Convenience store retailers do not believe that higher prices for added-sugar soft drinks would prompt a decline in sales, should manufacturers pass any new sugar tax costs on to them.
A tax on sugary soft drinks forms a part of the government’s long-awaited Childhood Obesity Strategy, which was published last week.
It has stressed that the UK-wide levy will only apply to soft drink manufacturers and importers – “not consumers” – although retailers are unconvinced that the cost would not be passed on to them.
The levy, which will prompt an estimated cost price increase of around 24p per litre, is expected to affect around 21% of the UK’s soft drinks market by volume.
But retailers think that shoppers will be willing to pay a premium anyway. “The government knows full well that manufacturers will simply pass the costs on to the retail trade and that we will have to pass it on to consumers,” Manny Patel of Manny’s in Long Ditton said. “However, I’m not sure that a small cost increase would lead to a loss of sales in any case. Chocolate has been getting more and more expensive and sales have not dropped. What does concern me though is that shopper demand for lower-sugar variants is just not there. I’ve already had to de-list a number of lighter variants because they weren’t selling, tying up cashflow and shelf space. I certainly wouldn’t want to stock any more unless demand changed,” he added.
A consultation on the technical details of the sugar tax has been launched by HM Treasury, and the government plans to legislate in the Finance Bill 2017, with implementation expected in April 2018.
The timescale gives manufacturers two years in which to reformulate their products in a bid to avoid paying the tax altogether, the government added.
The government also said that it had “no current plans” to introduce similar levies on other sugary snacks, or expand this one to confectionery.
Law lacks fizz
“ I don’t think a tax and any price rises will have an adverse impact. Tobacco taxes have been going up for years and it is still a strong seller. Educating the public is the real answer. ”
Chaz Chahal, multi-site retailer, Worcestershire
“ If people fancy a soft drink they’ll buy it regardless of the price. Demand for sugar-free Coke Zero is growing, which proves that new laws might not be necessary anyway. ”
Anita Nye, Eldred Drive Stores, Kent
Sales likely to fall, experts say
Independent analysis of the soft drinks tax commissioned by the British Soft Drinks Association (BSDA) claims that the levy could lead to over 4,000 job losses across the UK, and that lower sales could lead reduce the industry’s GDP contribution by £132 million.
The research indicates that many of these job loses will come in the small shops and hospitality sectors.
Energy drink sales are predicted to be the hardest hit, with volume sales expected to fall by around 9%. The still and juice category is expected to see the second largest reduction.