UAE, UAE, DUBAI - Industry
CEO, Dubai Refreshment Company (DRC)
Tarek El Sakka is a 30-year veteran of the FMCG business. He is well known in the Middle East beverage industry, having spent over 20 years in various locations and positions within the PepsiCo system. He is currently CEO of Dubai Refreshments Company (DRC). Prior to DRC, he was general manager of Jordan Ice and Aerated Water Co. Earlier, El Sakka spent 11 years in PepsiCo in various functions. He previously spent six years with Procter and Gamble in Geneva and in Saudi Arabia in both finance and marketing roles. He holds an MBA from Rice University in Houston, and a degree in business administration from University of Southwestern Louisiana.
Can you tell us about DRC’s presence in the UAE, and how the company has positioned itself here to work across markets?
DRC is one of the oldest manufacturing companies in the UAE. It was established in 1959 and signed a contract with PepsiCo in 1962 to become its exclusive bottler, manufacturer, and distributor for beverages. For the first 50 years, we focused on soft drinks and also launched Aquafina water in association with PepsiCo. Eight years ago, we made the decision to expand the facilities, finishing this factory in 2016. The idea was to expand the capacity to diversify the product portfolio and use it as a stepping stone to expand the business into other categories of beverages and snacks. It also allowed us to start expanding geographically and grow our relationships. One of the great things about our business is stability; however, after we built this factory and made this large investment, we were surprised by an excise tax that targeted cigarettes, energy drinks, and carbonated soft drinks. The tax is about five times the global average, at 50% of the retail price.
Do your operations here serve only the UAE or GCC market?
Our contract with PepsiCo is for Dubai and the northern Emirates; we have what we call an exclusive bottling appointment. We are also exporting products to several neighboring countries. They are usually countries that do not have a PepsiCo operation, and we sell to traders who supply them. We also occasionally supply other PepsiCo bottlers with products or packages that they do not produce themselves.
What is your strategy for the export market and using Dubai as an export base?
Export for us cannot be a substitute for the local business; it is opportunistic sales from our point of view. We leverage the unique UAE location and significant shipping and export infrastructure advantage to drive exports to neighboring countries. Buyers come to the UAE because of minimal regulations, ease of doing business, connectivity, quick exporting procedures, and stable currency. Recent developments with VAT and increased regulations has made exports more difficult; however, once people get used to the new system and once some of the new barriers are ironed out, I expect the UAE to regain its position in exports.
How is your solar project evolving?
Our solar power generation project was completed in March 2019. The new building has a 50,000-sqm roof and was designed to carry solar panels. One of the programs the government made available for industry is the Shams Program, which allows solar installations to connect to the grid and receive credit for power generated. Users do not have to invest in batteries to store the energy, which makes the project viable. The positive effects on this project’s margins were immediate. Our entire factory here is silver LEED certified, largely due to the substantial efforts we make in electricity and water conservation and reuse. This is excellent for the environment, but it is also profitable for us. We are now generating about 35% of our energy needs from our rooftop solar plant.
What will be your most important steps to maintain your long-term financial sustainability and market position?
We have to do two things that are critical. First, we have to expand our geographical footprint in the GCC and the Middle East in general. There are too many beverage manufacturers, particularly in soft drinks, so I expect some consolidation. It is important to benefit from maximizing the use of this new facility, and expanding geographically will help generate efficiencies and increase our ability to withstand shocks. It will allow us to also expand the portfolio more easily. In addition, we need to expand beyond the beverage portfolio and create new verticals. The beverage business is more mature now, and, unless we find growth opportunities in new verticals, our growth will be limited.