Most Competitive Market In The Region

The UAE has traditionally been a very important trading hub and this is reflected in the broad range of products on offer to consumers, and the highly competitive nature of the market.

Total consumption of non-alcoholic beverages, including packaged water, reached almost 2.6 billion litres in 2008, worth more than US$ 1.1 billion at retail level. This corresponds to average per capita consumption of just under 500 litres per annum, well in excess of consumption of tea, coffee, and dairy beverages which accounts for perhaps a further 130 litres per capita. If dispenser water is excluded, consumption is estimated at 1.5 billion litres, and worth around US$ 1.0 billion. Just three main product groups – carbonates, juices and water – account for 92% of this market volume.

Recent growth has been driven primarily by a rapidly expanding population in addition to a strong increase in tourist and business visitors. Market dynamics vary from sector to sector, with some of the key recent developments including:

• Sales of carbonates reached 400 million litres after average growth of 11% per annum over the past 5 years, driven by strong marketing activity on the part of Pepsi and Coca-Cola. But growth is slowing as consumers gradually switch to healthier alternatives such as juices and bottled water.
  
  
• Consumption of juice, nectars and still drinks, the next most important in volume terms, reached 283 million litres in 2008. However, when values are considered, they are worth more than carbonates (US$ 368 million vs US$ 306 million). Products with high juice content are growing fastest, spurred by factors such as the launch of MASAFI juice products in PET bottles.
  
  
• The market for bottled water (i.e. excluding dispensers) is as big as carbonates plus juice products combined (707 million litres) but is much smaller in value terms (less than one quarter the value of CSDs plus juice products). Bottled water growth has been in double digits in recent years.
  
  
• Several other products continue to make significant gains including malt beverages (+30% in 2008), energy drinks (+40%) and sports/health drinks (+20%). Not surprisingly, “older” formats are performing less well e.g., dilute and powdered drinks.
  

Pricing Dispute Hits 2008 Growth

Total consumption of non-alcoholic beverages, including packaged water, reached more than 730 million litres in 2008, and was worth almost US$ 560 million at retail level. This corresponds to average per capita consumption of just under 215 litres per annum, well in excess of consumption of tea, coffee, and dairy beverages which accounts for perhaps a further 140 litres per capita. If dispenser water is excluded, consumption is estimated at 668 million litres, and is worth just under US$ 550 million.

2008 saw a significant disruption to the market, when a dispute over pricing broke out between the leading Cooperative retail grouping and soft drinks suppliers. This led to out-of-stocks on many leading brands which for a period adversely affected consumption across most categories.

Perhaps not surprisingly, most local producers of soft drinks are very much export-orientated, with Iraq one of their major priority destinations. No change in this regard is expected in the short term as the Iraqi security situation remains uncertain.

In the domestic market some of the key recent developments in soft drinks are outlined below:

• Sales of carbonated soft drinks reached 240 million litres in 2008, with growth averaging around 4% per annum over the past five years. This would have been higher but for the marked slowdown in 2008 as a result of the pricing dispute with the Cooperative Group, in addition to significant price increases for cans and multi-serve PET (leading brands such as COCA-COLA and PEPSI increased by between 20% and 75% in 2008).
  
  
• Consumption of juice, nectars and still drinks reached 114 million litres in 2008, worth an estimated US$ 170 million (cf. US$ 200 million for CSDs). Still drinks account for 40% of volume with a recent influx of migrant workers from Asia contributing to their strong growth.
  
  
• Sales of bottled water (up to 6 litres in size) is the same as consumption of CSDs at around 245 million litres. Whilst tap water is reportedly safe to drink, since the end of the first Gulf War, consumers have had doubts about it and few consumers choose to use it. The above products account for around 90% of soft drinks volume, if dispenser water is excluded.

Growing Strongly But Huge Potential Remains

Although Egypt has one of the largest populations in the Middle East (around 80 million people in 2008), with only Iran broadly comparable in size, the non-alcoholic beverages market is relatively small and undeveloped, particularly when compared to neighbouring GCC markets. If dispenser water is excluded, the soft drinks market was valued at US$ 1.05 billion in 2008, compared with US$ 3.24 billion in Saudi Arabia, a country with 57 million fewer people!

However, consumption is growing strongly at rates way in excess of most GCC markets and reached almost 2.9 billion litres in 2008, worth close to US$ 1.1 billion at retail level, if packaged water is included. Growth has averaged almost 14% per annum over the past five years helped by a reduction in sales tax in 2006 and a step up in the marketing efforts of leading CSD and juice suppliers (Pepsi, Coca-Cola, Faragalla, Juhayna, Best, Enjoy).

Per capita consumption was just 36 litres in 2008 (cf., 217 litres in Saudi Arabia) but this is forecast to increase to more than 50 litres by 2013. The main reason soft drinks consumption is lagging behind neighbouring markets is the combination of low per capita incomes and low urbanisation (<45% of the population live in urban areas according to the UN).

Three main product groups – carbonates, juices and water – account for 94% of market volume. Market dynamics vary from sector to sector, with some of the key recent developments including:

• Sales of carbonates reached 1,650 million litres after average growth of 13% per annum over the past 5 years. They are consumed by all sections of society, especially children and although consumer research apparently suggests that consumers are aware of "health" issues surrounding CSDs, this does not seem to be impacting consumption levels.
  
  
• The market for bottled and dispenser water is the next most important in volume terms, and reached 850 million litres in 2008. This is driven mainly by Egyptians switching to packaged water in preference to filtered local tap water (the norm in Cairo) or well water due to previous mass water outages, pipe breakages and contamination scares. In addition, the millions of tourists visiting Egypt every year are concerned at the health aspects of mains water. Vittor (Nestlé Water) continues to dominate supply with around two thirds of the market currently.
  
  
• Consumption of juice, nectars and still drinks, is smaller by comparison at just 263 million litres in 2008. Key factors in recent growth have been the fast developing retail universe, which had improved product availability to consumers, and the increased availability of lower priced products (e.g. Faragalla’s line of value priced juices as well as Juhayna’s launch of BEKHERO line of value priced juices).

Saudi Arabia

• Sales of carbonates reached 1.68 billion litres after average growth of 4.6% per annum over the past 5 years, and worth US$ 1.13 billion at retail level. While this might be regarded as fairly modest growth compared with other countries in the region, it should be remembered that KSA is a relatively mature market as far as CSD consumption is concerned. Interestingly, this corresponds to a per capita consumption figure of 59 litres which is well below 70 litres that existed in the late 1990s. This reflects consumers gradually switch to healthier alternatives such as juices and bottled water (not coincidentally Pepsi’s major focus during 2008 was on the non-carbonated drinks sector, which includes, AQUAFINA water, TROPICANA juices, GATORADE, LIPTON ICE TEA and AMP energy drinks).
• Almost matching CSDs in value terms, juice products – i.e., pure juice, nectars and still drinks - are the next most important and in 2008 were worth US$ 1.12 billion (corresponding to 890 million litres). While still drinks account for the majority of supply (almost 60%), nectars have advanced most strongly in the last few years thanks to several leading short-life producers switching their short-life range from HDPE to PET, as well as suppliers such as Al Rabie launching and promoting 2-fruit varieties.
• Over 3 billion litres of bottled/dispenser water were consumed in 2008, worth a further US$ 514 million. Much of the growth in bottled water sales in recent years comes from the 5 litre PET jug segment as well as from smaller PET bottles (typically around 330 ml) that are set to replace smaller cups as Saudis’ preferred picnic items. Market leader Nestlé Waters/Al Manhal has recently entered into the 5 litre PET jug segment and introduced 330 ml bottles for its NESTLE PURE LIFE bottled water brand in 2008.
• Several other products continue to progress steadily - malt beverages (+8.5% in 2008), energy drinks (+7%) and dairy/juice blends (+5%). Not surprisingly, “older” formats are performing less well e.g., dilute and powdered drinks.

Imports Increasingly Dominant

• geographically, it is second in size only to Saudi Arabia in the GCC, and shares borders with the UAE, Saudi Arabia and Yemen,
• its small population (2.5 million) is widely dispersed (only around half of which lives urban areas),
• per capita incomes are the lowest in the GCC,
• and competition from imports is high (imports account for two thirds of the juices sector)

• Sales of carbonates reached 172 million litres after average growth of 7% per annum over the past 5 years. Pepsi brands, filled locally by Oman Refreshments Company, accounted for 84% of supply in 2008.
• Consumption of bottled and dispenser water also continues to advance and reached 254 million litres in 2008. Factors impacting demand include a lack of consumer confidence in local tap water, “Cyclone Gonu” which caused considerable infrastructure damage in late 2007, and a relaxation of licensing rules on the part of the authorities. National Mineral Water (JABAL AL AKHDAR and TANUF brands, among others) is by far the largest and longest established producer of drinking water in the country, supplying over 31% of all packaged water consumed in 2008.
• Consumption of juice, nectars and still drinks, at just 91 million litres in 2008, is smaller by comparison. However, the market grew by almost 16% in 2008 thanks primarily to increased supply of local long-life juices (previously in short supply), and the fast developing retail universe which is improving product availability to consumers.

The smallest economy in the GCC has a proud tradition in soft drinks and dairy production, despite imports from Saudi Arabia and the UAE securing a significant foothold in the market. Bahrain’s population in 2008 was less than 750,000, and even though this is boosted by business and tourism visitors (over 1.5 million people a year from neighbouring Saudi Arabia arrive over the causeway linking the two countries) there is limited local demand for soft drinks.

Total consumption, including packaged water, was around 280 million litres in 2008, worth US$ 150 million at retail level. This corresponds to average per capita consumption of around 390 litres per annum, compared with consumption of tea, coffee, and dairy beverages which accounts for a further 204 litres per capita.

If dispenser water is excluded, consumption falls back too just over 200 million litres in 2008, and worth around US$ 145 million. Just three main product groups – carbonates, juices and water – account for almost 93% of this market volume.

Market dynamics vary from sector to sector, with some of the key recent developments including:

• Sales of carbonates reached 86 million litres after average growth of 7% per annum over the past 5 years. Both Pepsi and Coke brands are filled locally and together accounted for an estimated 97% of supply in 2008.
  
  
• Consumption of bottled and dispenser water also continues to advance and reached 130 million litres in 2008. Growth has been stronger than expected thanks to factors such as greater market penetration on the part of suppliers, the recent boom in construction, and the launch of Nestlé’s flagship brand PURE LIFE.
  
  
• Consumption of juice reached 51 million litres in 2008 and was worth approximately US$ 54 million in value terms. Growth has averaged more than 8% per annum since 2004, partly thanks to negative publicity surrounding carbonated soft drinks and their ban on sales in elementary schools. Local companies Ahmadi Dairy and Awal Dairy (formerly Bahrain Danish Dairy or BDD) lead the market but are coming under considerable pressure from imports such as Al Othman, Almarai, Aujan and KDD.
  

Like some of its neighbours, Qatar is a small open economy that has changed beyond all recognition over the past 10 years, thanks to the windfall benefits arising from:

• the invasion of Iraq (e.g., supply contracts to foreign military forces stationed in the country),
• growing tourism (e.g., 2006 Asian Games),
• a rapidly growing population,
• most importantly, the revenues generated from the country’s vast natural gas reserves (Qatar accounts for more than 5% of world gas reserves and is the third largest producer in the world).

Given the above drivers it is not surprising that consumption of non-alcoholic beverages, including packaged water, grew at an average rate of more than 14% per annum since 2004 to reach 424 million litres by 2008, worth more than US$ 165 million at retail level. This corresponds to average per capita consumption of almost 355 litres per annum, well in excess of consumption of tea, coffee, and dairy beverages which accounts for perhaps a further 150 litres per capita. If dispenser water is excluded, consumption is estimated at 220 million litres, worth around US$ 145 million. Just three main product groups – carbonates, juices and water – account for more than 90% of this market volume.

Market dynamics vary from sector to sector, with some of the key recent developments including:

• Sales of carbonates reached 79 million litres after average growth of 15% per annum over the past 5 years, helped by a sustained rise in population (came to an abrupt end in 2009) but also from growth in upmarket retailing, commercial food service and, of course, tourism. The  only local supplier of carbonates is the Pepsi franchisee, Ali Bin Ali Establishment.
  
  
• Consumption of juice, nectars and still drinks, the next most important in volume terms, reached 42 million litres in 2008. However, when values are considered, they are worth almost the same as carbonates (US$ 48 million vs US$ 50 million). Supply is dominated by major Saudi companies such as Al Othman, Aujan and Almarai, with just two local companies still featuring  - Dandy and AQCDP.
  
  
• In volume terms, the market for bottled water (excluding dispensers) is as big as the market for carbonates (also 79 million litres in 2008), though water is less important when values are taken into consideration – US$ 22 million versus US$ 51 million for CSDs. The majority of packaged water supply is local (more than 80% in 2008), with companies such as Nestlé Waters, Rayyan and Safa well established, accounting for a combined 82% in 2008.
  
  
• Some of the smaller specialist niche categories such as malt beverages, energy drinks and sports/health drinks registered the strongest growth since 2004 averaging 25-30% per annum over the period. They still account for no more than 1% of the soft drinks market however.

The Region’s Sleeping Giant

Of all the markets in the Middle East, Iran is perceived as one of the most enigmatic and complex. This can be largely explained by its isolation since the overthrow of the Shah thirty years ago and subsequent devastating war with Iraq. Iranian soft drinks producers had little choice but to become self sufficient, and had little contact with counterparts in other countries. Consumer marketing, branding, product development and retailing developed differently to other countries in the region.

Thankfully, much positive change has taken place in the past five years and soft drinks multinationals now rightly regard Iran as a “sleeping giant” in the region, with significant scope to expand non-alcoholic beverages consumption which, including packaged water, approached 3.1 billion litres in 2008, and was worth almost US$ 1.4 billion at retail level.

In per capita terms this corresponds to around 42 litres per annum, which is very small in comparison to many of its neighbours (e.g. 216 litres in Saudi Arabia). Consumption of tea, coffee, and dairy beverages accounts for perhaps a further 215 litres per capita.

With carbonated soft drinks comprising more than 60% of market volume, a number of recent government initiatives targeting CSDs have dampened growth rates. These include:

• the banning of CSD consumption in government offices and buildings in late 2005
• the introduction of a 15% tax on “locally produced foreign brands” (i.e., COCA-COLA and PEPSI) in March 2007.
• the imposition of a 50% advertising by international brands in certain media, including television and radio (revenue from this tax is reportedly earmarked to help tackle associated health issues such as diabetes and obesity). 

Three companies account for more than 60% of CSD consumption - Bonyad Mustazafan (ZAM ZAM brand), Khoshgovar (the COCA-COLA bottler), and Jamia’a Al Zahra (aka Sasan Co – one of the PEPSI bottlers; own brands include PARSI COLA and SHAHD NOOSH).

Per capita consumption of juice products is also low, with foil pouches dominating supply (mainly low price drinks). Interestingly, Saudi company Aujan (RANI brand) has established a very strong presence in Iran (initially via export, but now manufacturing) and in fact is the leading juice supplier overall, ahead of local producers such as Orum Narin, Takdaneh and Shahd Iran.

Syria

As was the case in other countries in the Middle East, development of the soft drinks sector in Syria was quite much influenced by government policy. Not only was the State itself involved in production of some beverages, but also in concerns of setting prices, import control, further protection and support to domestic fruit growers etc., also shaped how the sector developed. While recent years have seen a reversal of many of the above policies, their legacy remains.

Non-alcoholic beverages consumption including packaged water, was estimated at just 690 million litres in 2008, and was worth almost US$ 352 million at retail level. In per capita terms this corresponds to around 31 litres per annum, which is very small in comparison to many countries in the region (e.g., 216 litres in Saudi Arabia). Consumption of tea, coffee, and dairy beverages accounts for perhaps a further 68 litres per capita, (significantly higher if artisanal products are taken into account).

To illustrate further potentially impacts by the government policy, Pepsi and Coca-Cola, the usual drivers of carbonated soft drinks markets, were not operate officially in Syria until 2005, a situation that allowed both independent producers and other international franchisors (notably Cadbury Schweppes International Beverages, Cott’s and Sinalco) to establish. However, by 2009 per capita consumption of CSDs stood at just 21 litres in Syria compared to 59 litres in Saudi Arabia, i.e., 35% of the KSA level.

Also, imports of juice products were restricted until very recently, with a smuggled contingent apparent (mainly from Lebanon). As happened in Iran, a government ban on imports of certain fruit concentrates, purportedly to protect local fruit growers, affected development of the juices sector. The low spending power of consumers means that packaged juice is a luxury that only a small proportion of the population can afford and artificially flavoured fruit drinks historically accounted for most juice products sold in the country. Supply is quite fragmented with only two companies having a share greater than 10% - Joud (SELES and YOMI brands) and Al Anzarooti (PUNCH), with 16% and 10% respectively.

Given the traditionally insular nature of the market, consumption of so-called “new age” beverages (i.e., sports & health drinks, energy drinks, dairy/juice blends etc) is not significant as yet, with imports dominating supply and these are likely to remain very much niche for the foreseeable future for price and regulatory reasons (since early 2009, energy drinks may be sold through pharmacies only).

Libya

Following years of isolation in the wake of the Lockerbie bombing, Libya has made great strides in recent years in reintegrating to the international community. This has been helped by its decision to compensate victims’ families, and by renouncing its nuclear programme. Recent economic reforms have seen the breakdown of many state monopolies and expanding private sector investment in fmcg production. Foreign investment is also on the rise, which has benefited development of the soft drinks industry.

Total consumption of non-alcoholic beverages, including packaged water, reached almost 780 million litres in 2008, and was worth almost US$ 545 million at retail level. To put in context, this is broadly the same as Kuwait for a population almost three times larger.  Per capita consumption is therefore low at just under 90 litres per annum, increasing to 116 litres if other liquids such as tea, coffee and packaged milk are taken into account.

Despite its modest size, consumption is growing strongly, averaging more than 16% per annum since 2004. This is due primarily to supply factors such as the commencement of local carbonates filling by Coca-Cola and Pepsi-Cola, improvements in distribution, the launch of new packaging formats, not to mention the significant success enjoyed by private sector juice producers since 2007 (e.g., Al Rayhan, Al Mazraa, Judi, and Jefara).

Three main product groups – carbonates, juices and water – account for 94% of market volume and dynamics vary from sector to sector, with some of the key recent developments including:

• Sales of carbonates reached 297 million litres after average growth of almost 15% per annum over the past 5 years. Direct distribution to retail outlets and the food service sector has increased in recent years, with the role of wholesalers starting to decline.
  
  
• Consumption of juice, nectars and still drinks, is smaller by comparison at just 240 million litres in 2008, but averaging growth of more than 30% per annum over the past five years. In recent years, the entry of new local suppliers and the increase in sales volumes for the existing suppliers has boosted consumption.
  
  
• The market for bottled and dispenser water is the next most important in volume terms, and reached 204 million litres in 2008, growing at approximately 10% per annum.

Rapid Growth Stokes Inflation

Like a number of countries in the region, following the war on the neighboring Iraq in 2003, the Jordanian economy benefited, not only from an upsurge in exports to Iraq, but also from increased demand from the estimated one million refugees believed to have settled in the country in 2006. However, this sudden increase in demand was not without its problems and, combined with rising supplier costs, contributed to a strong rise in inflation (almost 15% in 2008), which hit local products more than imports.

Total consumption of non-alcoholic beverages, including packaged water, reached almost 780 million litres in 2008, and was worth around US$ 403 million at retail level. This corresponds to average per capita consumption of approximately 105 litres per annum, with consumption of tea, coffee, and dairy beverages accounting for perhaps a further 90-95 litres per capita.

UAE, there is clearly still significant potential to grow consumption in Jordan, notwithstanding both countries’ very different consumer profiles. However, some trade sources believe the domestic market is being neglected somewhat as local sales are of secondary importance to some suppliers, over half of whose volume is destined for Iraq.

Some of the key recent developments in soft drinks are outlined below:

• Consumption of carbonated soft drinks reached an estimated 317 million litres in 2008, some 11.9% higher than in 2007, and corresponds to annual average growth of 15.4% over the past five years. Marketing activities by the two leading domestic suppliers (notably retail price promotions such as Coca-Cola’s three 1.125 litre PET packs for JD 1.00) were an important contributor to this growth in consumption. In addition, Coke and Pepsi have invested in expanding their distribution coverage to cover new “non-traditional” channels (e.g., bakeries).
  
  
• The market for juices, nectars and juice drinks has also grown strongly (but somewhat erratically) over the last few years with an average growth rate of more than 15% per annum since 2004 to reach 112.6 million litres by 2008. Supply is increasingly fragmented. Not only are imports, particularly from neighbouring GCC markets, accounting for a growing share of supply but the leading Jordanian producer, Zakey, is focusing more on exports to Iraq. Zakey is the only Jordanian producer that has undertaken any significant investment in its facilities in recent years.
  
  
• Sales of packaged water are in the same order of magnitude as CSDs, at around 320 million litres in 2008. Dispensers account for more than 70% of volume. The market – much of which is concentrated in Greater Amman – benefits from frequent reminders in the local press over dubious quality of the public mains water system. 2008 sales were also boosted by the  high-profile market entry of three new local bottled water producers, all of which had particular strength in branding, marketing and a focused pricing strategy (the local Pepsi Beverages bottler with AQUAFINA, local producer Nature Co with ULTRA, and Coca-Cola with RIWA).

Yemen

Yemen has considerable difficulties on a number of fronts including a severe shortage of water, high unemployment (estimated at 35%, but higher in rural areas), primitive distribution systems. If that’s not enough, the country’s problems are hugely compounded by the widespread cultivation and use of Qat, a medium-sized shrub or tree known for its leaves, which release stimulating substances (amphetamines) when chewed. Qat is consumed daily by a large part of the population, with “chewing sessions” sometimes lasting hours.

Given the above, it is not surprising that consumption of soft drinks is among the lowest in the region in per capita terms – around 29 litres per annum compared to 216 litres in Saudi Arabia for example. Consumption of tea, coffee, and dairy beverages accounts for a further 63 litres per capita (170 litres in Saudi Arabia).

Market dynamics vary from sector to sector, with some of the key recent developments as follows:

• Sales of carbonates reached 217 million litres in 2008, worth around US$ 145 million in value terms. It is established practice to accompany the Qat chewing ritual with frequent sips of sweet drinks (in particular CSDs) and water - to mask the plant’s coarse taste. This practice is now so ingrained that carbonates’ consumption will continue to play an important role in the market for some considerable time to come. Unusually for the region Coca-Cola is the leading supplier by virtue of its acquisition of Cadbury brands in 1970 (includes CANADA DRY, CRUSH, SCHWEPPES, SPORT etc). It supplied an estimated 52% of the market in 2008. Imported Pepsi brands account for a further 32%.
  
  
• Juice products, traditionally regarded more as a luxury in Yemen, accounted for a further 99 million litres in 2008, corresponding to just 4.3 litres per capita and worth US$ 107 million at retail level. Recent growth has been well into double digits (+17% in 2008) so the outlook remains positive. Currently imports make up 37% of supply (includes brands such as FAKHER, AL RABIE and CAESAR from Saudi Arabia), with three local companies – Derhim Group (DICO, RAMI, RANI), Yemen Dairy & Juice (YEMANY, SEVEN STARS) and NADFOOD (BREEZE) – together accounting for a further 55%.
  
  
• The largest sector in volume terms, but third most important when values are considered, is bottled water, estimated at 270 million litres and valued at US$ 92 million in 2008. Health concerns regarding the purity of local water supplies continue to fuel growth within the category. Also water serves as an inexpensive accompaniment for many Yemenis who chew qat. Although per capita consumption is strong, and second only to the longer established carbonates category, it is believed there is still considerable scope for future development.

Lebanon

Remarkably Resilient

Following the devastation of the Civil War which came to an end in 1990, life in Lebanon returned to a semblance of normality, at least until 2006, when it was again interrupted by the conflict with Israel. Summer 2006 saw the destruction of crucial infrastructure such as major roads, bridges and tunnels as a result of Israeli air attacks, not to mention the destruction of factories such as Liban Lait, the most advanced UHT milk producer in the country (SQUEEZE juices/nectars, CANDIA milk). Reconstruction is once again continuing and the resilience of soft drinks producers, and indeed the Lebanese population in general, must be admired.

Growth in soft drinks consumption, not surprisingly, was flat in 2006 but rebounded strongly the year after. By 2008, the market, including packaged water, surpassed 640 million litres, and was worth around US$ 335 million at retail level. Looking at the period 2004-2008, growth averaged 4.9% per annum which is impressive in the circumstances.

Per capita consumption of non-alcoholic beverages is currently estimated at approximately 145 litres per annum (cf. 216 litres in KSA), with consumption of tea, coffee, and dairy beverages accounting for perhaps a further 150 litres per capita. Just three main product groups – carbonates, juices and water – account for 9close to 97% of this market volume, of which water alone accounts for 45%.

Market dynamics vary from sector to sector, with some of the key recent developments outlined below:

• Consumption of carbonated soft drinks reached an estimated 238 million litres in 2008, some 23% higher than in 2004, and corresponding to annual average growth of just over 5% per annum. Growth in demand has been driven by a major price promotion on cans and multi-serve PET bottles, a ‘normalization’ of consumption patterns following the disruptions of 2006 and a revival of the food service sector. Pepsi Beverages and Coca-Cola together account for around 8% of supply.
  
  
• The market for juices, nectars and juice drinks has grown somewhat erratically over the last few years with an average growth rate of just 3% per annum since 2004 to reach 94 million litres by 2008. Following a dip in demand in 2005 and 2006, growth has returned, helped in particular by greater stability in supply, a post-war resumption of normal consumption habits, an improvement in the food service sector and the launch of a number of new juice products that re-captured consumers’ interest in the category.
  
  
• Sales of packaged water are the largest in volume terms, greater than even carbonated soft drinks, and estimated at 290 million litres in 2008. Dispensers account for 25% of volume currently, up from 20% in 2004. Three companies – Sohat/Nestlé, Tannourine and Rim – dominate supply with almost 80% of volume in 2008. Imports are virtually non-existent.

Algeria

The Algerian population of 34 million people consume 1,680 million litres of soft drinks or 49 litres per capita. Bottled water is the largest soft drink category in volume terms with poor quality public water supply in Algeria encouraging many consumers to pay for bottled water. The introduction of the country’s first clear and enforceable government regulations in 2006 has had a positive impact on the market encouraging higher standards and consolidation among existing suppliers. This in turn has made the market more appealing to international water producers and both Danone and Nestlé have become involved in the market in the past three years. Consumption in 2008 was some 690 million litres.

Another international company - Coca Cola international - is the market leader the carbonates sector supplying the market through two separate bottlers - Frutal in the central region and BGI in the Eastern and Central Regions. Local player, Hammoud Boualam is the second largest supplier followed by Pepsi Cola International. These three companies account for over 50% of supply with the balance supplied by a large number of small companies.

Fruit flavoured still drinks dominate the juice products market with total volumes (all product types) estimated at some 308 million litres. Much of this product is of dubious quality - referred to by the more quality conscious suppliers as little more than sweet coloured water. However it is cheap and therefore appealing in this cost sensitive market. There are a number of chilled juice dairy blends available which typically include about 10% to 15% juice and similar volumes of milk or yoghurt (the latter in the case of FRESH UP). The segment is more competitive than neighbouring markets with three significant suppliers. For Algerian dairies it is a particularly attractive sector as it allows clear differentiation from the heavily subsidised pasteurised milk against which private sector dairies must compete. Perhaps as a result of this more intense competition Danone's DANAO brand has been less successful than in other MENA markets.

Morocco

Soft drinks consumption in Morocco is estimated at 2.4 billion litres or seventy eight litres per capita in 2008. Carbonated drinks is the most mature soft drinks category. It accounts for 84% of total soft drinks consumption or in excess of two billion litres per annum. Supply is dominated by Coca Cola which has a number of well established bottlers throughout the country. Indeed even Pepsi Cola was absent from the market for some years and only re-entered the market in 2003.

The juice products category is much less developed with consumption dominated by powdered drinks and ambient nectars. Together these account for 94% of juice products supply. The popularity of nectars is thought to be due to the sweeter flavours possible in nectar (Moroccans are known for their love of sweet drinks). Overall juice product consumption is estimated at 76 million litres in 2008. Local suppliers, most notably Moroccan Food Processing (AL BOUSTANE and AGADIR brands), dominate the supply of ready to drink juice products. However there are signs of increasing interest in the market by European manufacturers, with recent investments in local facilities by Spanish companies Rostoy and 3 Soles. Kraft’s TANG brand dominates powdered fruit drinks supply.

Much of the public water supply in Morocco is considered to be of poor quality for drinking. Indeed in many rural areas, there is no water distribution system and tap water is delivered by truck. In consequence bottled water is available from every food store in Morocco, even in the most remote villages. Nevertheless per capita consumption of around ten litres is low by international standards. There are reputed to be over 120 water brands available in the market but supply is dominated by two large companies Sotherma and Les Eaux Minerale D’Oulmes. Between them, these two companies account for in excess of 70% of the packaged water market.

Tunisia