The full impact of the sugar tax has been revealed – and convenience stores will bear the brunt of it.
As British businesses formed a coalition against the Government’s levy on soft drinks, a new report said small retailers will face dire consequences when the sugar tax hits in April 2018.
The report by Oxford Economics found that small retailers will lose almost 2% of their soft drinks sales revenue following the introduction of the tax, which could add up to 24p per litre to sugary drinks.
“The impact will be felt across the wider economy, but predominantly among smaller retailers,” the report said.
More than a quarter of soft drinks sold by convenience stores will be subject to the levy – accounting for 36% of small retailers’ soft drinks profits.
The report predicted energy drinks sales would decline 9%, still and juice drinks would drop 6%, while sales of carbonated soft drinks would fall by 2%.
The soft drinks industry’s ‘Face the facts, can the tax’ campaign, which has been put together by bodies including the NFRN, Federation of Small Businesses, Federation of Wholesale Distributors and Scottish Grocers Federation, argues that there is no correlation between obesity and soft drinks sales.
Paul Baxter, NFRN chief executive, said the levy would be a pointless cost burden and impose more red tape on small retailers. “Piling on more ill-thought-out policies that will only make things more difficult for retailers while doing nothing to address the serious problem of obesity does not make sense,” he said. “This Government must rethink the approach.”
Pete Cheema, chief executive of the Scottish Grocers Federation, added: “This is likely to pass on the cost to consumers and further put at risk the viability of independent convenience stores in Scotland.”
Retailers have also expressed concern over the impact a sugar tax would have on their businesses. Saf Sathi of Singlewell Post Office in Gravesend, Kent, said his business is reliant on soft drinks. “As soon as you enter our store, there’s a two-metre chiller full of drinks, and they’re our main sellers,” he said.
Shropshire retailer John Vine of Newsworld in Church Stretton added that he expected energy drinks to take a hit. “Red Bull is a big seller for us,” he said. “Energy drinks are expensive already, so I won’t be surprised to see sales decline when the tax comes in.”
He urged retailers to start stocking more low-sugar drinks.
The tax could also open the door to illegal trading of sugary drinks, through cheaper, imported versions. “Introducing a levy on soft drinks in the UK creates a new opportunity for unscrupulous importers to bring tax-avoided products into the supply chain,” warned James Bielby, chief executive of the FWD.
Of an illicit trade, Sathi added: “It’s like everything else – we already see it with tobacco and alcohol. Let’s hope the sugar tax doesn’t come to that.”
The Government’s recently unveiled obesity strategy will target nine key categories for convenience stores – click here to find out how your range will be affected.