Following our analysis last week, which reviewed the impact of the ‘Sugar Tax’ on Soft Drinks brands, we’ve since reviewed the impact on retailers. The analysis, published in The Grocer, focuses specifically on the big six – Asda, Morrisons, Ocado, Sainsbury’s, Tesco and Waitrose.
Based on retailers’ listings on 22 March 2016, Ocado and Waitrose would have the greatest percentage of Carbonates and Energy Drinks products in both tax bands. Some 62.7 percent of the Carbonates and Energy Drinks products on the Waitrose website would fall into either of the tax bands, as would 59.6 percent of Ocado’s listings. Waitrose would have the greatest percentage of its range in the highest tax band with 46.8 percent.
The retailer with the lowest percentage of its range in either tax band would be Morrisons, with 44 percent, followed by Sainsbury’s which would see 48.8 percent of its range taxed.
How would Own Label Soft Drinks be affected?
A review of Own Label ranges in each supermarket shows that Asda only has five Own Label Carbonates and Energy Drinks products that would fall into the highest tax band – four of which would be 250ml cans of Chosen By You Pressé.
Ocado and Waitrose would again be most affected by the tax. 47.4 percent of Waitrose Own Label Carbonates and Energy Drinks would be subject to the highest tax band, as well as 42.1 percent of Ocado’s range. Ocado stocks Waitrose Carbonates and Energy Drinks products, hence the similar results, however Ocado does not list all of Waitrose Own Label products.
Ocado and Waitrose would have the greatest percentage of products in the tax bands, because both list significantly less diet or no added sugar Soft Drinks compared to their rival retailers.
Asda products in the highest tax band:
Brand View base price data, from 22 March 2016, shows that Ocado’s Own Label range would see the greatest rise in the average base price per litre as a result of the tax, at 25.7 percent. This is just ahead of Morrisons (24.1 percent) and Waitrose (23.5 percent). The ‘Sugar Tax’ would affect these retailers the most because their taxable products have a lower base price than the products that would be affected in Asda, Sainsbury’s and Tesco.
In Asda, Sainsbury’s and Tesco the ‘Sugar Tax’ would affect a significant number of smaller products (by pack size), particularly Energy Drinks (250ml cans). As the average base price is higher per litre for these smaller pack sizes, the overall price change after tax equates to a lower percentage comparatively.
The Tesco Cloudy Lemonade 2 litre bottle would increase most in price, if the retailer passed on the cost to the shopper. Its base price would more than double from £0.40 to £0.88. Sainsbury’s Cloudy Lemonade 2 litre bottle would also increase significantly in price from £0.60 to £1.08.
The Own Label Cola ranges in all the retailers would also be significantly affected – Morrisons Own Label Cola would see the greatest increase at 88.9 percent, just ahead of Tesco with 87.3 percent. The Waitrose Own Label Cola, listed in both Ocado and Waitrose, would see the smallest increase in base price at 53.3 percent.
The provisional 2018 start date for the ‘Sugar Tax’ gives retailers more than a year and half to work with their Own Label manufacturers to reformulate Soft Drinks, so that they incur less, or no tax.
The tax could potentially lead to an increased focus on range rationalisation, as the post-tax price of some products could dissuade some shoppers and lead to a significant drop in sales. A potential area that retailers may focus on is reducing the pack size of some products, for example they could reduce the bottles of Own Label Cola from 2 litres to 1.75 litres, as Coca-Cola has done.
Retailers could also look to reduce the variety of pack sizes available to save costs and reduce the potential tax impact across a range of the same products. For example, Ocado and Waitrose list a 2 litre bottle, 1 litre bottle and 6 x 330ml cans of Fiery Ginger Beer – they could consider delisting the least popular pack size.
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