Beer Market in Iran

Beer Market in Iran-Dissertation Writing Help

In 2010 sales of non-alcoholic beer record impressive growth of 46% in volume terms to reach almost 339 million litres

Complete ban on alcoholic drinks and harmful side-effects of cola carbonates offer growth potential for non-alcoholic beer

The average unit price of non-alcoholic beer increases by 9% in 2010

Behnoush Iran Co remains in the lead with a 65% volume share in 2010

Dynamic growth expected for non-alcoholic beer with a 33% CAGR in volume terms over the forecast period

TRENDS

Non-alcoholic beer is highly developed and established in Iran. The government played a key role in boosting the demand for non-alcoholic beer as, after the introduction of legislation banning the advertising of cola carbonates other than in stores, it encouraged the drinking of non-alcoholic beer by stressing its health benefits. The younger generation in Iran continued to boost demand for non-alcoholic beer, especially new flavours with different and attractive packaging.

Non-alcoholic beer is not perceived as an alternative to, or an extension of, an alcoholic beverage – but rather a malt beverage enjoyed as a cola or any other carbonated drink would be. The fact that non-alcoholic beer is malt based has led it to be perceived as a healthier option when compared to colas as it has lower sugar levels and is also supposed to be good for the kidneys.

Non-alcoholic beer recorded volume growth of 46% in 2010, which was higher than the review period CAGR of 41%. This improved performance shows that the category still has great potential and is far from maturity. Media advertising about the harmful side-effects of cola carbonates pushed consumers to look for alternative drinks, such as non-alcoholic beer and drinking yoghurt. Non-alcoholic beer benefited considerably from this trend, thanks to its purported health benefits. In addition, key players continued to expand their distribution channels and invested more in mass media advertising. The introduction of new flavours and attractive packaging further boosted volume sales, especially in key urban areas.

Non-alcoholic beer is the only beer legally permitted in Iran. According to Islamic law, it is forbidden to drink alcohol in any form. If a person is proved guilty of drinking alcohol, they will be punished by whipping. Consequently, all beer categories other than non-alcoholic beer are available only through the black market, having been smuggled into the country from Turkey and Iraq, and distributed illegally.

The unit price of non-alcoholic beer increases regularly every year due to growing demand and a high inflation rate, and was up by 9% in 2010. However, the highly competitive environment does restrict to some extent suppliers when setting their unit prices.

The major consumption group for non-alcoholic beer is young adults. These consumers are enjoying rising levels of disposable income, fewer responsibilities in terms of mortgages and children, and a desire for new experiences. More young adults in Iran are switching to non-alcoholic beer following widespread media coverage regarding its health benefits and the fact that it is perceived as cool. The health benefits occupy a significant position in most major players’ promotional activities. Although non-alcoholic beer is more popular among men than women, young women are becoming increasingly interested in it, and are expected eventually to comprise as important a consumer group as young men.

Beer in Iran is mainly consumed through off-trade channels, which accounted for 81% of total volume sales at the end of the review period. However, the off-trade channel’s share slipped slightly as its growth rate was much smaller than the on-trade channel’s in 2010. The on-trade sales were boosted by the fact that Iranians increasingly enjoy going out and drinking non-alcoholic beer in coffee bars and restaurants.

On-trade outlets in Iran are limited mostly to coffee bars, juice bars, restaurants and hotels as pubs, bars or nightclubs were basically non-existent in Iran at the end of the review period, in line with the governmental ban on the drinking of alcoholic drinks.

Small grocery retailers were the main distribution channel for non-alcoholic beer in the off-trade, with independent small grocers accounting for 70% of volume sales in 2010. This is due to the fact that small grocery retailers are present throughout the country.

Each year new flavours of non-alcoholic beer are introduced to the Iranian market. Among them lemon is the most successful one. Other important flavours include peach, pineapple, pomegranate, tropical fruits, mango and strawberry.

The most popular type of packaging for non-alcoholic beer remained the 330ml glass bottle, slightly ahead of metal beverage cans. Although there is a well-developed deposit system for bottles in Iran, Iranian consumers are becoming more reluctant to use it, as they do not find it convenient. The way the system works is that you buy the bottles and then have to return them to the store in order to get your deposit back. This trend affected the Behnoush brand of non-alcoholic beer, which is mainly available in deposit glass bottles. By contrast, Behnoush Iran Co’s other brand, Delster, benefited from the trend, as it is available in non-deposit bottles.

In general, Iranian consumers can use four main drinks with their meals, which are cola carbonates, drinking yoghurt, non-alcoholic beer and water. As a result, these choices face intense competition to attract the attention of Iranian consumers. Due to this trend of consumption, non-alcoholic beer can be regarded as one of the main competitors of soft drinks.

PRODUCTION, IMPORTS AND EXPORTS

At the beginning of the review period in 2005 Iran had a production of almost 60 million litres of non-alcoholic beer for domestic consumption, 4.1 million litres of imports and 3.1 million litres of exports to the neighbouring countries like Turkmenistan, Azerbaijan, Afghanistan, the United Arab Emirates, Saudi Arabia and Qatar. Currently, it is estimated that imports have reached almost 20 million litres, while export figures are no more than 15 million litres.

COMPETITIVE LANDSCAPE

Domestic supplier Behnoush Iran Co is the clear leading player with a 65% share of total volume sales in Iran. The state brewery is the main producer of non-alcoholic beer (original malt, lemon, pineapple and other flavours), producing more than 220 million litres annually from three factories. It produces the Behnoush and Delster brands (non-alcoholic beer) in bottles and cans as well as soft drinks such as the Iranda cola brand, Iranda diet drinks, yoghurt drinks in returnable glass bottles, malt extracts for biscuits and other products and chocolate mixed drinks. The company’s well-established Delster brand is synonymous with non-alcoholic beer in Iran. As well as having a wide product portfolio, Behnoush Iran Co uses PET packaging, which became very popular during the review period.

Behnoush Iran Co’s most popular brands in non-alcoholic beer are Behnoush and Delster. The latter, continuously increasing its share during the review period, surpassed the Behnoush brand at the end of the review period and became the leading brand with 60% of total sales. Delster benefited mostly from the fact that the Behnoush brand started to be actively exported by Behnoush Iran Co to neighbouring countries. In addition, the overall reluctance among Iranians to the glass deposit system boosted the sales of the Delster brand as it is available in non-deposit bottles.

Moreover, Behnoush Iran Co has introduced new products each year like its low-calorie non-alcoholic beer, Delster Diet, in 2008. The product is designed for young people who are interested in diet products in order to keep fit and wish to avoid high-calorie products.

The popularity of Behnoush and Delster means that local brands play the major role in non-alcoholic beer in Iran. Delster is popular because of its classic and flavoured non-alcoholic beer products. The most popular flavours are lemon, pineapple, and peach, which proved very successful over the review period.

Second-ranked Arpanoosh Co with its Istak brand posted the strongest increase in its volume share in 2010, up by more than three percentage points to reach 16%. The Istak brand portrays the image of a “quality product” among Iranian consumers, especially the younger generation.

Some private Iranian soft drinks companies have expressed interest in producing non-alcoholic beer, based on the assumption that it could become an alternative to carbonates. In 2009, new player Sirang Koohrang Co introduced a brand by the name of Bit. The new brand enjoyed a strong launch campaign and good distribution. Sirang Koohrang Co was the first player to use satellite TV to target consumers. Less than a month after the launch, nearly all supermarkets/hypermarkets in key urban areas had Bit on their shelves. Sirang Koohrang Co is owned by one of the key producers of mineral water (Koohrang Co) and produces its product under licence from Bitburger Braugruppe. The marketing target for Bit is to compete with Delster.

Sirang Koohrang Co was able to continue its impressive performance in 2010 and recorded a volume share of 6% in only its second year in the market. The brand proved its premium quality to many consumers and could become a strong competitor of Delster.

In 2010, Khoshgavar Mashhad launched HeyDay, Danjeh Aria launched Hoffenberg, Eichbaum-Brauereien AG launched Karamalz, Datis co launched Deo and Tehran Govar Food and Beverage Industry launched Jojo. These new launches were mainly supported by in-store activities like posters and targeted the young Iranian population.

In 2010, Arpanoosh Co established its second factory in west Iran by the name of Khorshid Zareewar Co. This factory is expected to have a production equal to the main company in Rasht. Arpanoosh plans to introduce new 1.5-litre PET packaging to the market in the near future and this new factory will be the site for the production of the new packaging.

PROSPECTS

The government’s restrictions on cola carbonates and its campaign encouraging the drinking of non-alcoholic beer provide the basis for the projected strong sales of non-alcoholic beer over the forecast period. Non-alcoholic beer is expected to register a 33% volume CAGR, to reach almost 1.4 billion litres in 2015. More young adults in Iran will be switching to non-alcoholic beer following widespread media coverage regarding its health benefits, which will occupy a significant position in most major players’ promotional activities.

Cola carbonates and drinking yoghurt will remain the most popular alternatives to non-alcoholic beer over the forecast period. The popularity of drinking yoghurt increased enormously during the review period, with many Iranians switching from non-alcoholic beer. Other smuggled and illegal alcoholic drinks will also represent a threat to growth of non-alcoholic beer over the forecast period.

Non-alcoholic beer will remain the only active category in Iran. No change in the law prohibiting other beer categories is expected over the forecast period.

Domestic companies are anticipated to remain the key players in non-alcoholic beer in Iran with their production increasing year-on-year to meet growing demand for this product. They are expected to continue to invest in research and marketing in order to enhance the position of their products in the domestic and international markets. New product developments and a strong focus on quality and innovation will drive the growth of non-alcoholic beer in the forecast period.

Behnoush Iran Co will remain a strong leader in beer. The popularity of its leading Behnoush and Delster brands will be enhanced by the company’s promotional activities, new flavours and packaging innovation.

New companies, both international beverage companies as well as some private Iranian soft drinks companies previously operating only in soft drinks, are expected to enter non-alcoholic drinks in Iran over the forecast period on the assumption that it could become an alternative to standard carbonated soft drinks. These players will aim to persuade young Iranians to drink non-alcoholic beer instead of traditional carbonates, which is in line with the Iranian Government’s policy.

The on-trade channel is expected to record higher growth rates in Iran over the forecast period thanks to the fact that Iranians increasingly enjoy going out and drinking non-alcoholic beer in coffee bars and restaurants.

The increasing number of supermarkets in Iran together with growing westernisation and urbanisation trends will be the key reasons driving the volume sales of foreign non-alcoholic beer over the forecast period. The shares of multinationals such as Carlsberg A/S, Bavaria NV and Heineken NV are expected to grow slowly but steadily during the 2010-2015 period, enhanced by their wider availability in all major supermarkets and hotels all over the country.