Overall, 2014 was another good year for the packaged water industry in Saudi Arabia, as it witnessed a strong growth in consumption of both bottled and dispenser water. Sales of packaged water grew in double digits over 2013 reaching 6.3 billion liters, equivalent to per capita consumption of 204 liters per annum. Consumption has grown at an average annual rate of 10% since 2010, says Middle East beverage specialist ManSci Research. Although both the bottled and dispenser segments grew proportionally, the dispenser segment contributed to 53% of total consumption.
Packaged Water – Bottled and Dispenser, Market Size 2010 – 2014
The increase in consumption has been driven by greater urbanization and improved distribution Consumers are moving towards packaged water for drinking, as compared to tap water, as the quality of tap water is felt to have deteriorated over time. Moreover, consumption has considerably increased during the summer months as a significant number of pilgrims visit the country during those months to observe Ramadan or perform Hajj. Producers have responded by aggressively increasing production capacity and also expanding their distribution network to areas that were previously less penetrated.
Growth in consumption might have been greater but for changes in regulation of the labour market. Saudi Arabia has dramatically extended its active labor market policies in order to address the issue of growing youth unemployment and low Saudi participation in the private-sector workforce. The government is increasingly aggressively pushing for greater employment of Saudi nationals. Known as the Nitaqat scheme, companies are classified into different categories and are required to meet specified Saudiasation targets. In support of this, in late 2013 the Ministry declared a short-term amnesty for workers in the country illegally to leave and approximately one million expatriates availed the amnesty offered.
The top five suppliers together hold more than 60% of the total market. Al Manhal Nestle Waters continues to lead the market and is expected to continue to do so at least for the immediate future. Its strength is primarily based on its dominance of the dispenser water segment, but with its PET filling facility on-stream since 2004, the company has acquired a strong position in the bottled water market as well. It is the only company with national coverage in the dispenser sector. Global Beverage Co- Fayha Waters is the second-largest packaged water company in the Kingdom. Aggressive marketing and sales activities have helped Global Beverage Co to gain significant share in the bottled water market in the last five years. GBC’s share is also likely to remain unchanged during the forecast period. More competition in the segment will increase the choices available to the customer.
There are no import tariffs at all on GCC products entering the Saudi market, whilst the standard 5% is levied on all non-GCC products. However, in practical terms, GCC imports of bottled water into Saudi Arabia are almost non-existent, and international imports are restricted to a few premium brands. On the other hand, exports of bottled water from Saudi Arabia have been banned as of August 2011, so as to conserve local water resources.
There has been a lot more innovation in terms of new pack sizes and better packaging in the bottled water segment. In the recent years there has been an increase in the single serve packaging driven by convenience and on-the-go lifestyles. Sustained growth in single-serve sizes has taken its toll on the 1.5 liter PET segment, which appears to be declining. Encouraged by the success of the 330 ml size, suppliers have introduced even smaller 200 ml PET bottles. The 200 ml size is already being offered by four suppliers Al Qassim, Hana Water, Hayat and Global Beverage Company (Fayha).
In the last few years, Al Qassim Health Water has also been adding new pack sizes. After the popularity of the 200 ml PET bottle, the company recently introduced a 1-litre size that aims to eventually replace the 1.5-litre pack.
Many bottled water producers have entered the dispenser water market by launching smaller non-returnable 12-litres bottles. These are gaining popularity as they are branded and are available via retail outlets. The availability of dispenser water is restricted to dense urban areas with patchy sales in other parts of the country and hence a strong growth is expected amongst the numerous smaller dispenser water suppliers that have come up outside the main urban markets.
In spite of the growing population and the significant competition and innovation described above, the very aggressive growth of recent years is unlikely to be sustained in the future.
Firstly, with per capita consumption having reached 204 liters per annum, the packaged water market is approaching maturity in 2014. Secondly, lower global oil prices will impact the oil revenues in KSA having a dampening effect on the GDP per capita and government spending. Overall, the packaged water segment is expected to further grow at 7% CAGR through till 2019.
ManSci had recently published it Packaged Water Reports taking you through to 2019 for Iran, Kuwait Saudi Arabia and UAE.
Based in Dubai, ManSci has provided the most complete and accurate understanding of dairy and beverage markets in the Middle East and North Africa for over 30 years.