Euromonitor International

GLOBAL: Malt-based drinks set for healthy growth - research

By | 8 March 2007

Whether marketed as non-alcoholic beers or soft drinks, malt-based beverages are expected to grow as a category in the coming years. While the products are finding increasing acceptance among Muslim countries, Johanna Iivonen of Euromonitor International believes there is significant potential to market them on their health credentials to a wider international audience.

Malt-based soft drinks can provide beverage manufacturers, breweries in particular, with a lucrative opportunity for growth according to the latest research from Euromonitor International. The Middle East is showing particular potential, as Islamic beliefs limit consumption of alcoholic beverages, while malt-based drinks could also fuel growth in Western markets with consumers on the lookout for healthier alternatives to conventional soft drinks and alcoholic beverages.

The manufacturing process of fermentation for malt-based soft drinks is similar to that used in beer production, with the products containing typically malt, sugar, and hops. Fermentation has not only been useful in terms of preservation, but has helped to add flavour and texture. More importantly malt-based drinks have developed a reputation over the centuries for their nutritional value, a message that is attractive for manufacturers to carry across in today's climate of increasing health awareness.

Indeed, age-old cultural tradition provides a platform for growth within malt-based drinks in many Eastern markets: Boza, a well known breakfast drink in Bulgaria, Macedonia, Albania and Turkey, harks back to 401BC, and kvas, a non-alcoholic fermented beverage popular in the Baltic region and Russia, also dates back to ancient times.

Manufacturers have now recognised the need to bring these traditional drinks up to date to do battle in today's fiercely competitive soft drinks markets.

In the current context of intense market rivalry, the concepts of health and energy are being used to refresh brand image.  For example, Royal Unibrew, which has been selling Vitamalt in Africa since the 1960s, recently launched Vitamalt Plus, a brand for the 'New Malt Generation', which is said to give 'both instant energy and long-lasting health benefits'. Meanwhile, Henninger has launched KaraActiv, containing Vitamin C, calcium and magnesium.

Meanwhile, boza, an old-time 'winter warmer' which is typically sold on the streets in Turkey during the winter, has recently become available in supermarkets across the country as a packaged product. Another example of such innovation can be found in kvas, which Russian beverage company Bulgarpivo began producing on an industrial scale at the beginning of last year following its launch of a non-fermented version of the drink in April 2005.
The growth of kvas in Russia has not gone unnoticed by the large soft drink players. Coca-Cola acquired Estonia's Linnus Kali brand in 2001.

Other types of malt beverage such as non-alcoholic beer are also reaping the rewards from the health trend. Given the similarities between traditional malt beverages and non-alcoholic beer, Europe may provide the right market setting for growth, according to Euromonitor.

In big beer markets, such as Germany or Finland, new non-alcoholic beer launches are now appealing to consumers who enjoy the taste of beer, but want to limit their alcohol intake. Carlsberg's Finnish subsidiary Sinebrychoff, for example, added the first non-alcoholic beer to its domestic product range in 2005, with the launch of Nikolai 0.0%, marketed as a thirst quenching drink for the health conscious.

Meanwhile in Russia, the country's largest brewery Baltika started producing Baltika 0%, a non-alcohol beer in February 2001. Although Baltika's initial foray in 1996 was a failure, more recent successes can be attributed to technical fine-tuning and an improvement in taste; Baltika 0%, for example, is said to be indistinguishable from its alcoholic counterpart brands. Sales of non-alcoholic beer increased by around 55% over the five-year period to 2006, Euromonitor International data reveals, with Baltika a key contributor thanks to its 43.5% share of this sector in 2005.

Non-alcoholic beer is also growing in popularity in essentially non-beer drinking nations of the Middle East. Non-alcoholic beer and other malt-based soft drinks provide Muslims in this region with an opportunity fulfil their curiosity for Western experiences, without feeling that they are acting against their religious beliefs. However, there is some ambiguity regarding non-alcoholic beverages in the Middle East, with some players marketing their brands as refined soft drinks, some as non-alcoholic beer and others somewhere in between.

At the same time, this ambiguity has proven advantageous to leading companies like Iran's Zam Zam which have effectively broadened their consumer base, by being all things to all consumers. The company currently owns 16 soft drink companies, including Behnoush Iran Co., which produces both non-alcoholic malt beverages, in original malt, lemon and pineapple flavours, and conventional soft drinks with fruit flavours such as orange and lemon.

Leading brands such as Fayrouz, Moussy and Barbican in Egypt are labelled as non-alcoholic beer but some say they should really be classified as soft drinks due to their often fruity, sweet taste. Curiously, these beverages have the body and head of beer. In essence, the success of these products can be largely owed to the regional preference for sweet beverages and a desire to buy into the Western image.

Malt-based soft drink producers have certainly found inventive ways of breathing new life into old-time brands by updating the products and appealing to new consumer groups. Arguably, the most vibrant strand of growth may lie within the market for non-alcoholic malt beverages and non-alcoholic beer in the Middle East, or Muslim populations in the West.

Euromonitor International forecasts that sales of non-alcoholic beer alone will increase by 54% in the five-year period to 2011 across Africa and Middle East. In pioneering markets such as Egypt, per capita consumption is forecast to reach 1.8 litres per annum by the end of this period, up from just 0.1 litres in 1997. With smart marketing - and possibly the addition of functional ingredients to their products - manufacturers of non-alcoholic beer and other malt-based non-alcoholic drinks can simultaneously appeal to all health-conscious consumers in the international market place.

Expert analysis

Health and Wellness Beverages in the United Kingdom (download)

Euromonitor International's Health and Wellness Beverages in United Kingdom report tracks the developments of health-associated product types and the healthy-option positioning of competing brands across different beverage sectors. It provides the latest retail sales data (2002-2005), allowing you to compare health and wellness categories with each other or in the context of the total market for a sector . It identifies the leading companies, the leading brands and offers strategic analysis of key factors influencing the market- be they new product developments, legislative context or lifestyle influences. Forecasts to 2010 illustrate how the market is set to change.

Sectors: Beer & cider, Soft drinks, Water

Companies: Baltika, Royal Unibrew, Carlsberg

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