LONDON: The Dubai-based Pepsi bottler lost some of its fizz in the second quarter as sales retreated.
Dubai Refreshment, which bottles Pepsi and other sodas such as Mountain Dew and 7Up, reported a 12 percent fall in second-quarter profit to 24.7 million dirhams ($6.7 million) as sales also declined by about 1 percent to 229.3 million dirhams.
Soft-drink sales have boomed across the Gulf helped by the region’s youthful population, but the rollback of government subsidies and moves to encourage healthier diets, while reducing levels of obesity, have put soda-makers in the crosshairs of regulation.
Pepsi last month reported a second-quarter profit that topped analyst estimates as sales ticked up by about 2 percent.
But the company flagged up higher raw material costs driven by the strong US dollar and operating cost inflation in some Middle East, North African and Asian markets.
“Consumption of sugary soft drinks is high in the region, and will in all likelihood continue to grow for the foreseeable future,” said Euromonitor International analyst Matthew Berry in a January 2017 report. “However obesity in the Gulf is a ticking time bomb and governments are starting to move to avert the looming public health crisis.
“This could potentially make these countries some of the most promising markets for health-positioned drinks in the world, but it will also pose a threat to sugar-heavy categories that have found the Gulf states to be a rare bright spot at a time of anti-sugar feeling.”
The cost of fizzy drinks in the Gulf have been among the lowest in the world historically, but consumers will soon have to get used to paying more with the introduction of both sugar taxes and value-added tax (VAT).
The UAE Federal Tax Authority said in May that energy drinks would be hit with a 100 percent tax in the last quarter of the year while sugary fizzy drinks would also be targeted with a 50 percent tax. That move follows the decision by Saudi Arabia to impose a special tax on sugary drinks, as well as on cigarettes, starting last June.
Dubai Pepsi bottler loses fizz ahead of sugar ‘sin tax’
Dubai Pepsi bottler loses fizz ahead of sugar ‘sin tax’
Saudi Aramco bolsters global oil market stability amid rising regional tensions
RIYADH: Amid growing logistical challenges facing the energy sector, operational moves by Saudi Aramco are emerging as a stabilizing factor in global oil supply.
The company has offered additional crude shipments on the spot market, a step analysts see as aimed at absorbing supply shocks and ensuring the continued flow of oil through key energy corridors.
The move aligns with Saudi Arabia’s long-standing role as a leading global producer and is intended to limit price volatility and maintain balance between supply and demand at a time of heightened geopolitical uncertainty.
Reuters reported that Aramco has offered more than 4 million barrels of Saudi crude through rare spot tenders, as tensions between the US and Iran disrupt Middle Eastern exports.
Mohammad Al-Sabban, former senior adviser to the Saudi energy minister, said the current surge in oil prices does not necessarily reflect an immediate shortage of supply. Instead, it is largely driven by what energy markets call a “geopolitical risk premium.”
Speaking to Asharq Al-Awsat, Al-Sabban said prices remaining above $100 per barrel reflect global anxiety that the conflict could expand and threaten future supply security.
He noted that higher prices, while boosting short-term revenues and fiscal surpluses for oil-exporting countries, also bring hidden costs. These include increased spending on security measures to protect oil infrastructure — costs that rise in a volatile regional environment where Gulf states face mounting security pressures.
Al-Sabban also pointed out that spot market sales are currently generating greater returns than long-term futures contracts. The uncertainty surrounding the conflict has led buyers to pay premiums for immediate deliveries, making spot transactions more attractive during the current crisis.
Strategic chokepoint
Shipping through the Strait of Hormuz, which carries roughly 20 percent of global oil supply, remains central to the crisis.
Al-Sabban warned that even a temporary closure of the waterway would inevitably reduce available supplies, potentially triggering panic in markets and forcing countries to draw from strategic reserves.
He recalled historical precedents, noting that during the Iran-Iraq war, energy markets became a hub for speculation, with negative economic consequences emerging later.
Asked whether the conflict represents a short-term economic opportunity or a broader risk for regional economies, Al-Sabban said the reality is a mix of both. High prices may offer temporary gains as long as oil remains above $100 a barrel, but a prolonged conflict could ultimately impose heavier economic burdens through rising logistical and security costs.
Flexible response
Financial and economic adviser Hussein Al-Attas said Aramco’s decision to release additional cargoes on the spot market reflects significant flexibility in managing supply and responding quickly to market shifts amid rising demand and concerns about potential shortages.
He told Asharq Al-Awsat that the move sends an important signal to global markets that Saudi Arabia continues to play the role of a swing producer, capable of intervening to maintain market balance and ease fears about supply security.
Al-Attas added that the recent surge in oil prices is largely tied to geopolitical tensions in a region that represents the heart of global energy supply.
While Brent crude could remain above $100 in the short term if supply concerns persist, he noted that history shows price spikes driven by political tensions are often temporary unless they lead to a prolonged disruption in supply.
Higher oil prices naturally increase revenues for exporting countries, potentially strengthening fiscal balances and enabling governments to finance spending and development projects, Al-Attas remarked.
Gulf states, particularly Saudi Arabia and the United Arab Emirates, may therefore benefit financially in the short term.
However, he cautioned that such gains are usually temporary rather than structural. Prolonged high energy prices can slow global economic growth by fueling inflation, which may eventually reduce demand for oil. As a result, the current price surge may represent a temporary financial opportunity rather than a lasting shift in oil revenues.
Ultimately, Al-Attas said the crisis carries two opposing dynamics: Gulf countries may benefit financially in the short term, but any wider regional conflict could pose greater risks to economic and commercial stability.
For that reason, he added, the region’s strategic interest ultimately lies in stable energy markets and uninterrupted oil flows, which are essential for sustaining global demand and supporting long-term economic growth.
