Food for Thought – Soft Drinks Industry Levy
12 September 2018
In the 2016 Budget, the Government announced the introduction of the Soft Drinks Industry Levy, with effect from 6 April 2018.
The tax will be charged at two rates upon production or import of affected drinks: a 24p per litre rate for drinks containing sugar content above 8g per 100ml; and an 18p per litre rate for those above 5g per 100ml.
What’s included, what isn’t
Pure fruit juices, milk-based drinks, alcoholic drinks and certain substitutes will not be taxed.
A producer of drinks will be liable to register for and pay the Soft Drinks Industry Levy if the drinks produced, packaged, owned or brought into the UK meet all the following conditions:
- it has had sugar added during production, or anything (other than fruit juice, vegetable juice and milk) that contains sugar, such as honey
- it contains at least five grams (g) of sugar per 100 millilitres (ml) in its ready to drink or diluted form
- it’s either ready to drink, or to be drunk it must be diluted with water, mixed with crushed ice or processed to make crushed ice, mixed with carbon dioxide, or a combination of these
- it’s bottled, canned or otherwise packaged so it’s ready to drink or be diluted
- it has a content of 1.2% alcohol by volume (ABV) or less.
Sugar includes sucrose, glucose, fructose, lactose and galactose, but doesn’t include replacements like stevia, aspartame, sucralose and erythritol.
The levy doesn’t apply to the following:
- drinks that are 75% milk
- milk replacements
- alcohol replacements
- fruit juices or vegetable juices without added sugar
- liquid drink flavouring added to food or drinks like coffee and cocktails
- drinks that are sold as a powder
- drinks prepared by mixing liquids and served in an open container, like cocktails
- infant formula, follow-on formula or baby foods
- formulated food intended as a total diet replacement or dietary food used for special medical purposes.
A couple of interesting facts…
In response to the new tax, Coca-Cola has taken a multi-pronged approach. On the one hand, they have pumped money into marketing various permutations of the Coke Zero brand, with new flavours such as peach joining vanilla and cherry. On the other hand, they are not changing the original Classic Coca-Cola, learning from past experience. In 1985, Coca-Cola sought to reinvigorate the product with a sweeter recipe, known as ‘New Coke’. Yet despite successful blind taste tests, the American public’s reaction to the change was so negative that within three months, the company reintroduced the original formula, delivering a significant gain in sales. This time around, despite the sugar tax, the Classic Coca-Cola recipe remains the same, and the company have dealt with the levy by reducing the size of a range of the most popular ‘red Coke’ servings, to minimise the price increase passed onto the consumer.
A.G. Barr, the makers of IRN-BRU, however, announced that from January 2018 they would reduce the sugar content of the famous Scottish soft drink by 50%, from 10.3g to 4.7g per 100ml, just below the threshold at which the new sugar tax applies. The extra sugar has been replaced with a blend of low calorie sweeteners including aspartame. Despite a public petition and ‘Hands off our IRN-BRU’ campaign, however, Barr are holding firm.
Other drinks have also been reformulated, with mixed results. According to the April edition of The Grocer, Lucozade Energy has also been reformulated to avoid the new levy, but has suffered an 18% fall in sales in the year since the new recipe was introduced.
It will be interesting to see how the consequences of the new Soft Drinks Industry Levy plays out, which we may consider in further editions of this newsletter.
The content of this article is for general information only. For further information please contact a member of Birketts’ Food Production and Processing Team.
This article is from the Autumn 2018 issue of Food for Thought, our newsletter for those working within the food and drink industries. To download the latest issue, please visit the newsletter section of our website. Law covered as at September 2018.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2018.