FOR ESSAYS GURU ONLY 42

Alcoholic Beverages Business in United Arab Emirates, Spain and Italy

Introduction

The United Arab Emirates alcoholic beverage market has been growing at a year rate of 8 percent. In 2010, the country imported 107 million dollars worth of alcoholic beverages with others worth 7.4 million dollars being re-exported to other nations. Alcoholic beverage imports from the United States amounted to 3 million dollars, accounting for 3 percent of the total import. A bigger percentage of the imported alcoholic beverage is traded through three major emirates of Dubai, Abu Dhabi and Sharjah at 89.1, 14.6 and 3.5 million dollars respectively (Manoukian & Akhidenor, 2012). Hence, there is a prospect for increased consumption of alcoholic beverages in the United Arab Emirates.

Success Factors

Economic Environment

Over the past years, the United Arab Emirates has experienced economic recovery due to vibrant tourism industry as well as massive investment in infrastructure. The economic trend is anticipated to continue as the United Arab Emirates authorities have decided to embark on new infrastructural projects such the construction of a new airport as well as the expansion of existing ones. These projects together with others will not only create employment to expatriates, but also boost the tourism sector. Thousands of tourists as well as the increasing number of restaurants will result in increased demand for alcoholic beverages (Manoukian & Akhidenor, 2012).

Legal Environment

The sale of alcoholic beverages is allowed in mandated retail stores alongside licensed outlets like restaurants, night clubs as well as bars that can either be part of some sports club or a hotel. All hotels must have valid liquor licenses that are issued by local police authorities before they can serve alcoholic beverages. Also, eligible residents of United Arab Emirates should have valid liquor license to purchase alcohol (Manoukian & Akhidenor, 2012).

Political Environment

The United Arab Emirates has 7 Emirates, each having its own governmental organization which results in flexible management across the nation. Most importantly, holders of valid liquor license can consume as well as transport alcohol across the seven Emirates. Furthermore, United Arab Emirates is a politically stable country with few incidents of political conflicts. Also, it has health trade relations with other countries across the globe (Manoukian & Akhidenor, 2012).

Cultural Environment

A bigger percentage of the population is Muslims which prohibits production as well as consumption of alcoholic beverages among Muslims. However, because of the large number of non-Muslims in the country as well as their demand for alcoholic beverages, there are allowances for the group to purchase as well as consume imported alcohol (Manoukian & Akhidenor, 2012).

Problems Associated with Alcoholic Beverage Business in United Arab Emirates

Introduction

Most food imports are subject to 5 percent customs duty, with the exception of fresh produce as well as staple foods which are duty free. However, the custom duty on alcoholic products is 30 percent. Also, there is a sales tax of 50 percent on all alcoholic products sold in Dubai. This is a major problem as it affects total net revenue (Manoukian & Akhidenor, 2012).

Operations, Marketing and Sales

In the United Arab Emirates, the number of distributors as well as importers is restricted to few businesses. There are two primary distributors in Dubai: Maritime and Mercantile International and the African and Eastern distributors, which control 57 percent and 43 percent of the market share. Because of religious sensitivity, the government has prohibited open advertising of alcoholic beverages in mass media as well as newspapers. Companies are prohibited from showing product names, pictures as well as brands of alcoholic beverages. These will surely affect total sales revenue (Manoukian & Akhidenor, 2012).

Alcoholic Beverage Industry in Spain

According to the Euromonitor International (2018) Spain is enjoying alcoholic drink sales courtesy of growing economy as well as rising confidence. Sales of alcohol products recorded positive growth in 2016, bringing an end to the negative sales cycle that commenced before the beginning of economic recession. Also, the alcoholic beverage is benefitting from increasing consumption of alcoholic beverages because of the increasing number of Spanish consumers visiting bars and restaurants. Also, the sector is more likely to benefit from the increasing number of tourists visiting Spain. However, the TMF Group (2018) indicates that businesses can incur high costs to get connected to electricity because of bureaucracy to be connected to the national grid.

Alcoholic Beverage Industry in Italy

In 2016, alcoholic beverages performed well because of renewed interest in alcoholic drinks. Despite the reduced disposable incomes as well as long standing economic crisis, Italians still enjoy a small treat when socializing with friends. Consumers favor higher quality alcoholic drinks and this is an advantage. However, smaller and non mature products are expected to register lower growth rates (Euromonitor 2017).

Recommendation

From the economic perspective, an investor should consider importing alcoholic beverages to United Arab Emirates because of strong economic performance and higher disposable income.

References

Euromonitor. (2017). Country report: Alcoholic drinks in Italy. Retrieved from. http://www.euromonitor.com/alcoholic-drinks-in-italy/report