On the 16th March 2016, the government announced their commitment to introducing a new sugar tax on soft drinks to combat obesity. The new tax is set to be enforced in April 2018. Have you prepared for this change?

February 1, 2018
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The Sugar Tax April 2018

Sugar Tax

On the 16th March 2016, the government announced their commitment to introducing a new sugar tax on soft drinks to combat obesity.

The new tax is set to be enforced in April 2018, and will force soft drink manufacturers to pay levies on all sugary drinks – with the cost expected to be passed on to consumers. This excludes milk-based drinks and pure fruit juices.

The sugar tax is made up of two rates: a levy of 18p per litre on drinks that contain more than 5 grammes of sugar per 100ml and a higher rate of 24p per litre on drinks that contain more than 8 grammes per 100ml.

At the time of writing, popular drinks such as Red Bull 250ml contains 30g of sugar which is equal to 7.5 teaspoons and Monster Energy 500ml contains 55g of sugar which is equal to 13 teaspoons of sugar.

Parents would welcome this as a small price differential that would make changes to issues of obesity. All money from these taxed sugary soft-drinks will go to programmes to improve children’s health in the UK.” – The BBC

Many retailers have already responded to this change in recent years. For example, several major retailers such as Tesco have removed sugary products from near their tills to underline their support for healthy eating. Manufacturers meanwhile, have been working to make their healthier products more attractive to consumers with Pepsi offering 20% extra free on their Diet and Max lines.

Consumers are more likely to buy nutritionally improved options if they cost less. Companies are more likely to support health initiatives if they make money by co-operating. The challenge is to provide economic incentives for buyers and sellers simultaneously.”- The Grocer 2013

What cost changes should you expect?

Officially, the levy affects producers and importers of soft drinks and is expected to raise the cost price of sugary beverages. While there has been speculation that manufacturers will absorb the costs, we’ve looked at the worst-case scenario for retailers…100% of the cost passed on to the consumer.

These new levies represent a significant rise in prices for some soft drinks. We’ve analysed current pricing for the top 10 selling soft drinks in 2,350 convenience stores throughout the UK and applied the proposed tax to show the price increase convenience retailers are currently facing.

Top 10 Selling Soft drinks

Barcode Product
Name
Price without
Sugar Tax
Price With
Sugar Tax
Variation
(%)
5020379129800 Es Energy Drink Pm30 30p 36p 20%
90415081 Red Bull Pm119 £1.19 £1.25 5%
5000112626032 Coca Cola Pm179 2 For Pm275 £1.79 £2.21 23%
5060166699864 Monster Energy Pm119 £1.19 £1.31 10%
5000112598834 Coke Pm100 £1.00 £1.12 12%
5020379129886 Es Isotonic Orange Pm39 39p 39p 0%
5000112604863 Coca Cola Pm65 65p 73p 12%
4060800172945 Pepsi Max Pet Pm100 2/Pm150 £1.00 £1.00 0%
5054267001756 Lucozade Orange Pm79 79p 79p 0%
5020379129923 Es Isotonic Berries Pm39 39p 39p 0%

What does the data show?

  1. The average increase price across the top ten sellers is 8%
  2. The highest increase is 23% for a 2L bottle of Coca Cola while 4/10 products will see no rise at all.
  3. The new levy will impact budget lines harder, with the cheapest product in the list (Euro Shopper Energy Drink) increasing by 6 pence or 20% of its cost.

Is it worth considering your range?

While some consumers will inevitably stomach the increased cost and continue to buy full fat products, it is likely that some will pick up the cheaper, healthier alternative. This means that variety is more important than ever. Use your EPoS reports to ensure that you at least stock the most popular sugary and low-sugar soft drinks to cater to both consumer profiles and review these reports to monitor for signs of changing consumer behaviour.

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