โThe 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.
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The Impact of Sugar Tax on the Consumer Sector
Significantly, the new tax has caused the industry to reexamine 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 fromย ยฃ520m to ยฃ240m.
Additionally, consumers are turning away from syrupy sodas. Anย Oxford studyย predicted the volume of soft drinks sold will be reduced byย 1.6%ย and contributions to theย GDP could be cut by ยฃ132 million.
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R&D Working with Procurement
Nestlรฉ, inspired by the legislation, developed a โcandy flossโ that usesย 30% less sugarย and claim to have already removedย 60 billion calories in the 2-year runup to the levy. This reduction has also helped them project a healthier image to consumers.ย
Daniel OโNeill, head of FMCG Procurement & Supply Chain Recruitment at DSJ Global thinks other companies in the sector are developing similar alternatives and procurement is a big part of the strategy.ย
โThey need sourcing and procurement talent that can bring value by partnering with R&D to marry creative ideas with sourcing strategies. A big part of Nestleโs project must have been led by procurement specialists to ensure they are working with the right suppliers bringing in the right ingredients at the right price. Thisย epitomisesย one of many ways that procurement can have a positive effect on a companyโs future performance.โ he said.ย
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New Talent from Other Industries
OโNeill also sees food and beverage companies seeking procurement talent outside the sector in order to better compete in the pricing of raw materials.ย
โOne of our leading food manufacturing clients has specifically asked for candidates with a background in automotive. 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 streamlinedโ.
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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/hotel titanย JD Wetherspoonย says the new tax will cost them an additionalย ยฃ3m per year.ย Jamie Oliver, who was a strong supporter of the levy, had to close several of his restaurants in February 2018 due to financial strain.
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โNow that the tax is in full effect, it could create an even greater urgency for him to control costs,โ OโNeill commented.
The Sugar Tax has profoundly changed the way sodas and other sugary foods are made, packaged, distributed, marketed, and sold. โProcurement is now at the heart of it. Those that adapt will survive,โ he added.
What do you think? Has your company been impacted by the Sugar Tax and are you navigating the change through procurement? Let us know your opinion below.
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Sources:
https://www.gov.uk/government/news/soft-drinks-industry-levy-comes-into-effect
https://www.cips.org/en/supply-management/news/2018/march/nestle-uses-candy-floss-technology-to-cut-sugar/
https://www.cips.org/en/supply-management/news/2018/march/jamie-olivers-sugar-tax-set-to-cost-wetherspoons-3m/
https://businessadvice.co.uk/tax-and-admin/efficiency/sugar-tax-arrival-makes-drinks-brands-think/
https://www.statista.com/topics/3134/sugar-tax-and-soft-drinks-in-the-united-kingdom-uk/
http://www.britishsoftdrinks.com/write/MediaUploads/Publications/The_Economic_Impact_of_the_Soft_Drinks_Levy.pdf
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