $1,512bn ($411m) in 2013, and its beverage portfolio includes the Al Ain water brand, and it also distributes Capri-Sun and Monster in the United Arab Emirates (UAE)*.

Beg took a deep dive into regional consumer dynamics in an attempt to answer a question he himself posed on the UAE: "How does premium water fit into this market?"

He admitted from the start that, while water plays a significant role in this marketplace, it faces the challenge of dislodging CSDs as the “natural rehydrator”​ in people’s minds.

GCC has ‘peculiarities’ people don’t realize

The wider Gulf Cooperation Council (GCC) comprises six countries - UAE, Bharain, Kuwait, Oman, Qatar, Saudi Arabia - and 42m people with a high average per capita income.

The bulk of the population is under 45 and the birth rate is a healthy 3%+ per annum.

Dubai 2

“So it’s a very interesting place to be operating in from a marketing and fast moving consumer goods perspective, but it has some really interesting peculiarities that people don’t realize,”​ Beg said.

Namely, that 65% of the population lives in Saudi Arabia, while in most markets 65% of the population is male due to large numbers of transient workers; in UAE 85% of people are expats who form transient groups – either as contract workers or expats on 3-5 year professional postings.

Then there are the cultural differences... In a region that also includes ultra-conservative Saudi Arabia, Beg described UAE (as home to 200+ nationalities) as an oasis due to its “highly dynamic, active, Western lifestyle, where people are free to enjoy religious and social freedoms”​.

Massive income disparity, ethnic diversity, population churn…

Add to this massive disparities in income and buying power between different groups and massive cultural differences – Beg said Emiratis won’t buy what other nationalities buy, a Pakistani won’t drink what an Indian drinks, Filipinos are a distinct group, etc. – while regulatory scrutiny of brands is increasing.

Companies also face the problem of ‘population churn’, Beg said, when people buy into a brand then return to their home countries after two years and forget it. Couple this with a fragmented and ethnically diverse media scene and it’s difficult to get your product into consumer consciousness.

Nonetheless, Beg said bottled water had a healthy share of throat in the UAE, and grew at circa. 7% per annum from 2008-2013. While energy drinks grew much faster off a low base, he believes that controversy dogging this category presents opportunities for waters brands.

‘Very alluring’ premium waters opportunity

“Even here in the UAE they’ve removed or curtailed energy drink sales to minors. So again, water is a great opportunity for us,”​ Beg said.

An opportunity with whom? Well, Beg said barriers to entry in the low-end segment were significant, with about 165 water brands now on sale in the UAE, but that the top four bottled water brands (circa.2% of volume) account for about 10-11% of the value.

“So I think there is a very alluring opportunity here in the UAE to diversify and enter the marketplace – an opportunity to grow in the premium segment,”​ he said.

 “We have steady population growth, healthy GDP growth, a strong and expanding tourism industry – particularly in the UAE – and a sizable population with high disposable income that is embracing premium and likes to buy the best,” ​Beg added.

Australian, US chic – who owns the ‘hot space’?

Lifestyle drivers for premium water in UAE included the fact that it’s seen as trendy, Beg said, and is for drunk by people who think they’re fit and those who look at the nutritional content of products.

“Premium waters from a bottle perspective are able to command double, triple, even four times the price versus local waters – if you have a value proposition, and clearly if you have a product with consumer acceptance, then you have an opportunity in this marketplace,”​ he said.

One premium opportunity might reside in origin, Beg suggested, citing Agthia’s group-wide research showing the ‘hot space’ in terms of what UAE residents think about imported brands from across the world – countries like Australia, US, UK, NZ topped the consumer acceptance charts.

*The UAE is a federation of seven emirates: Dubai, Abu Dhabi (the capital) Oman, Ajman, Fujairah, Ras Al-Khaimah, Sharjah and Umm Al-Quwain.

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