Energy Drinks in the United Arab Emirates

2020 IMPACT

Price hikes and rising health awareness curb demand for energy drinks

As was the case with sports drinks, declines in energy drinks off-trade volume and current value sales in 2020 were attributable to a combination of rising health-consciousness among consumers and dramatic price hikes imposed over the review period following the introduction of excise tax of 100% and VAT of 5%. Whilst energy drinks became more price-competitive in 2020 after the introduction of an excise tax of 50% on all other types of beverages with added sugar in the United Arab Emirates, demand for energy drinks continued to decline in 2020 in off-trade volume and current value terms.

Health-oriented products continue to gain popularity

Supermarket imports featuring claims such as “no taurine”, “reduced sugar” and “no caffeine” on packaging labels continued to gain ground in energy drinks in 2020. In particular, these products proved increasingly attractive to younger urban consumers seeking healthier alternatives to traditional energy drinks brands such as Red Bull and Monster.

Red Bull remains the leading brand despite declining sales

Red Bull remained the top brand in energy drinks in off-trade value and volume sales terms in 2020. The brand enjoys a strong early mover advantage and is synonymous with energy drinks in the minds of many consumers.

RECOVERY AND OPPORTUNITIES

Downward trend should be tempered by consumer loyalty

Sugar taxation and rising health consciousness will continue to have a negative impact on the performance of energy drinks over the forecast period, with off-trade volume and current value sales projected to decline consistently. However, the pace of decline should be tempered somewhat by enduring loyalty towards these products among core consumer groups who appreciate their stimulant effect, particularly students and young adult males with busy lifestyles or physically demanding jobs.

Health and wellness expected to remain a focal point for innovation

New product development activity in energy drinks over the forecast period is likely to be focused on addressing consumer demands for healthier choices. For example, more companies are expected to introduce products that are low in or free from sugar, taurine and caffeine, and instead use naturally healthy ingredients like ginseng, acai and guarana to achieve the stimulant effect traditionally associated with energy drinks.

Brand differentiation efforts likely to increase as competition intensifies

Competition in energy drinks will continue to intensify over the forecast period as the consumer base for the product area shrinks. Price looks set to remain a key point of differentiation, as consumers have become more inclined to trade down to cheaper brands since the excise tax of 100% was imposed in the review period, and this trend has recently become more pronounced due to worsening economic indicators.