The Sugar Tax April 2018

"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.

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Product Name Es Energy Drink Pm30 Red Bull Pm119 Coca Cola Pm179 2 For Pm275 Monster Energy Pm119 Coke Pm100 Es Isotonic Orange Pm39 Coca Cola Pm65 Pepsi Max Pet Pm100 2/Pm150 Lucozade Orange Pm79 Es Isotonic Berries Pm39

Price without sugar tax 30p £1.19 £1.79 £1.19 £1.00 39p 65p £1.00 79p 39p

Price with sugar tax 36p £1.25 £2.21 £1.31 £1.12 39p 73p £1.00 79p 39p

Variation 20% 5% 23% 10% 12% 0% 12% 0% 0% 0%

What does the data show?

• The average increase price across the top ten sellers is 8%
• The highest increase is 23% for a 2L bottle of Coca Cola while 4/10 products will see no rise at all.
• 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.