It’s a revolution that arguably first began in earnest decades ago with the launch of Diet Coke but the transformation of the soft drinks industry is almost complete with low and no sugar drinks now the focus of all marketing and NPD activity – so where are the thanks and congratulations?
by Antony Begley
If you’ve been a local retailer in Scotland for the last decade, you’ll be familiar with the drill: the Scottish Government selects a product category or an issue and decides that it’s the root of all evil. Alcohol, tobacco, fat, sugar. Take your pick. Then it realises that fixing the root causes of abuse of said category or product would take generations to solve – and the Government doesn’t have that amount of time to play with, so it goes for the easiest solution: restrict supply.
Let’s be honest, alcohol abuse, obesity and tobacco consumption are problems that have developed over generations and are going to take generations to solve. The reasons why adults over-consume has very little to do with price and availability and everything to do with wider societal issues.
When the government then decides to act to further its progressive agenda, more often than not this then involves local retailers and the whole convenience and grocery trade supply chains making massive and invariably very costly changes to the way they operate in order to comply – and all based on evidence that is often poor quality at best.
As far as I can see, there’s very little analysis going on of whether all the tobacco and alcohol legislation actually achieved the goals set out for it. We appear to live under an ‘on to the next thing’ government with little thought for whether previous attempts at legislation worked or not.
So now we have a dark tobacco market with plain packs, we have some of the most draconian drinks legislation in the western world, we have minimum unit pricing, we have the threat of bans on certain promotions and bans on where products can be sited in-store. And soon we will have a sugar tax on soft drinks.
What is remarkable is that, after the initial battle to question whether proposed legislation is sensible – or indeed legal – the manufacturers involved, and the local retailers involved, have shown very willing to comply with rules and regulations that frankly make it much harder for them to run sustainable businesses.
With hastily-drafted legislation comes badly-worded laws – and if you want to go looking for loopholes in tobacco and alcohol legislation in particular, you could fill your notepad in double quick time.
As the most obvious example, consider the fact that Scotland’s 32 councils can’t even agree on how to interpret the current licensing legislation themselves – and receive no support from the Government on how to do so.
Yet despite this, the industry has uniformly decided to play it straight, ignore the loopholes and carry on with the “spirit” of the legislation, rather than picking holes in the wording and seeking to exploit loopholes to get around the laws. That deserves some credit, surely. But you’ll wait a long time on anyone thanking the local retailing industry and supply chain for doing their bit, even though they often fundamentally disagree with many aspects of the legislation.
The Government seems to overlook the fact that local retailers have long had their customers’ interests at heart and have strong bonds with the communities they serve. The reason this happens? Look no further than last year’s SGF Conference when the Government’s position was made clear: “When left to their own devices, people make bad decisions,” was the Government’s statement, made on stage in front of the audience. So there you have it. The Government knows better than the people that voted it in.
So, to the latest industry to get it in the neck: soft drinks. Next month’s sugar tax is another heavy-handed tool to force the industry down the road of removing sugar from its drinks. The issue that stands out like a sore thumb here is the fact that the soft drinks industry has been migrating towards low and no sugar for a long, long time without any encouragement from the Government – and usually in response to changing consumption patterns.
Diet Coke has been on sale in the UK for about 30 years! Additionally, Coca-Cola European Partners has launched no fewer than 29 drinks since 2005 with no or less sugar.
What’s more, in the last couple of years pretty much every penny of marketing spend from the major soft drinks manufacturers has gone on drinks that are low or no sugar. Irn-Bru Xtra, Diet Coke, Coke Zero Sugar, Pepsi Max and Diet Pepsi have been soaking up all the marketing dollars in recent years, to all intents and purposes.
The same story plays out when it comes to NPD. Very few soft drinks launched into the UK market by the major players in the last few years have been high in sugar.
But does the industry get praise for helping move the national diet issue forward? No, it gets harsh legislation and a combative approach that portrays them as soulless purveyors of obesity and the reason behind our nation’s admittedly poor general standard of health.
Once again, the Government has largely refused to engage with the industry on the issue in any meaningful way. It hasn’t been quite as bad as the situation during the tobacco years, when the Government point-blank refused to even talk to the tobacco manufacturers, but the conversations that have happened have not led to any significant change in the way Government has approached the sugar tax.
Them and us approach
The Government’s apparent fascination with creating a “them and us” situation on every key debate is baffling. Surely it would be wiser to engage enthusiastically with interested parties, hear all the arguments then make an informed choice? Instead, it looks for all the world that the Government makes up its mind then digs its heels in regardless of what it subsequently learns on any given issue.
The result is yet more impractical and very costly changes to an industry already suffering badly. What’s more galling in this particular instance is that the direction of travel for the soft drinks industry was towards low and no sugar anyway. And the argument that the travel wasn’t quite going quick enough just doesn’t stack up.
As local retailers are aware, the current soft drinks market is increasingly becoming unrecognisable from the way it was just five ago. It is a vitally important category for local retailers and that fact should not be lost in the debate. A partnership approach is needed now more than ever between Government and industry if the very future of the local retailing industry is not to be thrown into doubt.
Let’s not forget that retailers and industry are not the bad guys. We’ve been working for years on improving the health of our customers and we receive virtually no thanks or praise for being there at the coal face, helping to change consumer habits – but we need support and what we do not need is constant castigation and dismissal of our legitimate commercial interests. No profits means no convenience stores – and where would that leave Scotland?
Scotland’s soft drinks market is now worth around £848m [IRI, Dec 2017] and continues to be one of the most profitable categories for convenience retailers and the second-highest bought category in Scottish convenience, after newspapers [HIM, 2017].
And the fact remains that the soft drinks industry is on board with shifting consumption patterns and is working exceptionally hard to accelerate that shift to low and no sugar drinks.
Adrian Troy, Marketing Director at Barr Soft Drinks, comments: “As the market has evolved, more and more people are looking for low and no-sugar options that deliver all the taste of their favourite soft drinks, for fewer calories. Barr Soft Drinks is encouraging retailers to ensure that their soft drinks range includes a wide variety of regular, low and zero sugar variants.”
As well as reducing sugar in its iconic Irn-Bru core product, AG Barr now offers a whole array of low and no-sugar drinks, including Irn-Bru Sugar Free (Scotland’s No.1 low-calorie flavoured carbonate [IRI, Dec 2017]), Irn-Bru Xtra (which has delivered £11m of sales since launch), Rubicon Spring (sparkling spring water with fruit juice and only 15 calories or less per bottle), Rockstar Revolt (zero sugar energy drinks), Snapple Iced Tea (no added sugar range and just 10 calories per bottle), San Benedetto (12% juice soft drink, less than 5g of sugar per 100ml) and Strathmore water.
It hardly looks like the company has been resisting the shift to low and no sugar, and it’s the same story at the other giant of the soft drinks industry in Scotland, Coca-Cola European Partners (CCEP).
While CCEP has chosen to go down a different route with its full sugar Classic Coke variant, retaining it as a special occasion treat option for customers, the vast majority of marketing spend and NPD is on low and no sugar lines, and long has been.
Amy Burgess, Trade Communications Manager at Coca-Cola European Partners, says: “For retailers, offering a wide choice of different products, including a range of flavours and variants, as well as pack formats, is the key to making the most of soft drinks sales.
“Especially important is keeping a wide selection of low or zero sugar drinks, and retailers should constantly review their soft drinks range as manufacturers innovate new lighter options to meet rising consumer demand for healthier options.
“Throughout 2017 we have continued to focus on innovation in response to shifting consumer trends like health and wellness, premiumisation and convenience.”
Note once more that CCEP has launched no fewer than 29 drinks since 2005 with no or less sugar, helping people make informed choices whilst reducing their sugar intake. A great example is Coca-Cola Zero Sugar which launched in summer 2016 and was supported by a £10m marketing campaign, the company’s biggest brand investment for a decade.
Burgess again: “Since then we have distributed 15.4m samples nationwide to drive trial of Coca-Cola Zero Sugar and have launched two new flavour variants – Coca-Cola Zero Sugar Vanilla and Coca-Cola Zero Sugar Cherry. As a result, Coca-Cola Zero Sugar has become the fastest growing cola brand in Great Britain, up +41% [Nielsen, Sep 2017]. Now worth £136m in value in Grocery, Coca-Cola Zero Sugar is the fourth-biggest cola brand in the country.”
What that means is that Zero has attracted 1.6m more households so far – and the company has just unveiled a £10m rebrand of Diet Coke and launched two new Diet Coke variants and one for Coca-Cola Zero Sugar. Does that sound like a company not trying hard enough to convert shoppers to low and no sugar?
Lucozade Ribena Suntory has likewise reformulated all its products to fall into the “less than 5g of sugar per 100ml” band of the Soft Drinks Tax and means the manufacturer’s core portfolio is entirely “sugar tax-free” as well as offering shoppers a low or zero sugar brand alongside the reformulated ranges of each core brand.
These are only some examples from three of the largest soft drinks companies operating in the UK, but the trend is repeated more or less across the board for drinks companies large and small. It is abundantly clear that while some of these moves to focus on low and no sugar were undoubtedly driven by the impending sugar tax, many of them have been in the pipeline for years and reflect a natural shift in consumption patterns.
Has the Government’s intervention been strictly necessary? Is it just jumping on a politically risk-free bandwagon and hoping to make some political capital from a trend that was well underway on its own anyway? And has it potentially caused significant damage as manufacturers shift investment into complying with the sugar tax and away from other areas where there would arguably be more benefit for all stakeholders – wholesalers, retailers and shoppers included?
The truth is that we will never know but the sugar tax is just the latest example of the Government acting with what many see as a wilful disregard for industry and for local retailers. This approach cannot go on forever. The future must be more collaborative if the local retailing trade is to enjoy a sustainable future and remain able to serve communities across Scotland that rely on their local store, as the recent snow-fuelled chaos demonstrated only too clearly.