Energy drink firms in fizz over partial Saudi ban
Red Bull ‘surprised’ while experts warn of ‘huge losses’ after kingdom’s crackdown on energy drinks
Energy-drink makers say they are surprised at a partial ban on their products in Saudi Arabia, as experts warn of “huge losses” within the industry in the wake of the new rules.
Authorities in Saudi Arabia this week banned the sale of energy drinks in sports clubs and within government, health and education facilities. It also outlawed all forms of sponsorship and advertising, and prohibited free distribution of the drinks.
The partial ban came after an Interior Ministry study on “the adverse effects of energy drinks,” a category that includes big brands like Red Bull, Monster, Burn and Power Horse. Under this week’s decision, energy drinks sold in Saudi Arabia will have to carry health warnings.
Experts and analysts say the restrictions will have a massive impact on the lucrative market in Saudi Arabia, which ranks as one of the world’s top-ten consuming countries of energy drinks.
“This ban will definitely decrease sales for the energy drinks in the market,” a spokesperson from research firm Euromonitor International told Al Arabiya News.
“In the long term, we will notice a decrease in the consumption of energy drinks just like it happened with carbonated soft drinks as the market strives to be healthy.”
A former employee of a major energy-drinks company, who is based in the Gulf, said that the Saudi ruling has caused “panic” in the industry.
“It will mean huge losses for energy-drink brands in Saudi Arabia,” said the executive, who wished to remain anonymous. “This is a huge move by Saudi Arabia. Definitely this is something that has alarmed the energy-drinks market.”
Global industry leader Red Bull said in a statement that it was “surprised by this decision by the Saudi Arabian government”, adding that “health authorities across the world have concluded that Red Bull Energy Drink is safe to consume”. Several other energy-drink companies did not respond to requests for comment when contacted by Al Arabiya News.
Red Bull is one of the most prominent brands in Saudi Arabia, where it has held high-profile sponsorship events such as its ‘Flugtag’ flying challenge and Red Bull Car Park Drift driving event. Under the terms of the new rules, such events would be outlawed.
The veteran energy-drinks executive said this means that Red Bull – one of the biggest brands in the sponsorship world – stands to suffer more than its competitors.
“It seems that the ministry is attacking one company in specific rather than the rest,” the executive said. “I’m not sure if the move is attacking the distributor [in Saudi Arabia] or the brand per se.”
Despite Red Bull’s citation of studies that the drink is safe to consume, energy drinks generally have been linked to health problems and even deaths.
Such concerns have led the United Arab Emirates and Kuwait to insist on warning labels being displayed on cans.
Euromonitor says it expects other Arab countries to follow Saudi Arabia in tightening restrictions on energy drinks even further.
“This will have impact on other Arab countries as Saudi Arabia has always been the leader in initiating such rules and regulations and we expect that other GCC countries will follow their lead,” the spokesperson said.
The industry executive likened the health concerns over energy drinks to those surrounding the tobacco industry.
“You see many countries in Europe banning advertising of energy drinks. This is a trend that is happening worldwide,” he said. “Many other Gulf and Levant countries will follow this.”
But the executive said a full ban on the drinks in the region was highly unlikely. “A complete ban on energy drinks will not happen. Look at the tobacco industry, where there hasn’t been a complete ban on it,” he said.
Likely scenarios in Saudi Arabia are that the ruling will not be implemented in full, or that multinational firms will start lobbying the government, the executive said.
“I think the energy-drinks business will go really quiet for the next couple of months. And then they will try to find a way of getting away with doing their activations like they did before,” he said.
‘Moderation is key’
Despite concerns among many in the industry, some drinks executives remain cooler on the subject.
Andreas W. Herb, chief executive of the Germany-headquartered MBG International Premium Brands, which is behind the Effect energy drink, admits he was “surprised” at the Saudi ruling.
“We went through a three-year process getting the whole certification done in Saudi,” he said. “We had to send in each ingredient in the drink in power form [for analysis by Saudi authorities].”
But Herb added that an advertising ban would not necessarily be harmful to his business.
“It will not change our strategy as a company,” he said. “That is not scaring me really. Energy drinks are only one part of our business… It will mean all my friends and competitors will have to go the same way.”
Herb added that Saudi Arabia remains a “very important partner for us”. He insisted that energy drinks are not harmful to health if drunk in moderation.
“Is it good to drink 20 energy drinks a day? I’d say probably no. If you drink one, two or three a day, I cannot see the harm,” he said. “Everything in over-consumption is somehow negative.”