Vimto-maker Nichols has issued a profit warning, citing the new tax on soft drinks in the UAE and Saudi Arabia for a drop in sales.
The UK-based juice is popular in the Middle East, particularly during Ramadan, when it is often used to break the fast – according to reports, the company makes $9 million annually from Saudi Arabia and the UAE, with 80 percent of sales coming during Ramadan.
“Within our international markets, Ramadan 2019 has been one of the brand’s most successful campaigns across the Middle East region,” the company said in a trading update.
The update from the company conceded that a 50 percent levy on soft drinks, which has been implemented in both countries, will affect performance in the region.
It said: “Whilst it is difficult to estimate the future effect on sales volumes of the Vimto brand in these regions, at this point in time, we have to assume the increased retail price will have a negative impact from 2020.”
In a bid to mitigate the impact, the company is spending more money on marketing the brand throughout the Middle East.
The update added that the Middle East “as a whole, remains a key strategic market for the Vimto brand”.
Nichols added that 2019 has proved to be a good year, with sales up 4 percent compared with a year earlier – despite a slowdown in the UK soft drinks market.
The UAE’s Federal Tax Authority (FTA) implemented an expansion of excise tax on Sunday which includes sweetened drinks, electronic smoking devices and tools, and the liquids used in these devices.
The new tax aims to reduce the consumption of specific goods typically harmful to either human health or the environment.
While Saudi’s “sin tax” came into force from December 1.
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