By Roger Field
New brands are pouring into the Middle East’s energy drinks market. How many of them will succeed?
|~||~||~|It’s no surprise that energy drinks makers, from market leaders such as Red Bull to relative newcomers including Wild Horse and Bomba, are keeping a close eye on the Middle East. The UAE’s energy drinks market alone was estimated to be worth some US $49 million in 2004, and is growing at a rate of about 25% annually.
Mohamed El-Gamal, chief executive officer of Power Horse International in the Middle East, is no stranger to this rapid growth. As CEO of the leading energy drink brand in Saudi Arabia and Yemen, El-Gamal puts the trend down to a demand for something new in a market already saturated with regular carbonated drinks.
“It’s a new fashion, it’s a new trend,” he says. “The consumer is getting tired of classical carbonated soft drinks and looking for a more exciting product which offers some functional benefits like energy, alertness, power.”
The rise of energy drinks in the Middle East can also be attributed to a young Muslim population looking for an alternative to alcoholic drinks, according to Pradeep Naik, general manager at Bomba Middle East, another recent entrant into the region’s energy drinks sector.
“This is a Muslim region where liquor is not so acceptable and people need energy and need to be active,” he told RNME. “This is why Gulf markets are easier to penetrate than other parts of the world. This market will be developing a lot in future.”
But it is not just the Middle East’s insatiable appetite for energy drinks that is luring manufacturers to the market in the region; some makers are also commanding premium prices, accorrding to El-Gamal “Energy drinks have managed to gain that kind of positioning across the Middle East for which it is commanding a premium price,” he said.
“There is this upper segment of consumers who are not price sensitive and will go for a drink which, price-wise, will be equivalent to five times the cost of a standard carbonated soft drink.”
Despite this, much of the growth in the sector is being driven by an upsurge in demand for cheaper energy drinks, and the market is segmented into two categories, according to El-Gamal. “There’s a premium segment which is the equivalent of AED 4-5 and a secondary ‘value’ segment which is retailing at approximately AED 2,” he says.
“The growth in the entire category of energy drinks is very much driven by the cheaper quality and the value products, which are mainly positioned as a competitor to carbonated soft drinks retailing at about AED 2 per unit.”
Power Horse, which is owned by Austrian firm Linz, gained a foothold in the Middle East after being launched in Saudi Arabia about five year ago. It now claims to dominate in Saudi Arabia and Yemen. Despite this, the drink remains a runner-up to Red Bull in the rest of the Middle East.
“If you were to exclude Saudi and look at other markets like UAE, we are a close number two to Red Bull,” El-Gamal says. But while some observers have pointed to similarities between Red Bull and Power Horse — both have been associated with extreme sports, are manufactured in Austria, and packaged in a similar way — El-Gamal is quick to point out a clear differentiation in the market place.
“What differentiates the one from the other is basically the fact that Red Bull started to launch its activities on an international basis early on, and very quickly started to dominate and drive that segment,” he says. “We, however, were the first comers in Saudi Arabia and dominated that. Red Bull is the leader internationally, but Power Horse has managed to grab the largest share of Saudi Arabia and Yemen.”
This has led to the two brands being associated with separate customer bases, according to El-Gamal. Power Horse is associated with Saudis and Yemenis, while Red Bull has been associated with expatriates. “This is what distinguishes the one from the other. One is perceived as an Arab brand,” El-Gamal says. “Red Bull relates itself and associates itself with the expatriates.”
With numerous other energy drinks vying for a position in the Middle East market, Power Horse has set its sights on consolidating its position as the number two player in the region.
“We are aiming to become a very close number two [to Red Bull],” El-Gamal says. “We are very realistic in our objectives and our financial resources. We will drive the brand through major marketing activities and consumer programs, closing the gap in the rest of the Middle East versus Red Bull, while maintaining our leadership position in Saudi Arabia and Yemen.”
But increasing its market share outside Saudi Arabia and Yemen is likely to be an uphill struggle, not least because the cost of supporting and marketing energy drinks can be prohibitive.
Indeed, one of the main entry routes into the sector is through agreements with outlets including hotels, restaurants, bars and nightclubs. “Red Bull has built entry blocks, signing long term exclusivity agreements with some of these outlets and therefore it’s becoming very challenging for us to penetrate,” El-Gamal says.
Another Energy drink, Wild Horse, is also focusing on marketing strategies such as sponsorship of sporting events to promote itself in the Middle East. Richard Bradley, CEO of Wild Horse, which was launched in 2003, said one of the main keys to success involves creating strong brand awareness.
To this end, Wild Horse is a sponsor of Team Saluki, a desert rally team based in Dubai. “We’re doing a lot of sponsorship and a lot of work with our clients and their retail outlets,” Bradley told RNME.
However, he admits this takes “time, effort and money” and is also a strategy that many companies in the sector fail to adopt — often at their peril. “There are lots of new energy drinks that come and go all the time, they’re not supported,” he says.
“People seem to think that putting an energy drink on the shelf is the way to make money, and they just forget about it. Throwing money at it doesn’t work and putting it on the shelf certainly doesn’t work.”
Another hurdle faced by Wild Horse and some other energy drinks in the region is that their products are often given a shorter shelf life in the Middle East than in most Western countries, a problem often attributed to Arab countries having received sub-standard products in the past.
“The shelf life of the drink [Wild Horse] in the Middle East is only nine months, where the same can lasts two years in Europe,” Bradley explains. “The quality of the product is two years, so it’s a great pity. It would be a monumental step forwards to bring the UAE into line with European standards. It’s a perfectly stable product.”
Pradeep Naik, of Bomba Middle East, also has his eye on claiming a share of the market, despite working with a tighter marketing budget than some of his larger rivals. “We have certain budgets, certain targets and we want to develop our own business,” he says.
“I don’t care who is the strongest competitor, we have our own strategy to enter the market. Although Red Bull is very strong, I believe people need choices.”
Naik also sees Bomba’s distinctive glass, hand-grenade shaped bottle as a key marketing point. “When I started doing some research on energy drinks, I discovered that most of the products come in a typical narrow can. I went for this because it is a bottle — it’s eye catching,” he says.
With a limited budget, Naik is promoting the drink through various events aimed at groups such as young people and executives with high-stress jobs. He has already promoted the drink through indoor cricket competitions, and is now involved with a bowling team. “During December, I’ll be targeting the European crowd with some events,” Naik explains.
Naik is also talking to some of the larger supermarkets such as Spinneys and Carrefour, and is confident the product will gain the appropriate listings it needs. “We are sure that we will do that,” he says. “The product is good and people like it. At the end of the day, the customers come to you for variety.”
While television advertising is beyond Bomba’s budget in the Middle East, Naik is convinced that the brand can take a significant share of the market that remains outside Red Bull and other more heavyweight players. “I would think Red Bull has a 70-80% share [of the market worldwide.] I’m looking for the maximum share of that 20 or 30% that is left. That would be about 3%-4.5%. I’d be happy with that.”||**||