Monday 16 April 2018

Reformulated Lucozade is tanking

Camilla Cavendish in last week's FT...

By designing a tax with two bands, Chancellor George Osborne created exactly the right incentive for companies to reformulate. Responsible brands and companies such as Suntory-owned Lucozade and Tesco have done so. Coca-Cola has held out, not wanting to dilute its legendary taste.

The boss of Suntory a couple of weeks ago...

Ribena and Lucozade's top boss says the introduction of the sugar tax today is a milestone moment that could secure the future of the Coleford factory that makes some of Britain's most iconic brands.

Today, back in the real world...

Lucozade has lost the title of Britain’s biggest energy drink brand to rival Red Bull following a backlash over its reformulation.

Lucozade Energy has lost £62.6m in value over the past year - the largest loss in the soft drinks category - as consumers turned away from the new lower-sugar formula.

According to IRI figures, Energy’s value sales were down 18.6% to £273.6m, while volumes fell 18.9% to 162 million litres, after Lucozade changed the recipe last April to avoid the levy.

Oh dear. How sad.

Meanwhile, Red Bull and Monster - two energy drinks that have not caved in to nanny statists - are booming...

Conversely, rival Red Bull added £20.5m to sales of its standard variant, taking its value to £279.6m and assuming the title of Britain’s bestselling energy drink.

... Coca-Cola has taken a similar approach with Monster, resulting in a £19.4m increase in sales of the standard variant, while low-calorie options soared by a further £14.1m.

I suppose that the execs at Suntory (the owner of Lucozade and Ribena) will be telling themselves that these figures all predate the sugar tax and that the money will roll in once people have to pay more for sugary options.

Unless they are totally mad, they must have taken the view that they would lose more sales from their drinks being more expensive than they would from making them taste disgusting. This was always a doubtful proposition and it now looks highly unrealistic. Would they really have lost more than 18.6% of sales if the price had gone up?

How much pain can the company take before the shareholders demand a U-turn?

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