The United Arab Emirates’ new excise tax system, which took effect January 1st, is reshaping beverage pricing across the country. Replacing a flat 50% tax on sweetened drinks, the new tiered system levies charges based on the amount of sugar per 100 milliliters, impacting everything from supermarket staples to café menus. Consumers are already noticing shifts, with diet options becoming more affordable while some sugary drinks are seeing price increases.
The Shift to Sugar-Based Excise Tax
Since 2017, the UAE applied a uniform 50% excise tax to most sweetened beverages, regardless of their sugar content. While this generated revenue, health authorities and economists argued it didn’t strongly incentivize manufacturers to reduce sugar levels in their products or encourage consumers to choose healthier alternatives. The previous system treated a premium, high-sugar juice the same as a budget soda, hindering efforts to address public health concerns related to sugar consumption.
The new model calculates excise duty per litre based on laboratory-tested sugar concentration, placing the focus on product formulation rather than brand recognition. This change aims to directly influence the composition of beverages available in the market. Energy drinks remain an exception, continuing to be taxed at a flat rate of 100%.
Current Excise Tax Tiers
- 8g of sugar or more per 100ml: Dh1.09 per litre
- 5g to 7.99g per 100ml: Dh0.79 per litre
- Below 5g per 100ml: 0% excise tax
- Artificially sweetened drinks: 0% excise tax
- Energy drinks: 100% excise tax on retail price
Why Some Drink Prices Are Falling
Because the tax is now linked to sugar content rather than retail value, the impact on pricing is uneven. Premium beverages, which previously faced a higher tax burden due to their price, are now seeing reductions. Conversely, budget-friendly, high-sugar drinks are no longer shielded from significant taxation. This shift is intended to level the playing field and promote healthier choices.
For example, a 330ml can of a full-sugar cola, containing approximately 10.6 grams of sugar per 100 millilitres, now incurs roughly 36 fils in excise tax, a decrease from the previous 83 fils. Retailers are beginning to reflect these changes as older, higher-taxed stock is replaced. The effect is even more noticeable in higher-priced categories.
A one-litre premium fruit nectar that previously carried around Dh6 in excise tax now faces a levy of just Dh1.09, allowing for potential price reductions of several dirhams. Similar adjustments are being observed with iced tea and sports drinks, with tax burdens decreasing from approximately Dh1.50 to Dh0.55 and Dh2 to Dh0.40 respectively for 500ml servings.
Examples of Early Price Movement
- 330ml full-sugar cola: tax falls from ~83 fils to ~36 fils
- 1L premium fruit nectar: tax falls from ~Dh6 to Dh1.09
- 500ml iced tea: tax falls from ~Dh1.50 to ~55 fils
- 500ml sports drink: tax falls from ~Dh2 to ~40 fils
- Diet sodas: excise tax reduced from 50% to zero
The Biggest Reset: Diet Beverages
Zero-sugar beverages are experiencing the most significant price adjustments. Products previously taxed simply for being “sweetened” are now exempt from the excise tax, leading to substantial savings for consumers. A 330ml can of Coke Zero or Pepsi Max, formerly priced around Dh2.50, is now commonly found for between Dh1.65 and Dh1.70.
This price difference is even more pronounced in larger formats like family bottles and multipacks, making diet soda consistently cheaper than its full-sugar counterpart for the first time in the UAE market. Local producers are also affected; Al Rawabi’s 100% juices remain untaxed due to being natural, while flavoured milk drinks are also excluded under dairy regulations. However, malt beverages like Barbican, with around 11 grams of sugar per 100 millilitres, now fall into the highest tax tier.
Pressure on Lower-Priced Options
At the lower end of the market, the adjustment is moving in the opposite direction. A Dh1.50 high-sugar drink previously paid around 50 fils in excise tax. Under the new volumetric model, a one-litre high-sugar beverage must now carry Dh1.09 in tax, regardless of its selling price. This increased tax burden is disproportionately affecting low-cost producers.
Retail audits since January indicate that some budget sugary drinks have increased in price by 20% to 40%, narrowing the gap between generic sodas and established brands. This change effectively removes the long-standing price advantage of ultra-cheap, high-sugar beverages, shifting competition towards product formulation.
Health Goals and Industry Response
Health authorities have framed the reform as part of the UAE’s broader strategy to combat non-communicable diseases. Public health data shows that nearly 30% of the population is classified as obese, with sugar consumption being a significant risk factor. The government believes that by making lower-sugar drinks more affordable, it can incentivize healthier purchasing decisions.
Industry analysts report that international beverage companies are already reformulating their Middle East recipes to fall below the five-gram sugar threshold and regain tax-free status. Retailers caution that price uniformity may not be immediate, as stock imported before January 1 remains in warehouses. As new shipments arrive, the price differences are expected to become more apparent.
Looking ahead, the full impact of the excise tax reform will become clearer as older inventory is depleted and manufacturers fully adjust their formulations. Monitoring price trends and consumer behavior in the coming months will be crucial to assess the effectiveness of this policy in promoting healthier beverage choices and achieving public health goals. Further adjustments to the tax tiers or expansion to other product categories remain possibilities depending on the initial outcomes.
