Landmark Wholesale is advising retailers to understand and prepare for the shift towards the low-sugar drinks category ahead of the introduction of the Soft Drinks Industry Levy (SDIL) on Friday 6 April 2018.
The SDIL has been introduced by the government to encourage soft drinks manufacturers to reduce the amount of added sugar in soft drinks to provide healthier choices for consumers.
There are two bands proposed in the levy: one applies to soft drinks with five or more grams of sugar per 100ml; the second applies to soft drinks with a sugar content over eight grams per 100ml. Pure fruit juices and milk-based drinks, as well as those below the sugar content threshold, are exempt.
As an example, Coca-Cola 1.5ltr will be priced at £1.99 or 3 for £3.30 after the levy, whereas Monster Origin 500ml will have a new price mark of £1.35. Additionally, Pepsi Regular 2ltr will be priced at £2.09 and Red Bull 250ml will have a new price mark of £1.29 following the levy.
The low-sugar drinks market is currently worth more than £460m in the convenience sector and is expected to reach £575m by 2019 as a result of the levy.
John Mills, Managing Director of Landmark Wholesale (pictured), commented: “Retailers should view the SDIL as a positive, mainly because it provides a great opportunity to review the mix of full and low sugar drinks and increase their sales.
“As the SDIL is to encourage consumers to choose low or sugar-free soft drinks to benefit their health, retailers should expect to see a rise in demand for low- and no-sugar drinks and consumers switching to other options like still and sparkling water and flavoured water. Independent retailers are already seeing the fastest growth of low-sugar soft drink sales, with a rise of 12.1% compared to 7.8% in the overall market.
“If you haven’t already, start thinking now about layout, range and stock so that you’re prepared for when the levy takes effect. Essentially, it’s recommended that you stock a wide range of zero- and low-sugar products in addition to core range full-sugar drinks.
“Many manufacturers have already reformulated products so the sugar levy doesn’t impact them, but some favourite products with a high sugar content such as Coca-Cola and Pepsi will be affected and experience a price increase as a result. So, it’s also important to be prepared to explain the SDIL and what it means to your customers who are likely to question price rises of sugary drinks.”
The levy is expected to raise around £385 million a year, which will be invested in giving school-aged children a brighter and healthier future, including programmes to encourage physical and balanced diets.
Landmark and its members have pulled together a one-page advisory communication for customers explaining the changes and the cost impact on different-sized cans and bottles.