Dubai: The 50 per cent retail price hike in Pepsi and Coca-cola drinks starting yesterday is unlikely to take the fizz out of regular consumption in the short-term but could lose customers in the long-run, retailers say.

"People will drink Coke and Pepsi even if the prices are higher because they are items of daily consumption," said Kamal Vachani, Director of Al Maya group.

"People have been drinking them for years now and will continue to drink and enjoy these brands."

Ahmad Al Sayed, 26, an engineer and regular Pepsi and Coke drinker, said he would continue to buy them.

"It's not like when gas goes up. That affects everybody a lot. It affects my spending habits. But when Coke goes up that is not going to affect my finances," he said.

The price increase was "fair" because the cost of living had also increased, he added.

The "escalating costs" of labour, overheads, and raw materials have led Pepsi to increase their prices, said Tarek Al Sakka, General Manager of Dubai Refreshments Company, in an e-mailed statement to Gulf News.

The increasing costs had put "tremendous pressure" on the viability of the business and hindered its ability to grow the business and employment base, he added.

Pepsi sold its drinks in the UAE for Dh1 for 30 years despite the inflation rate in the GCC and the increasing prices of basic commodities, he said.

"Adjusting our price now means that the prices of Pepsi products have effectively increased at a rate of less than 1.5 per cent per annum over the last 30 years," Al Sakka said.

The price hike is justified given the rocketing prices of commodities, said Harish Rupani, managing director of Equinox Trading, a food products trading company.

Pepsi and Coke rely heavily on sugar as a main ingredient. In the second half of 2010, sugar prices doubled, leading gains in the period among 19 raw materials in the Thomson Reuters/Jefferies CRB Index.

"Sugar prices have gone up from 13 cents to 35 cents today, that's almost 100 per cent in six months," he said.

"Many commodities have gone up and it comes back to the middle class as inflation. If you blame Coke and Pepsi, you have to blame every trade."

Plastic and tin costs have also gone up by 30 to 40 per cent in the past two years, adding to the companies' costs.

"They held down as long as they could, now they have to increase prices. Institutions like these only raise price when it's totally intolerable," said Rupani.

"It will cost them some customers over a period of time. People's reaction would be to drink less."

One government official said the increase to Dh1.50 after 30 years was "very reasonable" given the "increase in prices of commodities everywhere" and the high sugar prices on the international and local markets, he said, requesting anonymity.

Another government official said the price increases were bad for the consumers unless they regularly consumed the products and the hike was justified, he said.

The new prices were effective January 1 on new stocks, said Vachani. Neither Al Maya nor Lulu Supermarkets had received any inquiries or complaints on the prices yet, they said.

The new prices were clearly displayed on the cans, he said.

A source in Al Ahlia Gulf Line, which manufactures and distributes Coke, said the company was in a "long-pending" process with the Ministry of Economy for permission to increase the prices but had been refused several times.

Official Coke spokespersons were unavailable for comment.

Despite the continuing increase in commodity prices, Pepsi was not expecting a second price increase in the short term, it said.

"There is no plan to take further price increases in the near future," Al Sakka said.