The Impact of Sugar Tax on the Consumer Sector

The introduction of the Sugar Tax is affecting the way the food and beverage and related industries operate in many ways. From marketing to sourcing, companies are taking new approaches to cut costs and stay competitive.

The impact of sugar tax on the consumer sector

Significantly, the new tax has caused the industry to re-examine the amount of sugar they include in every serving. Because many decided to embrace the change and reduce, expected revenue for the first year has already dropped from £520m to £240m.

Additionally, consumers are turning away from syrupy sodas. An Oxford study predicted the volume of soft drinks sold will be reduced by 1.6% and contributions to the GDP could be cut by £132 million.

R&D working with procurement

Nestlé, inspired by the legislation, developed a “candy floss” that uses 30% less sugar and claim to have already removed 60 billion calories in the 2-year runup to the levy. This reduction has also helped them project a healthier image to consumers.

And they aren't the only ones, other companies in the sector are developing similar alternatives, with procurement professionals making up a huge part of these strategies. Businesses need to be sourcing procurement talent that can drive value by partnering with R&D teams to marry creative ideas with sourcing strategies.

This ensures that companies are working with the right suppliers, bringing in the right materials or ingredients, at the right price. These initiatives epitomise the positive effects having a strong procurement team can have on company performance. 

New talent from other industries

Companies also need to embrace procurement talent from outside the food and beverage industry, as this will allow them to remain more competitive in the pricing of raw materials.

For example, the automotive sector is renowned for its mature supply chain function, which has been under a number of continuous improvement processes over the years. The margins that the procurement professionals are negotiating is extremely tight-knit and the purchasing process is incredibly streamlined.

Higher costs for hospitality

Even though the tax is only officially imposed on the manufacturers, there are ripple effects in the related food service and hospitality sector. Pub and hotel titan JD Wetherspoon says the new tax will cost them an additional £3m per year. 

Jamie Oliver, who was a strong supporter of the levy, had to close several of his restaurants in February 2018 due to financial strain.

The Sugar Tax has profoundly changed the way sodas and other sugary foods are made, packaged, distributed, marketed, and sold. Procurement is now at the heart of it, and it's only those that adapt who will benefit, and essentially survive.

 

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