Last of the green markets

on 09 November, 2015

Business columnist Hamish Smith discusses whether Islamic countries could be the next growth engine of the drinks industry

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THE DRINKS INDUSTRY IS IN A STATE OF TRANSITION. ONCE-GREEN MARKETS HAVE GREYED. NEW GRAZING GROUNDS ARE REQUIRED FOR FUTURE SALES GROWTH.

The BRICs, in particular, are no longer the rock-solid bets for expansion they once were. Brazil is on the precipice of recession, Russia is drowning in currency devaluation. China now requires the prefix of ‘New’, such is its pirouette from luxury drinks gorger to cold turkey. The great hope of India for now remains manacled by protectionist import taxes.

Economists might point to the MINTs – Mexico, Indonesia, Nigeria and Turkey – because of their similarly emerging middle classes and rapid GDP growth. And now a lot of hope is placed on Malaysia and Kenya and, to a lesser extent, Ethiopia (the world’s fastest growing economy in 2015). But what do these countries have in common? Aside from Mexico they all have significant Muslim populations.

Data on alcohol consumption in Islamic countries can be hard to assimilate, not least in the Middle East where, according to The Economist, some black markets have propagated beneath the prohibitionist Sharia Law. But if we look at by-the-book figures, consumption of alcohol in the Middle East alone grew by 70% from 2001-2011 (IWSR). Other less rigorous studies suggest general Muslim consumption of alcohol has seen anywhere between a double and triple-digit increase in the past 10 years.

If true, the historically overlooked Muslim markets could collectively be the industry’s next growth engine. The UAE is already developed and probably saturated but Indonesia (88% of its 250m population is Muslim according to Pew Research Centre), Turkey (99% of 77m) and Malaysia (61% of 30m) could provide new consumer resource for the industry and have started to show up on drinks groups’ reports.

Each of these markets has strong recent GDP growth. Turkey’s middle class rose to 41% of the population in 2010, says Pew Research. The World Bank forecasts Indonesia will have the world’s fourth largest-spending middle class by 2030.

In Malaysia, Sharia Law should mean alcohol is off limits to its Muslim population, but the World Health Organisation named the country the 10th largest alcohol consumer in the world in 2011, per capita. Turkey, on the other hand, is a wine and raki producing country and an attractive long- term prospect to drinks groups. Diageo got in early and, even given a recently challenging political environment, its sales in Turkey grew 3% over 2014/2015.

These markets are experiencing growing pains too. Under prime minister Recep Erdogan Turkey has become a dark market and restrictions remain for most alcohol advertising in Malaysia too. In Indonesia, there has been a clamp down on beer sales in local shops.

But these objections are not all born out of Islamic piety – cycles of conservatism exist everywhere, as the west knows well – though throughout history prohibition has been almost impossible to maintain in democracies. And it’s worth mentioning that Islam and alcohol go way back. Distillation is thought to have been invented in the Middle East and alcohol is said to derive from the Arabic al-kohl.

Largely untapped and mostly misunderstood, Muslim markets might in the future offer the green pastures the alcohol industry is looking for.

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