Saudi soft drinks market softens

Saudi Arabia registered a 30% drop in the sale of soft drinks since increase of taxes on the sector, which came into effect on June 10, according to local media reports. The report also pointed out that the sales of energy drinks also nose-dived by almost 60% in both retail and wholesale channels.

The Kingdom imposed 100% selective tax on tobacco and energy drinks and 50% on soft drinks starting June 10. The imposition taxes are to encourage people to go for healthier options and to boost government revenues.

Consumers have already started to shift their consumption patterns and opt for cheaper alternatives, although soft drinks companies lowered the price of the small cans from 2.25 Saudi riyals ($0.60) to SAR2  ($0.53) following the sharp fall in sales.

Tobacco sales did not see any significant decline following the imposition of tax but lower income workers are seen shifting their preference to cheaper and smaller products.

The Kingdom expects to raise between 8 and 10 billion Saudi riyals annually from the new tax on selective products. The Saudi market for fizzy drinks was forecast at $782 million and $129 million for energy drinks in 2015.