This report first appeared in Gulf Marketing Review's December 2008 issue. The full report with statistics is available for download at the bottom of this page.

Background

According to the Consulate of Canada’s Agri-Food Program Section study, the GCC accounts for 60% of the world’s desalination plants. The percentage distribution of drinking water industries in the GCC is dominated by Saudi Arabia at 78%, followed by the UAE at 14%, primarily based on desalinated drinking water.

The UAE is reported to be the world’s biggest per capita water consumer. The UAE is also the second-largest producer of desalinated water at 950 million m3 per year, followed by Saudi Arabia.

There are plenty of local branded products on UAE grocery shelves when it comes to drinking water. Aside from a few natural underground sources used by some of the market leaders, most local bottled water production originates from treated water (desalination followed by other processes).

The top 3 sellers in terms of volume market share at retail are Masafi first at 37.9%, followed by Al Ain at 23.6% and Aquafina with 6.6%. However, there are close to 40 companies selling bottled drinking water, and most are selling purified treated water, which has been filtered.

According to US Government data, Saudi Arabia consumes over 22 billion cubic meters of water annually, having the highest per capita water consumption rates in the world, and the country is expected to face extreme water shortages. To meet the growing demand for water, the Saudi Government is re-organizing the water sector, launching water conservation campaigns and encouraging the private sector to take the lead in establishing and managing water purification and desalination plants.

Media Concerns

Over the course of 2007, UAE consumers were bombarded with media concerns related to bottled water products. Four particular issues got attention drawn to it. The first is from UAE plants as having up to 100ppb (part per billion) of bromate (a carcinogen bi-product of a particular desalination process used in the UAE). The second was raised by reputable local doctors cautioning against the reuse of PET (Polyethylene Terephthalate) water bottles. The third was on the environmental costs of packaging (in terms of fossil fuel consumption) and disposal problems. The last point was on the transportation energy wastage. Masafi would later tackle these issues in aims to improve its media image.

HOD Segment

Some 60% of bottled drinking water in the UAE is sold in bulk sizes, exclusively in reusable 18.9L bottles for use in coolers in the HOD segment. The emerging trend in this particular segment saw UAE-market leader Masafi entering this segment’s market with the launch of 100% fully recyclable 4-gallon bottles.

Masafi appears to have clearly differentiated their new bulk product from the 5-gallon market norm, as it entered the HOD segment for the first time. They moved to capitalize on this growing segment by their entrance with a visual size-differentiation. At present, Oasis holds about a 75% market share in this segment in the UAE market.

Flavored Water

Flavored water is the most dynamic sub-category, registering an average annual increase over (2001-2006) of 30%. Danone (who already own Evian and Volvic brands) launched their premium Hayawiya Natural Mineral Water, following its previously successful debut in Saudi Arabia. This launched included a still water and four fruit flavored varieties.

The biggest trend of UAE shelves is the comprehensive introduction by established brands of new still and sparkling flavored water, both domestic and imported. Flavored water segment is recording a compound annual growth rate of nearly 15%. Volvic essentially established the UAE’s non-carbonated flavored water sub-segment in 2006, however local brand leader, Masafi, entered the market aggressively in 2007 by introducing 4 flavored still waters of its own, and capturing a 10% market share by year-end.

Sparking/Carbonated Water

A number of the imported consumer-sized waters do span both the retail and foodservice segments. However, none is more pronounced in this regard than Nestle’s Perrier brand. Perrier holds a 65% market share of the premium sparkling water segment across the region. Their market in the UAE grew by 20% last year.

Carbonated water is witnessing an average annual increase of 10% during the period of (2001-2006). Nevertheless, sales of flavored and carbonated water remain marginal within the bottled water category. This is generally attributed to the fact that the main consumers of these products are Westerners and other expats.

Competition

Supermarket retail shelves display a variety of waters, from sparkling Europeans to domestic desalinated stills. A normal sized outlet will carry two aisles of over a half-dozen various domestic brands, including usually a house-brand, coupled with Evian, Volvic, Contrex, San Pellegrino, Apollinar, Perrier, etc.

Marketing

The Al Ain Mineral Water Company claims over a 23% share of the UAE bottled water market. They have responded to the relentless demand for innovation with the launching of 4-Kids which is said to “give children the chance to identify with the brand through fun looking, bright and colorful, child-oriented format, while at the same time encouraging them to consume water throughout the day.” In terms of corporate responsibility, they focus on supporting sporting events and “active” school programs.

Media Coverage

A search for carbonated/sparking water, flavored water and mineral/still water from the 25th of September to 25th of October yielded 13 clippings. Five of those clippings were on flavored water and 8 were on mineral/still water. However, there was no coverage at all on carbonated/sparkling water.

The coverage was somewhat evenly spread between newspapers, magazines and websites. The entire ties of the mentions were on Masafi and Al Ain Water. Masafi’s coverage included mentions of their launch of Jasmine Flavored Water, It also included mentions on them acquiring 65.6% market share in the non-carbonated flavored water segment. Mentions also talked about its Modhesh co-branded water and on unveiling a Carbon Action Plan where it successfully launched 100% recycled cartons for packaging Masafi bottles, installed energy-efficient non-CFC chillers at manufacturing units in aims to make Masafi a total eco-friendly company.

As for Al Ain, it penetrated messages on its launch of the ‘4-kids’ branded water and its water that contains added calcium and fluoride. Al Ain also sponsored a Polo team at the President’s Cup.

Survey Findings

A survey was conducted in the UAE and Saudi markets. Both sample pools consisted of 18 year olds and above, divided by gender, age and nationality. The UAE sample size was 507 respondents while the Saudi sample size was 898. They were asked to indicate their preference of the type of water they like to drink; Mineral/Still, Carbonated/Sparkling, Flavored, Indifferent or None.

Gender does not play a significant role in the UAE market. However, females tend to favor flavored water more than males do and males tend to favor carbonated/sparkling water more than females do.

Interestingly, 18-24 year olds in the UAE market show high indifference to their water preference with 19.64%. The level of indifference is reduced with age. Another pattern is with the carbonated/sparkling water preference. The higher the age, the higher the preference is for carbonated/sparkling water. While 1.78% of 18-24 year olds favor carbonated/sparkling water, 12.5% of over 44 year olds prefer it.

There are no clear patterns in terms of nationalities water preferences’. However, a few highlights were interesting. Asians are substantially more indifferent than other nationalities, Westerners prefer carbonated/sparkling water more than other nationality groups and UAE nationals like flavored water more than any other nationality group.

Males in the Saudi market displayed high preference for flavored and carbonated/sparkling waters than females, while females preferred mineral/still water more than males.

Age played a significant role in deciding water preferences in the Saudi market. The higher the age the higher the preference is for mineral/still water, the lower the preference is for flavored water and the less indifferent they are about their water preference.

In terms of nationality, Arab Expats stood out as the nationality group with the highest preference for mineral/still water. Africans had the highest preference for carbonated/sparkling water while Pakistanis had the highest preference for flavored water.

Conclusion

76.7% of all respondents in the UAE market prefer mineral/still water, 3.9% prefer carbonated/sparkling water and 3% prefer flavored water. 67% of all respondents in the Saudi market prefer mineral/still water, 3.8% prefer carbonated/sparkling water and 2.1% prefer flavored water.

While the preference for regular mineral/still water still ranks first, the market for flavored and carbonated/sparkling water is registering considerable annual growth. With the UAE and Saudi Arabian markets harboring the biggest bottled water consumption per capita rates, it gives water companies infinite opportunities.

Water companies compete for shelf space as well as via various marketing techniques such as sponsoring sporting events, niche branding such as Al Ain’s ‘4 kids’ and PR to offset health concerns.

Survey results highlight which demographic segments to target for the flavored and carbonated/sparkling waters, indicating yet another untapped slice of the market. With the expansion of the imported waters and the expansion of the local water companies’ products range, competition rises.

While the market demand is substantial, there seems to be only a handful of water companies that are dominating the drinking water market. Local companies such as Masafi and Al Ain dominate the HOD segment and the mineral/still water market. Perrier dominates the imported sparkling water for the foodservice segment.

Water companies continue to introduce new products and if they continue to follow the West, one would expect the introduction of vitamin and herbal waters to the UAE and Saudi markets soon. Masafi being the local market leader, which has made it a point thus far to enter all segments and differentiate itself, is likely to maintain market dominance in the UAE market.