Exclusive: Retail Express uncovers the first evidence of soft drinks levy avoidance

Sugar levy-evaded soft drinks are being sold to retailers by illicit sellers for nearly half the legitimate wholesale price, an exclusive investigation has revealed.

Sugar levy-evaded soft drinks are being sold to retailers by illicit sellers for nearly half the legitimate wholesale price, an exclusive investigation has revealed.

Retail Express found that three in five shops visited in Islington, London, were selling imported Coca-Cola cans that contain no English product labelling. It is an offence for retailers or wholesalers to sell goods in England that do not give product information in English. 

One retailer in the area said: “I was offered a case of Coca-Cola at £7.50 by a guy who came to the store with a van parked outside. He was trying to tell me how much extra I could make but I just said no, it’s never worth getting involved in things like that.”

Retailers selling the illicit stock claimed they had purchased them from a local Bestway branch, but the depot manager confirmed to Retail Express that foreign cans had never been sold by the company.

Customs expert Alan Henderson told Retail Express: “The fact that the text on the cans was not in English suggests that whoever obtained the product would not be compliant with levy regulations.”

Asked whether the stock was likely to have had the levy applied, Coca-Cola European Partners wholesale & convenience sales director Gary Black said: “One of the challenges is that there is no paper trail to prove the soft drinks levy has been paid on products.”

Henderson also suggested that the “negligible paper trail” on soft drinks means illicit sellers may attempt to pass off illicit stock to legitimate cash & carries.

Sold at RRP, a legitimate case of Coca-Cola costs £12.80 from a major wholesaler and delivers £3.76 gross profit. On the illicit cases, the gross profit is £9.06. More than a third of the extra margin would be from the sugar levy avoidance, with the remainder made up of VAT evasion, currency exchanges and geographic pricing differences.

Commenting on the investigation, British Soft Drinks Association director general Gavin Partington said: “We welcome Retail Express’s efforts to expose a problem which we warned would be exacerbated by the introduction of the soft drinks industry levy.”

A spokesperson from HMRC said it is undertaking “a wide range of compliance activities as part of our strategy to ensure the soft drink industry levy is a success”. As with alcohol and tobacco, this includes analysing supplier sales data for changes in demand. Those caught selling illicit soft drinks at any level face “seizures, assessments, civil and criminal penalties”.

The first imported sugar levy-evaded soft drinks have been discovered. How should retailers respond?

“The sale of imported soft drinks from Europe has risen dramatically in my area. Coca-Cola’s switch from 2l to 1.75l bottles has led to an influx of Polish 2l bottles sold in other local shops, it’s almost expected for smaller independent wholesalers to have a choice between sugar-levy paid stock or not. As the Government hasn’t stopped illicit alcohol even after the alcohol wholesaler registration scheme (AWRS), retailers are not worried about repercussions. Yet!”

Gaurave Sood, Neelam Newsagent in Uxbridge

“As we have a Coca-Cola soft drinks chiller, we’ve been told by Coca-Cola that only GB manufactured and branded Coca-Cola stock can be sold in it. My customers have said that imported stock tastes different, but if the products are cheaper, they are fine with it and buy it over legitimate stock. I think the retailer response has to be dependent on what your competition are doing and the demographics of the area around your business.” 

Kishor Patel, Premier Basing View Stores,Basingstoke

“We haven’t seen any grey soft drinks stock around here and I really hope we won’t in the future. The Alcohol Wholesaler Registration Scheme finally managed to get a grip on illicit alcohol and it has put retailers on a level footing, so I don’t want that to change. It’s bad timing because it coincides with CO2 shortages. There will be a lot of retailers going to cash & carries that they may not otherwise visit looking for soft drinks lines.”

Pardeep Sakaria, BK Stores, Immingham

Have you been offered prices too good to be true on soft drinks? Call us on  020 7689 3371

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