Dubai Refreshments bottles up a good first half to put fizz in figures

Dubai Refreshments executives must have experienced something of a sugar rush yesterday as the company doubled its profits for the first half of the year.

The exclusive bottler and distributor of Pepsi in the UAE injected some fizz into the start of the earnings season with a 15 per cent increase in revenues to Dh444 million (US$120.8m) compared with the same period last year.

"The UAE has benefited from the price increase we took at the beginning of year, but this has been offset by an increase in costs of raw materials and a reduction in volumes," said Tarek El Sakka, the general manager of Dubai Refreshments.

Along with its major competitor, Coca-Cola, Dubai Refreshments increased the price of a can of Pepsi from Dh1 to Dh1.50 in January, having kept prices unchanged for 20 years.

"Volumes are down as expected, but we are operating on plan as a result of the price increase," said Mr El Sakka. "It's very much in line with the plan in our growth markets."

Sugar prices, a major raw material cost for beverage bottlers, hit record highs in January, almost doubling in little more than nine months. Prices have since come down by about 25 per cent, according to the UN's food index.

The increase in price and a reduction in costs helped boost Dubai Refreshment's profits by 109 per cent to Dh61.1m in the first six months of this year, up from Dh29.2m in the same period last year.

The company has the licence to bottle and distribute Pepsi, as well as many of PepsiCo's other brands such as 7UP, Mountain Dew and Mirinda.

The Pepsi brand is the market leader in the UAE, with a 15 per cent market share, compared with 10 per cent for Coca-Cola, according to Euromonitor, a data provider.

Sana Toukan, the research manager in the Middle East for Euromonitor International, said although consumers initially responded negatively to the increases in price of both Pepsi and Coca-Cola, they had since started buying again.

"Demand recovered quickly due to strong loyalty for both brands and the lack of similar alternatives,"she said.

Mr El Sakka said although the company had seen weak volumes in the UAE, volumes in export markets were growing strongly, particularly in the Horn of Africa, Kenya, Tanzania and Afghanistan.

The company has also made some long-term cost savings.

Dubai Refreshments has reduced the amount of packaging it uses and made the top of its cans smaller to reduce aluminium costs.

rjones@thenational.ae