Britvic revenue forecast to fall 5% over UK sugar tax

Levy will be introduced in 2018, giving firm time to boost low-calorie variety portfolio

British chancellor George Osborne said the levy on the soft drinks industry will be introduced in two years’ time, in two bands depending on how much sugar is in a drink. Photograph: Getty Images

British chancellor George Osborne said the levy on the soft drinks industry will be introduced in two years’ time, in two bands depending on how much sugar is in a drink. Photograph: Getty Images

 

Goodbody Stockbrokers have estimated the sugar levy on soft drinks in Britain, which is due to be introduced in two years’ time, will have a 4-5 per cent impact on Britvic earnings.

British chancellor George Osborne said the levy on the soft drinks industry will be introduced in two years’ time, in two bands depending on how much sugar is in a drink. Mr Osborne said the levy would raise about £500 million (€636 million) annually.

Goodbody noted the main rate charge will apply to drinks with above 5g of sugar per 100ml , with a higher rate for drinks containing more than 8g of sugar per 100ml. The details of the levy will be decided this summer for legislation next year and will then be implemented from April 2018 onwards.

“We estimate that a 10 per cent tax would be a circa 4-5 per cent hit to Britvic’s group EBIT,” Goodbody analyst Patrick Higgins said.

He said it is important to note that this tax will not be introduced until 2018 at which point Britvic will have further progressed its portfolio to diet or low-calorie varieties.

“This currently sits at over 60 per cent of GB sales, having recently reformulated all its Robinsons products to have no added sugar,” he said.

He said Coca-Cola only generates approximately 40 per cent of sales through diet varieties, and as such, Britvic is better positioned than most to handle this levy.