Suppliers Confident About the Sugar Tax
The chancellor has dropped his Sugar Tax bombshell. The trade is assessing the implications and there's a lot of talk about bringing influence to bear during the consultation period. Concerns around the technicalities, mechanics, and inconsistencies of the tax are all highly valid and will be argued out over the next two years.
Results show that purchases of regular soft drinks in the UK have fallen by 32% from 2010 to 2014. So why hit the only category that has consistently reduced the sugar content of its products? There are many other sectors that have a case to answer on refined sugar. Yet in a strange way this could work in favour of the soft drinks manufacturers. Aligning with anticipated consumer expectations and moving them ahead of the curve.
David Gilroy has spoken to a number of senior people in the soft drinks arena. There's a lot of positivity about the direction of the industry and the opportunities on offer. For some time most have been reformulating their products to reduce sugar content. In his budget speech the chancellor even complimented Robinson's drinks on the their work in this respect. The current and planned actions include:
- Reformulation of existing products.
- Creation of new sub 5g per 100ml products.
- Rebalancing of product portfolios towards lower sugar skus.
- Effective labelling to enable consumers to make informed choices.
- Communication plans to facilitate informed choice.
- Working more closely with education and health enterprises to promote ways of healthier lifestyles – calories in/calories out approach.
Many are trying to forecast how this will play out in terms of winners and losers. There's no doubt that the ratio of sales will change and that on-shelf space allocation will have to be adjusted accordingly. The view is that the losers are likely to be the low cost, heavy sugar filled 2 litre and 3 litre bottled carbonates and those drinks high in sugar content. Some with sugar content as a high as 15g per 100ml will have tough decisions to make on the impact of sugar reduction versus taste and whether or not to reformulate.
David's contacts predict that the winners are likely to be:
- Pure fruit juice products – more naturally occurring sugar and less refined.
- Soft drinks below the 5g per 100 ml – they will have a price advantage.
- Milk-based drinks – exempt from the tax.
- Bottled water.
- Low sugar energy drinks – young adult target market.
Everyone is confident that while there will be profound changes in the composition of sales; volumes will hold up well. That's good. Our industry needs this important sector to be successful.
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