Long before the introduction of soft drinks in 1865, and their industrialization in 1955 in Iran, Iranians were accustomed to using sharbats (syrups).  An industry with old roots in Iran, the soft drinks industry has undergone many changes and challenges throughout its history.   The Islamic Revolution of 1979, its subsequent ban of alcoholic drinks and confiscation of major carbonates production units was an inflection point in the industry.  The result was a rapid growth in consumption of non-alcoholic drinks, and an isolation that enabled local companies to rapidly capture the market and reach production levels to export to neighbouring countries. 

An industry in growth stage, the soft drinks industry is valued at about $2 billion a year. Today, Iran produces about 3 billion litters of different types of soft drinks to address consumption per capita of 46 litters, and export more than 12% of its production.   With 66% of its 70-million population below the age of 30, and a growing consumer purchasing power as a result of a growing economy, urbanization, and access to quality raw material have been the main drivers of its rapid growth. Furthermore a lower consumption per capita than the global average, as well as an expected major shift in Iran’s demographic profile, which implies addition of another 10 million consumers to the most valuable segment of the market, predict further growth in the market of soft drinks in the next 5 years.   

Although a fragmented industry, with more than 300 players, rivalry has not been intense, and product differentiation is non-existent.  The demand in the market is so high that the players have not had to compete for market share, and have not developed differentiation or market segmentation strategies.   Another reason for lack of differentiation has been the long process of obtaining permits for new production.  In each category of soft drinks (Carbonates, Bottled Water, Fruit Juice Products, Malt Drinks and Energy Drinks), producers use similar packaging which varies depending on the category, and similar flavours.   In fruit juice category, non-aseptic packaging dominates the market.  In carbonates, glass bottles dominate, while PET bottles and cans are gaining market share quickly.  

Entrance of new foreign producers such as Al Aujun, and new product categories such as energy drinks is shaking up the industry.   In a market dominated by domestic players for more than 25 years, new foreign companies have been able to very quickly gain market share, mostly due to their positioning.   While Iranians are very loyal consumers, lack of education and awareness make them price sensitive.  Success stories of the past only demonstrate the importance of branding in the FMCG market, and emphasizing on consumer loyalty.

Lack of awareness with regards to benefits of different product types, allows for easy substitution of different categories, e.g. carbonates with juice, and lower-end products with more expensive ones.  In recent years, some mega-trends have become more apparent in Iran.  Increased awareness with regards to the damages of carbonated drinks and sugar, and high levels of diabetes has created a move towards healthier products.  The rising purchasing power has resulted in consumer attraction to premium products such as energy drinks, and a thirst for new products, especially those that represent western cultures, hence leading to growing demand for imported products such as foreign malt drinks.