EXECUTIVE SUMMARY
Alcoholic drinks growth marginally below review period average
Despite the economic downturn, total volume growth of alcoholic drinks in 2011 was only marginally below the review period average, with sales driven by the high growth rate witnessed by spirits and beer. However, overall, higher growth was displayed by the off-trade channel.
Alcohol sales recover as expatriate and tourist numbers improve
Faith in the United Arab Emirates’ economy improved in 2011 as the number of expatriates and tourists increased since 2010. This positively impacted volume consumption of alcohol positively as consumer spending started to improve, with 2011 seeing a higher growth than in 2010 when the economy performed poorly.
Consumer preferences still focus on familiar brands
Even with the increase in consumer spending in 2011, the introduction of new products was a little restrained. Consumers continued to purchase brands with which they were familiar, as well as making purchases that were viewed as the best value-for-money. In addition to purchasing well-known brands, consumers continuously kept watch for promotions introduced by the on-trade and off-trade channels.
Premium trends and on-trade sales slowly growing
After the economic downturn, consumers changed their purchasing habits from on-trade to off-trade channels and from super-premium and high cost premium brands to some economy and standard brands. However, 2011 witnessed a return to on-trade sales, and premium brand spending primarily due to the increase in tourism and a return to more economic stability.
Sales expected to grow in line with recovering economy
With the economy slowly recovering in 2011, sales of alcoholic drinks are expected to improve and increase over the forecast period. This growth will fall short of the 2003-2008 boom period in the United Arab Emirates, however. Nevertheless, premiumisation trends are expected to return to alcoholic drinks over the forecast period. This growth will lead to an increase in new segments, such as the organic biodynamic wines, premium Japanese whisky, as well as an increase in new product launches.
Tourism impacts alcoholic drinks and premiumisation
The United Arab Emirates remains a leisure destination despite the fact that it is also the prime business hub in the Middle East. Tourists from across the world come to visit the different attractions and festivals promoted throughout the year. Family tourism accounts for the largest share of tourists to the United Arab Emirates, with friends and family of expatriate residents accounting for the second largest share in leisure arrivals. Inbound tourism witnessed 3% growth in 2010 after slowing down in 2009.
Current impact
With a growing number of tourists visiting the United Arab Emirates for luxury and business purposes, sales of alcoholic drinks increased in on-trade outlets, and especially for premium brands. Tourists see the United Arab Emirates as a luxury destination and a large part of this luxury is attributed to the fine dining restaurants, fashionable bars and chic lounges, where tourists spend their nights. The fact that the United Arab Emirates has a law that bans the purchase of alcohol without an alcohol licence through off-trade channels pushes sales in on-trade outlets. Most of the brands available in on-trade outlets are premium and super premium, and when tourists come to visit the country, their focus is on these brands. Thus, sales of premium and super-premium spirit brands, such as Grey Goose and Belvedere in vodka, and Chivas Regal and Johnnie Walker Black Label in whiskies, have increased on-trade in both volume and value terms.
Outlook
With the United Arab Emirates being advertised as a prime destination for luxury and business tourism, this trend will continue during the forecast period, as it is expected to remain politically and economically stable, and its attractiveness for tourists due to its lavish hotels and sites, such as Burj Khalifa and Atlantis The Palm. In addition, the government’s effort to have a full calendar of events during the year, such as shopping festivals, summer surprises festival, film festivals, and fashion weeks, is expected to help maintain a steady inbound of leisure tourism.
Future impact
As tourism is expected to grow over the forecast period in light of a recovering economy and increased government efforts to promote the country, alcoholic drinks sales in the United Arab Emirates are expected to grow in volume and value terms. However, this trend will only affect the growth in on-trade outlets due to the legislative laws surrounding the purchase of alcohol in off-trade outlets without an alcohol licence. New product developments will likely focus on the premium segment, upholding the United Arab Emirates’ positioning as a luxury destination. While the marketing of alcoholic drinks is not allowed in the United Arab Emirates through typical media, on-trade promotions will help drive its success.
Price-sensitivity slowly decreasing with economic recovery
As the economic downturn hit the United Arab Emirates in 2008-2010, consumers became reluctant to spend their money on luxury purchases. 2011 started to witness a decrease in price-sensitivity, as the job market began to stabilise and redundancies decreased. For example, unemployment fell to 4.4% in 2011 down from 4.8% a year earlier. Residents started to feel more secure economically and started spending more on luxury items.
Current impact
As the economy improved in 2011, more local consumers who were purchasing standard and economy brands during the economic downturn, traded up to premium brands. Throughout the years prior to the economic downturn, price was never an issue to residents and expatriates as brand name and quality were the top concerns when purchasing alcoholic drinks. As price-sensitivity dropped, 2011 witnessed healthy growth in value and volume terms within many categories, including spirits and wine.
Falling price-sensitivity also led to the opening of more bars and clubs across the country, which drove on-trade sales, especially for standard and premium brands such as Absolut, Grey Goose and Belvedere – as people have higher disposable income to spend in these outlets.
Outlook
Whether this trend will last is all connected to the economic situation in the United Arab Emirates; but economic indicators show that its economic stability will strengthen further, especially during turbulent times in the region. The Arab spring in early 2011 is expected to continue pushing tourism in the UAE well into the future, thus bringing unemployment down and pushing GDP growth, with real GDP growth expected to register 4% year-on-year over the forecast period. Moreover, unemployment is expected to drop year-on-year over the forecast period, reaching 3.7% in 2016, down from 4.4% in 2011.
Future impact
As falling price-sensitivity and economic recovery are expected to continue over the forecast period, demand for premium brands within all categories, including wine and spirits is expected to increase. This trend will also lead to the import and introduction of new premium brands, where consumers will be more inclined to try new brands, giving room for new products to enter and develop. Thus, the trend is expected to push demand for alcoholic drinks in general over the forecast period.
A shift in expatriate nationalities leads to shifting preferences
During the economic downturn, many redundancies occurred, where expatriates left the United Arab Emirates to move back to their respective countries. When 2011 showed signs of recovery and companies started hiring again, expats from Arab and Asian countries started flocking towards the United Arab Emirates as a safe haven from political upheaval and as an economically stable country, changing the demographic landscape of the country. Previously, European expatriates were the majority in the United Arab Emirates, but 2011 saw a shift in this trend whereby Arab expatriates and Asians increasingly grew. As the latter group also tends to accept lower wages, this is helping companies recover more quickly.
Current impact
The United Arab Emirates is a cosmopolitan country with Dubai alone having around 220 different nationalities; this in turn impacted alcoholic drinks, as nationals from different countries usually consume drinks that they are familiar with in their home countries. Prior to the downturn, the highest number of expatriates who drank in the United Arab Emirates hailed from Western Europe; thus alcoholic drink sales replicated the trends of consumers from this demographic. Currently, new expatriate nationalities are rising and accordingly alcoholic drink preferences are changing. A prime example is the introduction of Russian Standard to the United Arab Emirates, which kept the Russian branding on the bottle to cater for Russian expatriates. This trend is also pushing sales in off-trade outlets. For example, while Kingfisher is a great seller for Indians in the United Arab Emirates, a rising number of Filipino expatriates are pushing sales for San Miguel beer. Equally, a rising Asian community is pushing the sales for none-grape wines, helping new product segments to grow.
Outlook
This trend is expected to continue over the forecast period as expatriates will continue to form the majority of people residing in the country coupled with the fact that new nationalities are likely to continue to flock to the United Arab Emirates, which include Chinese and Ukrainian expatriates. Although Westerners are expected to return to the country over the forecast period, in light of the economic recovery, the expatriate population will be more varied than before.
Future impact
As the trend is expected to continue over the forecast period, sales of alcoholic drinks overall are expected to grow. This trend is likely to have an effect on the success of new products entering in the future. It will help importers and distributors pick successful products to launch by focusing on the nationalities in the country. This might also follow through to on-trade outlets, since at the moment this trend highly impacts off-trade channels more, with only a marginal impact on on-trade sales.
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Overview
Discover the latest market trends and uncover sources of future market growth for the Alcoholic Drinks industry in United Arab Emirates with research from Euromonitor's team of in-country analysts.
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The Alcoholic Drinks in United Arab Emirates market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Production, imports by origin, exports by destination
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Alcoholic Drinks in United Arab Emirates?
- What are the major brands in United Arab Emirates?
- Have there been any alcoholic drinks legislative changes over the past 12 months?
- How is the alcoholic drinks industry affected by the recession?
- What is consumed more; beer, wine or spirits?
- What have been the key trends seen in new product developments?
- Do alcoholic drinks consumers want value for money or added value?
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This industry report originates from Passport, our Alcoholic Drinks market research database.
