Advice from the Experts – Everything you need to know about the Soft Drinks Industry Levy

By a Treasury spokesperson – HM Treasury is the government’s economic and finance ministry, maintaining control over public spending, setting the direction of the UK’s economic policy and working to achieve strong and sustainable economic growth.

What is the Soft Drinks Industry Levy? The Soft Drinks Industry Levy (SDIL) was passed into law ahead of the 2017 General Election, as part of the Finance Act. It comes into force in April 2018. It is aimed at the producers and importers of added sugar soft drinks, and will only exclude the smallest producers. UK-based importers of big brand drinks made abroad will still need to pay the levy on them. Companies will pay a charge based on volumes of pre-packaged drinks with added sugar and total sugar content of 5g or more per 100ml. The levy charge is 18p per litre for drinks in the main band, with a higher charge of 24p per litre for drinks that contain 8 grams of sugar or more per 100ml. Dilutable cordials, squashes and syrups will be taxed according to their sugar content and volumes after dilution, so that a glass of cordial is taxed as it is intended to be consumed.

The levy will not apply to pure fruit juices, or any other drink with no added sugar, and milk-based drinks will be excluded as a source of calcium and other important nutrients. The levy will not be charged on alcohol substitute drinks like low strength beers and wines, which are intended to help adults reduce their alcohol consumption. The levy is expected to raise around £385million a year, but soft drinks companies can pay less tax if they change their approach on sugary drinks – they don’t have to shift the tax onto consumers.

Why remove added sugar in soft drinks? Children in the UK are consuming too much sugar. On average, they consume three times the recommended level. Sugar-sweetened soft drinks are one of the biggest sources of dietary sugar for children and teenagers and a source of empty calories. A single 330ml can of cola can contain nine teaspoons of sugar, which is more than a child’s daily recommended intake of added sugar, often without any other intrinsic nutritional value.

Sugar consumption is a key factor in child tooth decay, with tooth extractions being the main reason for hospital admissions for children aged 5-9 years. Tooth extractions for under 18s cost the NHS £35million per year. Public health experts have identified sugar-sweetened beverages as a major factor in the over-consumption of sugar, and a cause of childhood obesity. The Chief Medical Officer has said that reducing sugar content and portion sizes is a public health priority. How will the new levy work? The levy is already working. Since we announced the measure last March several major companies have accelerated their reformulation work to cut sugar ahead of introduction. These include Tesco, Lucozade- Ribena-Suntory, AG Barr and Nicholls. We now expect more than 40% of all drinks that would otherwise have been in-scope to have been reformulated by the introduction of the levy. This means that the forecast revenues for the levy are lower, but the government will continue to fund the Department for Education with the £1billion we originally expected from the levy until the year 2019/20. The Devolved Administrations will also receive the full funding originally announced.

What is the aim of the levy? The evidence from salt reformulation shows that industry behaviour can drive public health outcomes. But we need the soft drinks industry to act now and move faster. The new levy is a strong lever for driving producer behavioural change. Producers were given two years from the time of the announcement until the levy comes in, and many of them are using this time to reformulate their product mix and reduce the sugar in soft drinks, as intended. Producers will pay less – or nothing at all – if they: (1) reduce the amount of added sugar in soft drinks, (2) reduce portion sizes for sugary drinks, and (3) move consumers towards healthier choices (e.g. through marketing). It’s up to them to act. They don’t have to pass the charge onto consumers.

Childhood obesity: what’s the scale of the problem? Childhood obesity is a national problem. The UK currently has one of the highest overall obesity rates amongst developed countries, and in England a third of children are obese or overweight when they leave primary school. Obesity has costs both to individuals and to society. The evidence shows that 80% of children who are obese in their early teens will go on to become obese adults – with a greater risk of heart disease, cancers and diabetes.

Supplier viewpoint

“The best thing companies can do in the short term is to ensure all staff understand the legislation. Assuming that those producers subject to a levy pass on the cost to their customers, staff who can explain the introduction of the levy and why the price has increased will be invaluable in mitigating possible consumer frustration when they see a price differentiation between drinks that previously cost the same amount. Well-trained staff will be invaluable in reassuring consumers that the caterer is not responsible for the price increases. Where a sugar levy has been introduced in other countries, drinks subject to the levy have seen a sales decline, whereas those exempt from the levy have seen a sales increase. We believe that the introduction of the levy will accelerate the growth of low and no calorie soft drinks in the UK and caterers should stock a range of soft drinks that cater for this already burgeoning area of growth. Thanks to Lucozade Ribena Suntory’s on-going reformulation efforts to meet consumer demand for lower-calorie, great tasting drinks, none of our Lucozade Energy, Lucozade Sport, Ribena or Orangina drinks will contain more than 4.5g of total sugar per 100ml by March 2018. All of these brands will be entirely exempt from the soft drinks industry levy.” – Fraser McIntosh, senior communications manager, Lucozade Ribena Suntory

Radnor Hills have been reducing sugar in our products for a number of years now but in 2018 all of our soft drinks ranges will contain less than 5% sugar. The sugar tax has only affected our adult premium pressé range Heartsease Farm to which the new sugar-reduced recipes will launch in January 2018 using only natural ingredients and featuring a newly designed label and sloping neck bottle to accompany the launch. The new recipes will be mainly sweetened by a 100% natural plant-based sweetener that contains almost no calories. My concern with the sugar tax is the consumer might not be getting the correct message. There are lots of soft drinks on the market that contain naturally occurring sugars from fruit including our Heartsease Farm range as we use real fruit juice in the recipes. We are finding that some retailers can be scared to list products that contain any sugar at all! I would encourage people to look at the labels and check to see if it’s a naturally occurring sugar from the fruit juice or if it’s added sugar.” – Chris Sanders, sales director, Radnor Hills

“The impending soft drinks levy that the government will introduce from the 6th April 2018 will undoubtedly have an impact within foodservice, due to increased costs on levy applicable products. As a proud supporter of the Country Range Group, Britvic Soft Drinks will be supporting customers with soft drink industry levy tools, which will illustrate why the levy is being implemented and which products will be impacted. So why does it matter? For example if an outlet is selling 200 x 500ml bottles per week of full rate levy products, the annual soft drinks cost increase would be £1,248 from April 2018 so we would recommend that owners consider the cost impact to their business.

Be range ready Have a great tasting range of drinks for your customers to choose from, that are either below the soft drinks levy threshold or are exempt from the levy

Pass on the Levy Follow the spirit of the levy and create price differentials between high sugar and low sugar drinks

Educate staff to know the products and facts We believe in choice and helping make informed decisions on healthier choices

Provide your guests with sensational drinks that create a great experience – inspirational choices, perfectly served

What are Britvic doing? We’ve taken bold steps to help consumers make healthier choices. Through reformulation and innovation, we have removed 19bn calories from our portfolio since 2012 on an annualised basis. [Robinsons has removed 6.9 billion calories since 2015] and by April 2018 72% of our full GB portfolio (94% of our owned brands) will be below or exempt from the levy.”-  Stephen Hurley, customer development manager – wholesale leisure, Britvic Soft Drinks

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