35.8% decline in sales of two soft drinks companies in 9 months

Sales of two companies in the soft drinks sector declined by 35.8 percent in the first nine months of this year compared to the same period in 2017, according to Emirates Today in their financial statements.

Financial analysts said the introduction of 100% selective tax, the subsequent introduction of value added tax, and changing consumer habits contributed significantly to the decline in sales, especially as consumers followed the introduction of "selective tax" to juices as an alternative to soft drinks.

Despite the success of the tax in achieving the objectives of reducing the consumption of these products, the return of sales and profits for stability, in the coming period, linked to the introduction of alternatives commensurate with the health trends in the markets, and reliance on marketing policies.

Financial results

The results of the Dubai Soft Drinks Company, listed on the Dubai Financial Market (DFM), showed a decline in sales during the first nine months of 2018 to reach AED 456.246 million compared to AED 728.979 million for the nine months The first of 2017, a decline of 37.4%.

The Emirates Foodstuff Company, listed on the Dubai Financial Market, also reported a decline in sales for the first nine months of 2018 to reach AED 37.986 million compared to sales of AED 41.031 million during the same period of 2017, a decline of 7.4%.

During the first nine months of the year, the two companies reported sales of AED 494.232 million compared to AED 770.01 million during the corresponding period of 2017, a decrease of 35.8%.

Tax effect

"The application of selective taxation has been the most important factor in the decline in sales of soft drinks, which in turn has reflected the revenues and sales of the companies that produce these beverages," said Walid Al-Khatib, chief financial officer at Global Securities and Securities. Of its financial statements.

He added that the application of value added tax on the prices of these products, after increased by selective tax, was the second factor in the decline in demand for these products compared to last year, especially during the pre-application period of selective tax.

Khatib said that the return of stability and improvement to the sales of soft drinks, subject to the tendency of manufacturers to propose alternatives with the ability to increase market share again from sales, and attract more consumers, in addition to increasing the marketing means of those products, pointing out that the selective tax lists included beverages With tobacco and energy drinks, which in turn reduced or discouraged some consumers from ordering such products.

Al-Khatib pointed to a third factor affecting the sales of soft drinks, namely the slow demand in retail and restaurants in general, affected by global economic changes, or the application of VAT.

Significant impact

"The financial statements for the first nine months of companies operating in the production of soft drinks revealed a clear drop in sales during that period, compared to the same period of the year," said Essam Kasabia, financial analyst at Mena Corp Financial Services. Which indicates the great impact of selective tax application in soft drinks sales, especially since the first year of the application process is most influential in the sales movement.

He added that the application of value added tax, after the rise of the prices of these drinks of «selectivity», increased the proportion of the impact on the movement of sales, especially with the increased competitiveness of juices in the movement of demand markets.

He explained that the return of improvement or stability of financial indicators of companies engaged in the production of soft drinks, linked during the coming period with restructuring policies to control the cost of work, and find new ways to expand in the markets.

Competitive juices

In the same context, financial analyst Wael Muheisen agreed that the introduction of selective taxation had clear effects on sales lists of taxable goods.

Although selective taxation had the greatest impact on the demand for sales of such products, other factors, such as the introduction of value added tax (VAT) and the increased competitiveness of the beverage sector on the market, were factors influencing the decline in sales of soft drinks.

Moheisen said that the juices accounted for a larger share of sales, after the price increases of soft drinks and energy drinks. Moheisen pointed out that the aim of selective taxation is to limit the sales of these drinks for health reasons, which has borne fruit, as evidenced by recent indicators of sales in the markets, regarding the return of indicators of improved sales of soft drinks by offering alternatives to suit the health trends in the markets.