UAE’s Bottled Waters Brands Battle for Market Share

Published in Bloomberg Businessweek, 18 August 2015

New labelling rules are opening up the market to international players.

As temperatures top out in the Middle East’s intense summer, it’s peak season for bottled water companies. In the UAE—the thirstiest country in the region, according to the International Bottled Water Association—competition is severe. As many as 160 brands vie to quench the country’s thirst. If such a crowded market weren’t tough enough, many now have to operate at a distinct disadvantage to their competitors.

Since October, local companies have faced tight restrictions on how they can label their product. Rules introduced by the Emirates Authority for Standardisation & Metrology (ESMA) mean they’re no longer able to describe what’s in the bottle as mineral or spring water; instead they have to use the rather more prosaic “bottled water.”

The reason is simple enough: The amount of natural mineral and spring water in the country is so limited that almost all the local bottled water companies use desalinated H20 to some extent—and some use nothing else. The few that rely solely on groundwater still have to treat it heavily. In either case, to call it mineral water is rather misleading. “Most people understand that there’s a limited water table in the UAE, so water has to be treated,” says Fasahat Beg, executive vice-president of the consumer business division of Agthia Group, which produces Al Ain water. His company uses a mix of well-water and water from the municipality that has gone through a process of reverse osmosis and is then “re-mineralised.”

Christian Kurdy, managing director of public health and safety organisation NSF Middle East, which works with a number of local and international producers to help them meet the new standards, says the implementation of the labelling rules has been difficult. ESMA had to grant a grace period for compliance with its new standards from 1 April 2014 to 1 October 2014 after it found only 18 firms had met its requirements by the original date. As well as setting out how companies can describe their products, the new ESMA standards also cover the water sources a company uses and testing of the product itself.

Aiming to take advantage of the stir the ESMA regulations have caused are imported water brands, which can still describe their product as spring or mineral water if it’s been verified as such by ESMA. Badoit and Evian are among the big international players exploiting the change, along with a raft of smaller Turkish brands, including Alpin, Sirma and Erikli (the latter being owned by Nestlé). While this group of Turkish companies represents a small segment of the market, it’s a fast-growing one. James George, research analyst at Euromonitor International, which tracks brands’ market share, says Turkish brands have been increasing their presence over the past few years, in part because some consumers are moving away from desalinated, processed water.

With the sixth highest consumption rate per capita in the world, according to the International Bottled Water Association, the UAE bottled water market is attractive to brands from around the world. Some 141 litres of bottled water was consumed by the average UAE resident in 2013, it says—the global average is just 37.5 litres per person. According to Euromonitor International, more than 1 billion litres of bottled water is sold every year in the UAE via off-trade channels (a figure which excludes hotels, restaurants and cafés), bringing in revenues of 1.4 billion dirhams ($381 million). Euromonitor expects the market’s rate of growth to increase from 6 per cent over the last few years to 7 per cent through to 2019. By then some 1.4 million litres are projected to be sold, generating revenues of almost 2 billion dirhams.

For now, local brands still dominate the market. The Gulf Organization for Industrial Consulting says there are 41 bottled water factories in the UAE. Three local players lead the way with a combined 54 per cent of the market, according to Euromonitor. Masafi accounted for 19 per cent of bottled water sales; Oasis, owned by the National Food Products Company, had an 18 per cent market share; and Al Ain water had 17 per cent. Agthia claims that its Al Ain water brand has since taken the lead in terms of volume, although Masafi says it’s still ahead when it comes to the sub-two litre category.

As local brands adjust to the changed landscape, the title of market leader isn’t the only thing in dispute. Reginald Randall, chief executive of Masafi, which claims to be the only leading brand that draws its water exclusively from an underground source, says some companies are still falsely advertising their product. If the new regulations are to mean anything, he says, then consumers must be absolutely clear about from where their water has come. “There’s been a proliferation of local water brands using desalinated seawater but using graphics and advertising depicting trees and waterfalls to confuse consumers as to the source of the water,” he says. “There’s a large segment of consumers who aren’t aware or are being misled as to the source of their bottled water.”