UAE’s new sugar tax is already changing what residents pay for drinks

Dubai: Shoppers across the UAE are seeing a quiet but widespread reset in drink prices this month after the country overhauled how sweetened beverages are taxed, linking excise duty to sugar content rather than retail price for the first time.

The tax reform, which took effect on January 1, replaces the UAE’s long-running 50% flat excise tax with a tiered volumetric system that charges producers based on grams of sugar per 100 millilitres.

The shift is already altering price structures across supermarkets, cafés and convenience stores, with diet drinks and several premium beverages becoming cheaper, while some low-cost high-sugar products move higher.

Since 2017, the UAE taxed most sweetened drinks at 50% of retail value, meaning expensive and budget beverages faced the same rate regardless of sugar levels. Health authorities and economists had argued the system raised revenue but offered limited incentive for reformulation or sustained shifts toward lower-sugar consumption.

That structure ended at the start of this year. Under the new model, excise duty is calculated per litre and determined by laboratory-tested sugar concentration, placing formulation rather than branding at the centre of the tax framework.

The system divides beverages into clear sugar bands, with energy drinks remaining outside the structure and continuing to face a flat 100% excise tax.

Because the levy is no longer linked to shelf value, the reform is producing uneven outcomes across the market. Premium drinks no longer automatically carry heavier tax, while budget beverages no longer benefit from being cheap if they are sugar-dense.

A standard 330ml can of full-sugar cola, which typically contains about 10.6 grams of sugar per 100 millilitres, now carries roughly 36 fils in excise tax, down from about 83 fils under the previous model. Retail pricing is beginning to reflect the difference as new shipments replace inventory taxed under the old system.

The shift is more pronounced in higher-priced categories. A one-litre premium fruit nectar that previously sold near Dh18 once included about Dh6 in excise tax. That tax has now fallen to Dh1.09, allowing shelf prices to drop by several dirhams even after margins.

Zero-sugar beverages are undergoing the most visible repricing. Products that were previously taxed simply for being “sweetened” are now exempt.

A 330ml can of Coke Zero or Pepsi Max that once retailed near Dh2.50 is increasingly priced closer to Dh1.65 to Dh1.70 as new stock reaches stores. In family bottles and multipacks, the difference is more pronounced, making diet soda consistently cheaper than its full-sugar equivalent for the first time in the UAE market.

Local producers are seeing mixed effects. Al Rawabi’s 100% juices remain exempt despite naturally high sugar content, as natural juices fall outside the excise framework. Flavoured milk drinks also remain excluded under the dairy rule. Malt beverages such as Barbican, which contain around 11 grams of sugar per 100 millilitres, now sit in the highest tax tier, pulling estimated shelf prices down from around Dh3.50 toward the high-Dh2 range.

At the lower end of the market, the adjustment is moving in the opposite direction. Under the old system, a Dh1.50 high-sugar drink paid about 50 fils in excise tax. Under the volumetric model, a one-litre high-sugar beverage must carry Dh1.09 in tax regardless of how cheaply it is sold.

For low-cost producers, the tax alone can now exceed what they previously paid in total. Retail audits since January show some budget sugary drinks rising by 20% to 40%, narrowing the traditional gap between no-name sodas and global brands.

The change effectively removes the long-standing advantage of ultra-cheap, high-sugar beverages, forcing price competition back toward formulation rather than packaging.

Health authorities have positioned the reform as part of the UAE’s wider non-communicable disease strategy. Public health data indicates close to 30% of the population is classified as obese, with sugar consumption a key risk factor.

By structurally making lower-sugar drinks cheaper, the government is embedding health incentives into routine purchasing decisions rather than relying solely on awareness campaigns. Industry analysts say international beverage companies are already reformulating Middle East recipes to fall below the five-gram threshold and regain tax-free status.

Retailers caution that prices may not yet appear uniform. Stock imported before January 1 entered under the old 50% excise regime and is still clearing through warehouses. As new shipments replace older inventory, the pricing gap between diet, moderate-sugar and high-sugar drinks is expected to become more visible across supermarkets, cafés, schools and hospitality venues.

For UAE residents, the reform is now less about regulation and more about routine spending. Sugar content, rather than branding alone, is increasingly determining what costs more at the checkout.