The Sugar Tax Cost: Sugary Drinks Tax will Cost Suppliers Half a Billion

The Sugar Tax Cost:  Sugary Drinks Tax will Cost Suppliers Half a Billion

The Sugar Tax is to be implemented in the UK by the Conservative Government after years of lobbying by celebrity chefs, dieticians and health advisors. Chancellor George Osborne has estimated that the tax levied will raise £530 million (more than 740 million US dollars).

 

The Sugar Tax has been introduced in an effort to reduce obesity and diet related illness. Scientific evidence suggests that sugar has replaced fat as the biggest contributor to diet related health problems. There is said to be strong evidence for the independent role of sugar sweetened beverages, particularly soda, in the promotion of weight gain and obesity in children and adolescents.

 

Soft drinks manufacturers will have the Sugar Tax levied according to the volume of sugary beverages they produce or import. The tax is set to launch in April 2018 the first level of tax will be levied for all drinks that contain at least 5g of sugar per 100ml, drinks with more than 8g per 100ml face a higher rate.

 

Unsurprisingly the soft drinks manufacturing industry isn’t happy with efforts to turn consumers away from sugary drinks, with the American Beverage Association having invested millions of dollars fighting laws to tax and label sugary drinks. 

 

City analysts have suggested that a price rise of between 6 and 8 pence per can may be enough to persuade consumers to switch to a healthier option.

 

The tax will be levied on drinks companies in two years’ time, this will enable them to adjust ingredients and modify recipes as necessary to reduce their drinks’ sugar content in an effort to enable their drinks to fall into a lower tax category or out of the scope of the tax altogether. However, this isn’t the only way that manufacturers will be able to reduce their liability to the tax. As the tax is levied based on volume of sugar in the beverage, one obvious way to reduce it is to make the servings smaller. This may be the way the industry goes, by selling their products in smaller volume cans effectively offsetting the cost of any tax levy onto the consumer by selling smaller cans for the same price.

 

It is clear that this tax being levied is a wake up call to manufacturers to diversify their products and expand beyond sugar laden drinks. The effect on the industry as this tax comes into effect will be interesting for both consumer and manufacturer. Smart suppliers will manage the problem with an effective Category Management solution that achieves the ‘3 legged stool’ of  achieving the needs for the shopper, the supplier, and the supermarket.