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The ‘Bevy Levy’ Part 1: How have retailers prepared for the Soft Drinks Industry Levy?

By Irene Bodega

Increasing childhood obesity rates have urged the UK government to establish a levy in an attempt to reduce sugar content in soft drinks, ultimately aiming to lower children’s sugar intake.

The Soft Drinks Industry Levy (SDIL), first announced in 2016, will apply 18p or 24p per litre to soft drinks’ manufacturers if the added sugar drink contains 5g or 8g of sugar or more per 100ml respectively. The levy will be rolled out nationwide from April 2018.

Using Brand View Nutrition, we have investigated how six major retailers have been preparing for the impending levy by looking at the sugar content of the Carbonates and Energy Drinks categories in April 2016 and February 2018.

 

Retailers’ assortment

All six retailers stocked a higher proportion of exempt listings (i.e. <5g of sugar per 100ml or no added sugar) in February 2018 compared to April 2016, as shown in Chart 1. Morrisons led the way with 65.3 percent of its range being levy-exempt, closely followed by Sainsbury’s (65 percent). Sainsbury’s was also the retailer with the lowest proportion of its range (25.8 percent) falling within the higher band of the levy in February 2018. Tesco saw the greatest percentage increase in the share of exempt lines; up by 15.8 percent to 63.2 (Chart 1).

In 2016, more than half of Morrisons’ range already contained less than 5g of sugar per 100ml. As a result, it recorded the lowest decrease in the share of range sitting in the higher levy band, down by 6.1 percent. This corresponded to 26.3 percent of its range falling in the high band of the levy in February 2018, the second lowest of the retailers analysed (Chart 1).

Ocado and Waitrose delisted the highest proportion of products containing more than 8g of sugar per 100ml (50.0 and 48.3 percent respectively – Chart 2). Both retailers launched a higher percentage of listings falling in the low band of the levy than those they delisted (Chart 2). This resulted in the two retailers having the lowest percentage of exempt SKUs overall, 53.2 and 50.2 percent respectively, in February 2018 (Chart 1).

 

 

 

Own Label assortment

Since the SDIL was announced, the average sugar content of Own Label Carbonates and Energy Drinks dropped from 3.2g per 100ml in April 2016 to 2.7g in February 2018.

Although the total number of Own Label exempt listings across the retailers decreased compared to April 2016 (-22 SKUs), the number of Own Label products falling in the high band decreased even further (-49 SKUs) (Table 1). Of these, 34 lines were delisted and 17 underwent reformulation (17), while only two new products were launched.

This resulted in all six retailers registering an increase in the proportion of their Own Label range that will not be affected by the levy, with Tesco hitting 100 percent, up from 74.5 in April 2016 (Chart 3). Asda also revised its Own Label range to ensure 96.9 percent of it will be exempt and that no products will fall within the higher band (Chart 3).

Waitrose and Ocado saw the lowest percentage increase in their share of Own Label exempt SKUs, up from 47.5 and 48.7 to 51.3 and 52.8 percent respectively (Chart 3). Compared to their competitors, both retailers maintained a greater percentage of Own Label SKUs falling in the high band of the levy (33.3 and 41.7 respectively), as shown in Chart 3. For example, while all other retailers only offered sugar-free ginger beer in February 2018, with Sainsbury’s and Tesco having delisted their full sugar variation after April 2016, a variant containing 12.8g of sugar per 100ml was still available at Ocado and Waitrose, along with their sugar-free option.

 

 

 

Has sugar disappeared or has it been replaced?

After analysing the changes in the number of products falling in each of the bands, Brand View focused on the distribution of exempt SKUs across four sugar content categories; illustrated in Chart 4.

Although sweeteners alone remained the most popular alternative to added sugar, the number of products that contained a combination of added sugars and sweeteners increased compared to April 2016 (Chart 4).

In particular, Tesco, Asda and Sainsbury’s saw a significant decrease in the proportion of exempt listings containing only sweeteners, down by 15.5, 14.5 and 9.9 percentage points respectively. Tesco and Sainsbury’s replaced these with a greater proportion of soft drinks containing a combination of added sugar and sweeteners, up by 18.8 and 11.4 percent, whereas Asda increased the percentage of listings containing added sugar alone (up from 0 to 9.7 percent) (Chart 4).

 

 

Where do the changes come from? Delisted, NPDs and reformulated exempt SKUs

Exempt lines containing sweeteners only accounted for the majority of Own Label SKUs that were delisted after April 2016 (57 SKUs), but also for the greatest proportion of newly launched products (13 SKUs) (Chart 5).

One of the key reasons behind the increase in the proportion of exempt SKUs containing both added sugar and sweeteners is that almost all of the reformulated SKUs, 24 of 26, maintained some level of added sugar after sweeteners were added in (Chart 5).

Furthermore, a higher number of exempt soft drinks containing only added sugar have been launched compared to the equivalent delisted lines (Chart 5).

 

 

What about soft drinks manufacturers?

After the Sugar Levy was announced in March 2016, retailers have taken considered action to replace high sugar content drinks with healthier alternative across shelves and shoppers are already reaping the health benefits before the levy is officially rolled out.

Judging by the initial impact the levy has had with retailers, the initiative is looking like a success; with healthier lines across shelves and more lower sugar Own Label options available.

Stay tuned for our next ‘Bevy Levy’ Insight where we investigate the role manufacturers have played in dropping sugar levels.

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