Brewers tap growth of zero-alcohol beers in Middle East

Egyptian Mohannad Abdelazeem, 35, doesn’t drink alcohol. But he does consume three or four cans per day of Moussy and Fayrouz – alcohol-free beers.

Brewers including Carlsberg and Anheuser-Busch InBev (ABI.BR) say interest is growing in such booze-free brews across the Middle East and North Africa, presenting opportunities in a region with some of the lowest alcohol consumption rates globally.

Reuters spoke to eight Egyptian consumers, shopkeepers or cafe owners – including Abdelazeem – who said they or their customers have recently switched to non-alcoholic beers, ditching US soft drinks brands like Pepsi and Coca-Cola because they see them as supportive of Israel following its bombardment of Palestine.

PepsiCo (PEP.O), which acquired Israel-based SodaStream in 2018, and Coca-Cola (KO.N) did not respond to a request for comment.

There is also a broader shift in consumer tastes underway, some executives say.

AB InBev has seen demand for zero-alcohol brews rising among locals in some Middle Eastern countries, including Saudi Arabia, according to Jason Warner, its CEO for Europe and the Middle East. Sales to tourists and expatriates have also grown.

AB InBev launched its flagship alcohol-free beer Corona Cero in Saudi Arabia in the first quarter. Announcing the planned launch in September 2023, Brian Perkins, AB InBev’s head of Western Europe, said Corona Cero offered “new frontiers of growth and brand building in expansion markets”.

Abdelazeem, a genetics researcher, said he used to drink seven or eight cans of Pepsi or Coca Cola every day, but worried about its health impacts. He sees drinks like Carlsberg’s Moussy as being good for digestive health and preventing kidney stones, adding his whole family had now made the switch.

“Honestly, we like it even more given its health benefits,” he said.

Moussy is made by avoiding alcoholic fermentation, instead of by removing alcohol afterwards as is common with many non-alcoholic beers. Carlsberg refers to Moussy as a non-alcoholic beer, though it is marketed as a malt beverage in Egypt, where it has been sold for 30 years.

While Carlsberg said growing interest in zero-alcohol brews presented an “opportunity” in the Middle East and North Africa, they were unlikely to make any substantial contribution to revenues any time soon.

“Culturally it is going to take time for people to be comfortable with the notion that it is a beer,” CEO Jacob Aarup-Andersen told Reuters in an interview earlier this year.

Carlsberg’s teams were working to develop markets in the region, but this was a long-term endeavour, he added.

AB InBev is focused on appealing to existing beer drinkers, who currently drive zero-alcohol sales globally, executives told Reuters.

It sees demand for non-alcoholic beer in the Middle East mostly concentrated in international venues like hotels and western restaurants. While trends in cosmopolitan cities tend to spread over time, AB InBev had no plans to try to drive uptake, Warner said.

Heineken’s (HEIN.AS) net revenue grew by upwards of 40 per cent in Egypt in the first half of this year, in part thanks to sales of Fayrouz. The company does not break down its results by country and declined to provide further details.

“PIVOTAL PERIOD”

Non-alcoholic beers remain a small part of brewers’ revenues, but are increasingly central to strategy as they offer growth. So far, that has mostly been driven by expanding the opportunities for existing drinkers to sip on beer brands, such as during working lunches.

The executives’ comments, however, indicate potential for zero-alcohol brews to recruit new customers in nations with large populations that brewers have barely penetrated to date.

While all brewers operate in the Middle East and North Africa, their beer sales in many countries are focused on a niche market of travellers and expatriates – which is growing as tourism increases.

Brands like Carlsberg’s Moussy and Heineken’s Fayrouz, by contrast, have targeted the local population.

Carlsberg commenced local production of Moussy in Egypt in 2023, and has also built a local sourcing hub in Jeddah, Saudi Arabia, where it says Moussy and another Carlsberg brand Holsten hold over 50 per cent of the zero-alcohol beer market.

It has developed new flavours, including lemon and mint, a popular taste locally.

“We are at a pivotal period in the Middle East where local preferences and aspirations are changing rapidly,” said Alexander Hauberg-Jensen, Carlsberg’s vice president for Middle East & Africa.

Carlsberg, which sells soft drinks as well as beers, plans to expand its portfolio to include other non-alcoholic beverages, he said.

AB InBev’s chief marketing officer Marcel Marcondes said the company was not making any specific effort to grow in Middle Eastern markets, which are not a priority and where it does not advertise.

The company works to ensure product is available to meet demand and provide partners with tools to serve its drinks well, such as glassware, Warner added.

CULTURAL BARRIERS

Even indirect promotion of alcohol is prohibited in Gulf nations, including the United Arab Emirates, and it is unclear if advertising a zero-alcohol version of an otherwise alcoholic brand would class as such, said David Yates, Partner and Head of Digital & Data at corporate law firm Al Tamimi & Company.

Companies would have to consult carefully with authorities to understand what marketing, if any, is permitted, and even then risk offending conservative consumers, he added.

Any significant cultural shift is generations away, said Laurence Whyatt, analyst at Barclays, adding the brand awareness and pursuit of moderation that drive zero-alcohol sales elsewhere do not exist in regions where most do not drink.

“I’m not holding my breath,” he said.

In some countries, zero-alcohol brews are growing for different reasons, such as in Egypt where they are perceived to be good for digestion, said Alexandra Molokova, research analyst at market research firm Euromonitor International.

This presents an opportunity for brewers but they need to adapt their strategies and pricing to reflect these differing motivations, added Susie Goldspink, Head of No- and Low-Alcohol Insights at beverage market research firm IWSR.

Most customers in the region would otherwise be drinking a soft or hot drinks – far cheaper than the alcoholic beers brewers usually price in line with, she said, adding well-known brands like Moussy have the upper hand.