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| 22 May, 2017

UAE sin tax spells trouble for Swiss cigar maker

A factory worker looks at newly rolled cigars at the United Tobacco Processing (UTP) cigar factory, for export mainly to Europe, in Katunayake, February 10, 2010.  Image used for illustrative purpose.

A factory worker looks at newly rolled cigars at the United Tobacco Processing (UTP) cigar factory, for export mainly to Europe, in Katunayake, February 10, 2010. Image used for illustrative purpose.

REUTERS/Andrew Caballero-Reynolds

The UAE has enjoyed growth faster than the global average over the past year in the cigar sector

Monday, May 22, 2017

DUBAI

Whilst the UAE is a promising market for cigar maker Oettinger Davidoff, it also faces strong headwinds that could seriously dent its momentum.

The UAE has enjoyed growth faster than the global average over the past year in the cigar sector, and the Swiss company has decided to open a sales and marketing office in Dubai as a result.

However, with the announced taxation on carbonated drinks and tobacco products set to come into force later this year or in early 2018, these plans for expansion could yet be derailed.

“We are obviously not great supporters of this so-called sin tax,” Hans-Kristian Hoejsgaard, CEO and President of Oettinger Davidoff AG, said in an interview with Gulf News on Monday.

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“Yes, there is an effect at the beginning from such a tax, but cigar smokers somehow find their way back,” he added.

Hoejsgaard said he wasn’t sure what the level of taxation would be — some reports indicate it will be 100 per cent on tobacco — but noted that he had heard “stories about the doubling up of prices.”

The CEO was quick to mention that he was unclear what this would apply to.

“On which basis would this be implemented? Is it import, is it wholesale, is it retail?” he said.

It is impossible to avoid passing this additional cost on to the consumer, Hoejsgaard confirmed.

“It’s going to be higher, but there’s no way around that. We have to pass the cost on. We’ll see what the impact will be,” he said.

It’s not all bad news for cigar manufacturers, however.

According to Hoejsgaard, the younger audience of 28-35 years old have begun to acquire a taste for cigars, “rejuvenating” his company’s consumer base.

“They like the finer things in life, thankfully, because if your consumer base doesn’t rejuvenate your company will die out,” he added.

Oettinger Davidoff AG’s three key markets, according to the company’s CEO, are Dubai, Kuwait, and Saudi Arabia, in addition to various airports around the region.

By Ed Clowes Staff Reporter

Gulf News 2017. All rights reserved.