Work hard, play hard: Tough Saudi Arabia energy drink market could reap rewards

Alcohol is banned in Saudi Arabia, and as a result energy drinks serve as a substitute social drink because of its high caffeine content. They also have a strong appeal to Saudi Arabia’s young, active consumers, who are increasingly interested in Western culture.    

The energy drink market grew by 12% in 2014, and is forecast to continue growing at a CAGR of 8%, the market research company says.

Caffeine kick replaces alcohol haze​

Energy drinks appeal strongly to the younger generation – and Saudi Arabia has a large and fast growing cohort (in 2013, 49% of the population was aged 18-44).

In a country keen on sport, energy drinks are associated with fitness and consumers like the image this gives them.

Fatemah Sherif, research analyst, Euromonitor International, told BeverageDaily.com the energy and sports drink market was worth SAR 919m ($245m) in 2014 (with energy drinks taking a 99% share).

“People usually turn to energy drinks or sports drinks as a substitute – basically, they are interested in any drink with a kick of caffeine,”​ she said. “Some of the main competitors within energy drinks are Power Horse, Red Bull, Boom Boom, and Play. ​

“Furthermore, with the growing youth population in the country, the energy drink category is mainly driven by impulse purchases.”​

However, the sector faces sizeable challenges following a 2014 government review​: a ban on marketing of energy drinks; a restriction on sponsoring sports and cultural events, sales bans in certain areas such as restaurants and sports clubs, and a requirement to carry a health warning on products.

“However, because society is not very well informed about the health risks imposed by energy drinks, the youth population still has access to these products and are not likely to pay attention to such risks,” ​said Sherif.

“Companies rely on their reputation and distribution channels - as well as the sports trend - to continue driving consumption.”​

Western lifestyles​

Abuljadayel Beverages (a Saudi Arabian company) leads the category, with products like its flagship Bison energy drink. However, with a population that embraces Western trends and lifestyles, consumers are also looking for branded goods from US or European brands.

“There is definitely growing potential for more US and European brands as energy drinks are expected to continue growing by 8% value CAGR within off-trade over the forecast period,”​ said Sherif. “That’s lower than the last five years, but still growing. ​

“European and US brands within energy drinks represent approximately 60% of the market and the rest are regional or local players.” ​

The biggest challenges for Western energy drink manufacturers are coping with marketing bans, and ensuring ingredients are halal, Sherif added.