Soft Drinks Industry Levy hitting customer behaviour
According to IRI data, sales of Diet Coke were £13.7m in the week ending 19 May, ahead of Classic Coca-Cola which saw sales of £11.4m.
This lean towards Diet Coke began in February when IRI first reported the low-sugar variant outselling the original. This coincided with a marketing push for the variant from Coca-Cola GB.
Following the announcement of the levy, many drinks manufacturers moved to remove sugar from their products.
AG Barr reformulated Irn-Bru to reduce sugar content from 10.3g/100ml to just 4.7g/100ml, and the business said that 99% of its products were now not subject to the ‘Sugar Tax’.
James Simmonds, partner and head of UHY Hacker Young’s drinks industry team praised the manufacturers for their reformulation work. “It’s good to see the soft drinks manufacturers responding so positively to the new tax – reducing sugar levels in drinks makes sense financially, given the potential cost of the Levy.”
However, this reformulation does come at a cost, with the amount of money set to be raised by the Soft Drinks Industry Levey expected to be significantly lower than anticipated, according to Government figures.
The measure, which came into effect in April, was expected to raise £520m per year but this was revised to £240m due to reformulation by drinks manufacturers, according to the Treasury. The money raised has been earmarked for school sports funding, with the Government saying it will take money from other budgets to make up the shortfall.
Earlier this year, HMRC confirmed that 326 soft drinks manufacturers were eligible for the Soft Drinks Industry Levy.
Simmonds warned that the fallout from the Soft Drinks Industry Levy might cause burdens, especially if it wasn’t raising as much as anticipated. “Targeted taxes like the ‘Sugar Tax’ might have very noble aims, but they do run counter to the aim of simplifying the tax system. The evidence of health benefits from these taxes is relatively limited, but the Sugar Tax certainly adds to the burden of cost and red tape for businesses.
“It does remain to be seen how the Government will make up the £280m shortfall in money for school sports, however.”
Businesses eligible for the Soft Drinks Industry Levy have to submit their first return by 30 July 2018.