Such issues as low oil prices, the conflict in Syria, as well as certain financial constraints have contributed to the introduction of VAT in some Middle Eastern countries including the UAE. Although the country was a mecca for many businesses and individuals with its tax-free zone, the United Arab Emirates had to introduce the new tax as the oil industry comprises approximately 80% of the country/s budget (“Saudi Arabia and United Arab Emirates Introduce VAT”). Food and drinks are specifically vulnerable, and it is expected as this market will reduce considerably. The market for carbonated drinks is estimated to lose 13% in the country, so companies will have to shape their marketing strategies.
Coca-Cola is one of the world leaders in the drinks industry, but the company can lose millions due to the use of the 5% VAT. Apart from this 5% tax, the Emirati government introduces additional taxes for such products as tobacco or carbonated drinks. When it comes to the latter, the new tax will reach 50% of the previous amount (Clowes). These additional costs will result in the increase in customer prices.
It is important to add that the increase in 5% may seem almost unnoticeable for such giants as Coca-Cola, but it is likely to result in additional costs associated with the use of new technology, the development of new strategies, and staff training. The modern approach to marketing Coca-Cola is associated with its focus on value-added aspects. The company is likely to maintain this marketing strategy, but some shifts will still take place.
Corporate social responsibility will become one of the most recurrent themes due to the influence of some societal forces. The Emirati society is becoming more concerned about health and negative effects of carbonated drinks on the human body (Clowes). This trend was another reason for the introduction of the additional tax for carbonated drinks. Coca-Cola’s products are associated with health concerns, so the company will have to include such topics as responsible consumption in their marketing messages.
The public’s attention to health may become a facilitator of the diversification of the company’s range of brands and products. Bottled water and healthy drinks can become an innovative solution for Coca-Cola.
It can be necessary to recollect the earlier days of the drink when it was marketed as a type of medicine. Another shift in marketing related to CSR can be the focus on various projects and programs aimed at the development of communities, improvement of the environmental situation, and the contribution to solving other most burning challenges the modern Emirati society has to address. The increased costs may force the company to try presenting its brands (at least, some of them) as unique and exclusive products that are worth the money paid. Finally, the company may need to optimize its supply chain management to reduce costs.
In conclusion, it is possible to state that Coca-Cola will have to shape its marketing strategy in the UAE due to the introduction of the VAT, as well as an additional tax for carbonated drinks. The focus on experiences and emotions rather than other aspects are likely to remain.
At the same time, the company is likely to pay more attention to CSR and publicizing its effort to contribute to the development of the society. The diversification of the company’s products and brands with the introduction of healthy drinks can become an appropriate solution as these changes will be consistent with the major shifts in the society. However, Coca-Cola is likely to remain a leader in the drinks market due to its well-established brands.
Clowes, Ed. “UAE to Charge Selective Tax from October 1.” Gulf News. 2017. Web.
“Saudi Arabia and United Arab Emirates Introduce VAT for First Time.” BBC. 2018. Web.