Dubai Refreshment Co’s 2018 profits drop 54% after VAT, excise tax

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The implementation of value-added tax (VAT) and excise tax amounted to 60 percent of the Dubai Refreshment Company’s net local revenue and led to higher consumer prices, according to a statement to shareholders posted to the Dubai Financial Market.

In the statement, Dubai Refreshment Company, which is the sole bottler and distributor for PepsiCo in the UAE, said that the company “was forced to pass these taxes to the consumer”.

“This happened at a time when other sugary non-carbonated drinks were not subject to the excise tax and as such did not need to increase their prices,” the statement added.

 “The price increase on company products combined with favourable tax advantages for non-carbonated sugary drinks put DRC products at a significant competitive disadvantage which resulted in significant reduction in sales and profit.”

In 2018, Dubai Refreshment Company’s net profit fell 54 percent to AED 42.3 million ($11.52 million). Revenues totalled AED 646 million ($175.87 million), a 26 percent decline when compared to the year before.

“The situation was especially difficult in the first few months after the excise tax implementation, however, through a combination of sales improvement and cost reduction initiatives, the company has been able to stabilise the situation and return to reasonable profitability,” the statement said.

Dubai Refreshments distributes carbonated, non-carbonated and bottled water products. Some of brands under Dubai Refreshments’ portfolio include Pepsi, Diet Pepsi, 7-Up, Diet 7-Up, Mountain Dew, Miranda, and Shani, Mountain Dew and Aquafina.