After investigating the retailers’ response to the Soft Drinks Industry Levy (SDIL), Brand View looked at the actions taken by manufacturers. Using Brand View Nutrition, we reviewed the sugar content of branded Carbonates and Energy Drinks available in six major retailers (Asda, Morrisons, Ocado, Sainsbury’s, Tesco and Waitrose) in April 2016 and February 2018.
Since the levy was announced in March 2016, the average sugar content of unique branded lines dropped from 6.7g to 5.6g per 100ml. The number of unique levy-exempt lines jumped from 343 to 490, while the number of drinks in the highest sugar levy band fell from 401 to 294 (Chart 1).
As with Own Label lines, the surge in the number of exempt listings was accompanied by a decrease in the proportion of exempt SKUs containing only sweeteners and an increase in the number of listings falling in the remaining three sugar categories (Chart 1).
How are manufacturers reducing sugar?
This fall in sugar was driven by a combination of reformulation, delists and new product developments. Of all the branded products falling in the low and high bands in April 2016, 14.2 percent (203 SKUs) across all retailers were reformulated into the low band (23 SKUs) or became levy-exempt (180 SKUs).
Overall, the product that saw the biggest reduction in sugar after reformulation is Rockstar Punched Tropical Guava; its sugar content fell from 15.6g to 4.8g per 100ml. Lucozade Energy Pink Lemonade underwent the second biggest sugar reduction; down by 9.6g to 4.4g per 100ml. These changes were implemented by removing some of the added sugar and replacing it with sweeteners.
Table 1 shows how the number of exempt products launched after April 2016 exceeded the number of exempt SKUs that were delisted (392 versus 300). It also reveals that the number of listings falling in the high band of the levy that were delisted (341 lines) surpassed that of new products (185 lines), whereas the number of newly launched listings in the low band was greater than that of delisted lines. Overall, this resulted in a higher number of delisted SKUs compared to NPDs.
Which manufacturers made the most adjustments?
Brand View focused on the manufacturers that, in April 2016, had at least ten unique products across the six retailers considered.
Merrydown, Lucozade Ribena Suntory and A.G. Barr registered the highest percentage increase in the proportion of exempt SKUs, up by 86.7, 50.7 and 28.3 respectively (Chart 3). These manufacturers were more active than the rest in reformulation, with Merrydown and Lucozade revamping all of their drinks that contained more than 8g of sugar per 100ml in April 2016 (Chart 2).
Coca-Cola reformulated the most products from the low sugar levy band into being levy-exempt (Chart 2). Of the 29 unique lines that had between 5 and 8g of sugar per 100ml in April 2016, 12 were reformulated to contain less than 5g. These included Dr Pepper, the sugar content of which fell from 7.2g to 4.9g per 100ml, and Fanta Orange, from 6.9g to 4.6g.
A.G. Barr reformulated 15 of its 45 drinks sitting in the high band to ensure the levy will not affect them (Chart 2). These were largely Rockstar and Rubicon Sparkling Juice Drink lines, which saw the addition of sweeteners in place of some of the added sugar.
Reformulation, however, explains only part of the changes that affected A.G. Barr’s offer. In fact, 53 lines that fell in the high band of the levy were delisted against 11 that were introduced after April 2016 (Chart 4). Additionally, more exempt SKUs were launched compared to those that were delisted after April 2016.
Adversely, Coca-Cola recorded a sharp decrease in its proportion of listings falling in the low band of the levy in favour of exempt lines, up from 115 to 161 SKUs (Chart 3). In addition to reformulation, Coca-Cola delisted a high number of products falling in the low band of the levy (45 SKUs) while only introducing seven new SKUs (Chart 4). The manufacturer also registered a higher number of exempt NPDs across the retailers investigated (140 SKUs) compared to those that were delisted (101 SKUs).
Fever Tree was one of the few manufacturers to record an increase in the average sugar content per 100ml in February 2018. This is a result of a number of NPDs in the lower sugar levy band, including the Fever-Tree Madagascan Cola 500ml, with 7.6g of sugar per 100 ml, and Fever-Tree Mediterranean Tonic Water 8 x 150ml, containing 7.4g.
Our two-part analysis suggests that the SDIL has been a success so far, with both retailers and manufacturers adapting their offerings and ultimately reducing the sugar content available to shoppers by an average of 15 percent since April 2016.
Our investigation showed that reformulation was a significant contributor to the decrease in the average sugar content across the Carbonates and Energy Drinks categories. Cawston Press is one of the most recent examples, having revamped its offer by removing all added sugar to make it levy-exempt (The Grocer).
In addition to delisting a significant number of drinks that would have fallen in the higher band of the levy, some big players (including Coca-Cola), focused on introducing new low-sugar options; as demonstrated recently by the launch of a new Sprite zero-sugar variant (The Grocer). It remains to be seen whether Coca-Cola, or its rivals, will feel the pressure to reformulate its major products.