What does the return of alcohol tax mean for Dubai?
Dubai’s wine trade is braced for a “challenging” 2025 as the reinstatement of a 30% alcohol municipality tax threatens to put a brake on the boom enjoyed here during the last two years.
2023 saw the Dubai government suspend alcohol sales tax in a move thought to be designed to make the emirate more affordable for both residents and the tourists who have been arriving in record numbers as part of the city’s growth strategy. The suspension was extended into 2024, but at the end of last year Dubai’s two alcohol distributors, Maritime & Mercantile International (MMI) and African + Eastern, informed customers that the tax would be reinstated as of January 2025.
Both companies have cushioned the impact for customers by temporarily absorbing the price increase. African + Eastern reassured Instagram followers that it would hold prices on all products throughout January, while rival MMI confirmed that it would hold prices on “200+” brands, although there was no detail of how long this deal would last.
Commenting on the beneficial effect of the tax suspension, Matthew Castle, group category manager for wine & Champagne at Africa + Eastern, told the drinks business: “The tax-free environment allowed our customers, both trade and consumer, to explore regions and upgrade their wine drinking choices.”
In contrast to the company’s “dramatic growth in the sales of fine wine and fine Champagne” during 2024, Castle predicted: “2025 will be a challenging year in certain areas of the business with the re-introduction of the sales tax.” However, he added: “We will do our best to continue to provide fair prices and offer a compelling wine portfolio to our customers.”
Tony Dodds, general manager for wine, Champagne & Sake at MMI, confirmed the boost to business from government policy over the last two years. “The suspension period along with the authorities making it a lot easier to get an alcohol licence had a big impact in our retail shops,” he reported. “We reduced prices overnight and customer numbers shot up. Wine sales benefited, but not quite to the same extent as spirits.”
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Off-trade market impact
While the impact of the tax changes has been felt most keenly in the Dubai off-trade, Dodds remarked: “It’s a shame that more restaurants and hotels didn’t reduce their pricing at the time to help make Dubai a more affordable place to eat and drink out.”
One company that expects to benefit from the tax reinstatement is The Bottle Store in neighbouring Abu Dhabi, which has a shop on the border with Dubai. “It brings business back into the border stores for sure,” said Sam Underwood, managing partner of The Bottle Store. Although admitting “we’ve not seen much of an impact yet,” he suggested that would change when Dubai’s distributors start to pass on the increased cost. “They can’t absorb it forever,” commented Underwood.
Many wine producers are also taking a close interest in the impact of this latest development. Daevid Warren, commercial director for Penfolds EMEA, confirmed the “significant growth to our retail sales” as a result of the tax suspension. Although conceding that its return is “not welcome news,” he insisted: “We’re still just as committed to working with our partners in Dubai collaboratively to deliver outstanding wines and experiences for the many guests and shoppers looking for the ultimate in luxury in UAE.” This includes the creation of a Penfolds Dining Room at the Folly Brasserie in Emirates Hills, which is due to open in early 2025.
“Clearly, the reintroduction of the alcohol duty tax in Dubai is going to make the market more challenging,” remarked Warren; “but we still expect Dubai to remain a haven for wealthy jetsetters who enjoy the finer things in life, so there’s still reason for optimism.”
A more detailed analysis of the Gulf wine market will appear in a future issue of the drinks business.
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