In the 2016 Budget, the government proposed new legislation that would impose a levy on soft drinks containing added sugar. The levy would apply to the productions and importation of all soft drinks containing added sugar. The sole purpose is two fold. To encourage manufacturers to offer greater choice of lower sugar products by reformulation and product development. And secondly, to encourage consumers to drink a broader range of low sugar and no sugar soft drinks, with retailers adopting clearly defined differential pricing. The levy comes into effect from 6th April 2018. Here’s WBC’s retail guide to The Sugar tax, helping you consider the cost impact on your business, and ways your maximise the opportunity.
What’s the sugar problem?
The UK has a sugar problem – we love it too much. The problem is, our children are picking up our bad habits and loving it too. A cyclical dilemma is creating a an obesity epidemic in the west where 14.7% of children’s daily calorie consumption is made up of sugar.
Soft drinks are the largest single source of sugar for children aged 11-18, providing a whopping 29 per cent of their daily sugar intake.
The good news is that other countries like Mexico that have implemented similar sugar taxes, have seen the sales of fizzy drinks plummet by 12% in the first year. So although there are retailers and manufactures claiming the levy is more likely to cause job losses than make children less obese, the government’s recent intervention spells a more ‘let’s give it go’ approach. Which is also probably a bit better late than never.
How does the sugar tax work?
- The levy applies to all applicable drinks sold in the United Kingdom, including all imports.
- Pure fruit juices and milk-based products are exempt.
- The tax will be levied in two bands: one for total sugar content above 5 grams per 100ml and a second, higher band for the most sugary drinks with more than 8g per 100ml.
- Drinks with less than 5g of sugar per 100ml are exempt
To give you some perspective, 5 gram of sugar = approx 1 teaspoon. Some popular drinks on the market with enough sugar to make your eyes water include:
A can of coke = 35 grams
500ml bottle of lucozade = 43.6 grams
Can of Redbull = 27.5 grams
500ml bottle of Ribena = 52.6 grams
300ml bottle of Robinson’s Fruit Loop = 3 grams
500ml bottle of H2O = 0 grams
How will the sugar tax affect your business?
For the industry, there’s no doubt that makers of soft drinks have kicked up a fuss. Many have claimed they’re being singled out unfairly. Others, like Scottish favourite Irn Bru, have used it as a positive PR exercise, and as a golden opportunity to be the first to take a stand. The Scottish firm stopped making their original full-sugar version in early January, and slashed their sugar content from 10 grams to 5 grams. That’s a calorie count reduction from just under 140 to around 66. Not sure how it taste now, but they’ve certainly won brownie points for it.
For the retailer, if your store currently sells around 200 x 500ml bottles of full rate levy Coca Cola per week, your annual soft drinks cost will increase around £1,248 from April 2018. So it makes sense that you crunch the numbers and seriously consider the cost impact to your business.
It’s not all doom and gloom though. Like the plastic bag tax before it, the new sugar levy coincides with changes in consumer trends. 2018 shoppers, and certainly millennials are obsessed with a healthy eating in away their parents weren’t. They are responding to calls for greater ethical trading, environmental responsibility and transparency across the board, and brands will do well to fall in line.
Retail Expert Eve Reid writes: “We are starting to see customers interrogating brands online and scanning products in supermarkets with mobile phones to check everything from their ethical policies to their calorie count. For the consumer in 2018, traceability and safety are interlinked with quality. The consumer is looking for brands that have a commitments to all three.”
What steps can retailers take?
Pass on the levy
Some customers will always choose the higher priced products, but the key objective of the new tax is to start educating people about the healthy and unhealthy choices. The tax is designed to encourage customers to choose to consume a wider variety of low or no added sugar soft drinks. With that the case, drinks supplier Britvic advise retailers to pass the levy onto customer and create a clear price differential between high sugar and low sugar.
Review your range
If one thing is certainly in today’s world of drink, it’s that no sugar and low sugar alternatives don’t have to be boring. They no longer have to compromise on taste either. At WBC we have many great customers offering really innovative and naturally sweetened drinks that are bucking the trend and taking on the market. Just look at the revolution on mixers in pubs and bars; it’s coke out and Rose Hip and rhubarb flavoured tonic in. Be confident on your range and you will sell it. This strikes to the heart of how you display and the signage & communication you use for maximum impact. Think about your shelf space. The number of soft drink sales has reduced by 5.2% over the past 5 years. This all the while sales of plain water is rising. Flavoured water is growing, fortified water by 17%. It shows that consumers are aware of the dangers of consuming too much sugar and switching to healthier alternatives. So be confident in how you merchandise:
Instead of hiding the tax amount, shout about the alternatives you offer.
Create instore hotspots to coincide with April’s levy date.
Advertise a manager’s sugar free drink of the month.
Display special offers and incentives like buy this and get a bottle carrier for free.
Offer greater choice
Lastly, this is a no brainer, but it’s the most important. Know your demographic. If you’re convenience store off-licence, what you can offer will be very different from a farmer’s market or local deli. Continue to stock added sugar products but ensure that your shelves, your space and stock holding reflects the change in consumer attitudes and demands.