Fictitious children’s story character Mary Poppins may well have found a spoonful of sugar helped the medicine go down, but her method could soon be deemed madness in light of the soft-drinks industry levy, which on first glance is a bit of a mystery for many operators.
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In last year’s Spring Budget (in March 2016), former Chancellor of the Exchequer George Osborne dropped the shock news that a levy would be placed on the soft-drinks industry. The charge, which is set to kick in next year, aims to ensure soft-drinks producers reduce the sugar content of their products to help combat obesity.
While the industry is working towards the imminent implementation of the soft-drinks industry levy, often referred to as the sugar tax or sugar levy, there was a brief period of uncertainty when Prime Minister Theresa May called a general election earlier this month.
Yet, any scepticism about whether or not the levy would be shelved until after the next general election were allayed on 25 April, when parliament gave approval for its go ahead.
There are some perceived negatives surrounding the situation, yet also ample opportunities for operators as outlined at the inaugural Soft Drinks Summit organised by Britvic in association with The Morning Advertiser and sister title Convenience Store last month (7 April).
The advice and insights given by Britvic and a host of other industry experts at the event in London will stand pubs in good stead when the tax is enforced. Current consumption data, both in the on- and off-trade, shows drinkers are demanding more low- and no-sugar alternatives, as well as more premium options, without Government encouragement.
However, before the opportunities available to pubs are outlined, it is important to understand the soft-drinks industry levy and what it means for operators.
As explained at the summit by Britvic commercial operations director Nigel Paine, sugary soft drinks that fall into the sugar levy will be categorised in two ways – those with a total sugar content above 5g per 100ml and a second higher band for drinks with more than 8g of sugar per 100ml. Those that fall into the higher band will incur a 24p charge per litre and, those in the lower band, an 18p charge per litre.
Working to reduce sugar
Some soft drinks, however, will be exempt from the levy, including milk-based drinks, chilled coffee drinks, pure fruit juices and those containing less than 5g/100ml of sugar.
The levy has been designed, and will be implemented, to deter consumers from drinking too many high-sugar soft drinks and to switch to low or zero-sugar variants, which is why Britvic and other soft-drinks giants will pass on the cost of the levy to its customers, who should pass it on to theirs.
This decision is not one that Britvic took lightly, but was made after weighing up the rationale behind the tax and its reasons for existing. Also, almost 70% of the company’s products will not fall under the levy, since Britvic has been working diligently for years to successfully reduce the sugar content of 70% of its drinks to below 5g/100ml.
“Health is an important issue for anyone in the food-and-beverage industry, so we have been looking at this for a long time,” Paine told the audience of pub operators and convenience
store owners at the summit.
“Back in 2012, we really started to change our portfolio to lower calorie content, specifically around sugar. We became the first company in the soft-drinks industry in Great Britain to introduce stevia, seen as a natural sweetener, to replace sugar.”
Sugar is a big topic for consumers and something operators should be aware of when selecting drinks to sell in their pubs, according to Mumsnet co-founder Carrie Longton.
Consumers, though, do not necessarily understand the soft-drinks industry levy and what it could mean for them, Longton told delegates. However, she did reveal the results of some exclusive research, which showed how conscious of sugar the parents who took part in her poll are.
More than three quarters (77%) of parents say they are conscious of the added sugar content in soft drinks when purchasing for themselves and a staggering 87% look at sugar content when they are purchasing for their
children, said Longton.
“It’s not just about health, it’s about your bottom line because if you can create something that my kids think is a treat, but I as a parent am very happy to give to them, that will absolutely do your bottom line a world of good,” she said.
Longton also made it clear consumers wanted assurances that the proceeds of the levy would be used to help educate people on nutrition and encourage exercise.
Trend in growth
That said, the focus for the future, it appears from Britvic and CGA Strategy research, is going to remain on low- and no-sugar soft drinks, a rising trend prior to the soft-drinks industry levy.
This trend was identified as a major growth area by Britvic in its Soft Drinks Report, which was outlined to delegates at the summit. According to the figures, sugar-free and premium softs are set for major growth in the years ahead. The data showed sales of low- and no-sugar drinks were growing faster than those of full sugar, with low- and no-sugar beverages up 6.8% to £1.9bn a year against a 2% rise to £4.9bn in full-sugar drinks.
CGA Strategy head of soft drinks Simon Stobart – who told delegates 29% of 18- to 34-year-olds are likely to reduce their sugar consumption, mainly driven by the soft-drinks levy – backed these trends and figures. Just under a fifth (18%) of 35- to 54-year-olds and only 14% of those aged 55 and over said they would reduce their sugary soft drinks consumption.
Stobart said: “It is the low-sugar soft drinks that are driving the category growth and propping up its performance. More than a quarter (28%) of all soft drinks sold in the licensed trade are now low sugar.”
6 in 10 are likely to come back to an outlet if their drink was served to perfection
4 in 10 are willing to pay more for a better-served soft drink
6 in 10 consumers would order a second soft drink if they received great service
64% are likely to order a soft drink special if recommended by staff
52% would order a shared drink if eating out as a group
34% say flavour descriptions are likely to inspire them to buy a soft drink
(Figures from Britvic’s Soft Drinks Report)
And here lies a plethora of opportunities for operators to take advantage of and boost sales of soft drinks by playing to the rising trends for low- and no-sugar softs as well as premium and non-alcoholic ‘cocktails’.
A bigger play can be made if pubs work with their suppliers, according to Britvic senior category manager, foodservice and licensed, Ruth Scullin and senior customer marketing manager, foodservice and licensed, Russell Kirkham.
Scullin said: “I think there will be real opportunities to nudge consumers and make them aware of the types of drinks that you could trial.”
She suggested offering customers the low-sugar alternative when they order their drinks. “You could say to them ‘we do have a low-sugar version of this you could try’,” she added.
“But I do think choice is really important because some people will want to choose full-sugar products.”
Scullin also advised operators about other opportunities they can use to help premiumise soft drink offers by tweaking the way they are served.
She said: “A drink like lime & soda is a drink people can buy into. You can really put some sizzle into that by using a nice piece of glassware, some ice, really bringing up that drink to evolve it.
“Customers are more likely to have another drink if it is served in a great way and tastes lovely.”
As outlined by Britvic’s Kirkham and Scullin, there are clearly many opportunities for operators to tap into in the years ahead and, importantly, the soft-drinks industry levy need not leave publicans with a bitter taste in their mouths.
Although, some operators may need a little more persuasion when it comes to the levy. Cheshire Cat Pubs and Bars co-owner Tim Bird, for example, was sceptical about the tax and the reasoning behind it. He argued that it would
be beneficial to highlight the nutrit-ional issues of all drinks, rather than target one segment.
That said, the pubco operator was open to evolving the soft-drinks offer of his enterprise to accommodate the levy and acknowledged that it would be beneficial to his business to do so. “We will continue to offer fresh farm apple juice and freshly squeezed orange. But, we will add all the healthy drinks that don’t get taxed and remove the ones that do,” Bird said.
While Bird was sceptical, Corner-stone Inns managing director Damon Horrill welcomed the tax and had already planned big changes to the soft-drinks offer in his sites. “We will be removing original Pepsi from the post-mix range and replacing it with Pepsi Max,” he said. “Diet Pepsi will remain and we will still stock the iconic glass bottles for moments of indulgence.
“As customers become more conscious about the soft drinks they choose, there will be opportunities to introduce a greater range and a real reason to improve point-of-sale communication.
“Profit margins on soft drinks are significantly higher than alcohol, a greater focus on and customer interest in soft drinks is to be welcomed.”
No change to ongoing ideals
Yet, these are all just the first steps for operators and the soft drinks industry and when the levy is implemented, Britvic will work to further change consumer behaviour, both through price, value and education, said Paine.
“We need to make sure people are very conscious of what they are buying and not just change the value of it,” he added. “The levy doesn’t change anything for us because we were working hard to reduce the sugar content of our products before and we will continue to reformulate them. We already have close to 70% of our products under the soft-drinks industry levy and our innovation going forward will focus on increasing that percentage.”
For more on adapting your soft drinks range to appeal to today’s pubgoers, contact Britvic on 0121 711 1102.