CAIRO/LONDON, Aug 15 (Reuters) - Egyptian Mohannad

Abdelazeem, 35, doesn't drink alcohol. But he does consume three

or four cans per day of Moussy and Fayrouz - alcohol-free beers.

Brewers including Carlsberg and Anheuser-Busch

InBev say interest is growing in such booze-free brews

across the Middle East and North Africa, presenting

opportunities in a region with some of the lowest alcohol

consumption rates globally.

Reuters spoke to eight Egyptian consumers, shopkeepers

or cafe owners - including Abdelazeem - who said they or their

customers have recently switched to non-alcoholic beers,

ditching U.S. soft drinks brands like Pepsi and Coca-Cola

because they see them as supportive of Israel following its

bombardment of Palestine.

PepsiCo ( PEP ), which acquired Israel-based SodaStream in

2018, and Coca-Cola did not respond to a request for

comment.

There is also a broader shift in consumer tastes underway,

some executives say.

AB InBev has seen demand for zero-alcohol brews rising

among locals in some Middle Eastern countries, including Saudi

Arabia, according to Jason Warner, its CEO for Europe and the

Middle East. Sales to tourists and expatriates have also grown.

AB InBev launched its flagship alcohol-free beer Corona Cero

in Saudi Arabia in the first quarter. Announcing the planned

launch in September 2023, Brian Perkins, AB InBev's head of

Western Europe, said Corona Cero offered "new frontiers of

growth and brand building in expansion markets".

Abdelazeem, a genetics researcher, said he used to drink

seven or eight cans of Pepsi or Coca Cola every day, but worried

about its health impacts. He sees drinks like Carlsberg's Moussy

as being good for digestive health and preventing kidney stones,

adding his whole family had now made the switch.

"Honestly, we like it even more given its health

benefits," he said.

Moussy is made by avoiding alcoholic fermentation, instead

of by removing alcohol afterwards as is common with many

non-alcoholic beers. Carlsberg refers to Moussy as a

non-alcoholic beer, though it is marketed as a malt beverage in

Egypt, where it has been sold for 30 years.

While Carlsberg said growing interest in zero-alcohol brews

presented an "opportunity" in the Middle East and North Africa,

they were unlikely to make any substantial contribution to

revenues any time soon.

"Culturally it is going to take time for people to be

comfortable with the notion that it is a beer," CEO Jacob

Aarup-Andersen told Reuters in an interview earlier this year.

Carlsberg's teams were working to develop markets in the

region, but this was a long-term endeavour, he added.

AB InBev is focused on appealing to existing beer

drinkers, who currently drive zero-alcohol sales globally,

executives told Reuters.

It sees demand for non-alcoholic beer in the Middle East

mostly concentrated in international venues like hotels and

western restaurants. While trends in cosmopolitan cities tend to

spread over time, AB InBev had no plans to try to drive uptake,

Warner said.

Heineken's net revenue grew by upwards of 40% in

Egypt in the first half of this year, in part thanks to sales of

Fayrouz. The company does not break down its results by country

and declined to provide further details.

"PIVOTAL PERIOD"

Non-alcoholic beers remain a small part of brewers'

revenues, but are increasingly central to strategy as they offer

growth. So far, that has mostly been driven by expanding the

opportunities for existing drinkers to sip on beer brands, such

as during working lunches.

The executives' comments, however, indicate potential for

zero-alcohol brews to recruit new customers in nations with

large populations that brewers have barely penetrated to date.

While all brewers operate in the Middle East and North

Africa, their beer sales in many countries are focused on a

niche market of travellers and expatriates - which is growing as

tourism increases.

Brands like Carlsberg's Moussy and Heineken's Fayrouz, by

contrast, have targeted the local population.

Carlsberg commenced local production of Moussy in Egypt in

2023, and has also built a local sourcing hub in Jeddah, Saudi

Arabia, where it says Moussy and another Carlsberg brand Holsten

hold over 50% of the zero-alcohol beer market.

It has developed new flavours, including lemon and mint, a

popular taste locally.

"We are at a pivotal period in the Middle East where local

preferences and aspirations are changing rapidly," said

Alexander Hauberg-Jensen, Carlsberg's vice president for Middle

East & Africa.

Carlsberg, which sells soft drinks as well as beers, plans

to expand its portfolio to include other non-alcoholic

beverages, he said.

AB InBev's chief marketing officer Marcel Marcondes said the

company was not making any specific effort to grow in Middle

Eastern markets, which are not a priority and where it does not

advertise.

The company works to ensure product is available to meet

demand and provide partners with tools to serve its drinks well,

such as glassware, Warner added.

CULTURAL BARRIERS

Even indirect promotion of alcohol is prohibited in Gulf

nations, including the United Arab Emirates, and it is unclear

if advertising a zero-alcohol version of an otherwise alcoholic

brand would class as such, said David Yates, Partner and Head of

Digital & Data at corporate law firm Al Tamimi & Company.

Companies would have to consult carefully with authorities

to understand what marketing, if any, is permitted, and even

then risk offending conservative consumers, he added.

Any significant cultural shift is generations away, said

Laurence Whyatt, analyst at Barclays, adding the brand awareness

and pursuit of moderation that drive zero-alcohol sales

elsewhere do not exist in regions where most do not drink.

"I'm not holding my breath," he said.

In some countries, zero-alcohol brews are growing for

different reasons, such as in Egypt where they are perceived to

be good for digestion, said Alexandra Molokova, research analyst

at market research firm Euromonitor International.

This presents an opportunity for brewers but they need to

adapt their strategies and pricing to reflect these differing

motivations, added Susie Goldspink, Head of No- and Low-Alcohol

Insights at beverage market research firm IWSR.

Most customers in the region would otherwise be drinking a

soft or hot drinks - far cheaper than the alcoholic beers

brewers usually price in line with, she said, adding well-known

brands like Moussy have the upper hand.