Commentary by Lee Bowen, Head of Operations and Development at Capcon Limited
Following the introduction of the Soft Drinks Industry Levy (Sugar Tax) by the UK Government, many businesses have now replaced standard postmix cola with reduced / zero sugar alternatives such as Pepsi Max and Coke Zero. While zero sugar postmix has now become the norm, package products haven’t followed the trend.
Many businesses are still stocking products that are impacted by the additional tax. This isn’t restricted to just cola; other packaged minerals are also impacted by the tax for example tonic water is also impacted.
A recent poll, conducted by Capcon Ltd on behalf of a large restaurant franchise client in the hospitality sector, showed that just 10% of customers said they wouldn’t choose light tonic if standard tonic was not available.
This leads me to ask the question; as hospitality businesses are most likely to make more profit from slimline tonics (which do not incur ‘Sugar Tax’), and knowing that 90% of those surveyed would be happy with a slimline tonic, why do restaurants, pubs and hotels still stock both ‘full fat’ and sugar-free options?
Let’s look at an example, to demonstrate my case:
- During August a premium hotel chain we work with sold 5,690 bottles of standard tonic against 3,504 light tonic across their estate.
- The gross profit difference between the two products is 6%.
- If standard tonic had been removed from sale, and only light tonic stock made available, the business would have generated an additional £740 in profit for the month.
- That’s a significant £8,868 in additional profit for the year.
I should add that this comparison was completed on just one brand of tonic water; the company also stock other brands.
There are also several additional products that could benefit from this level of analysis. For example, energy drink products have on average a cost price difference of 11 pence between the standard and low sugar versions, resulting in an average gross profit difference of 4.5%.
These are just a few ways that hospitality businesses can – very simply – boost their bottom line!
For more information about how Capcon can help you assess your current stocktaking and selection systems, or to find out more about how we can help you improve the profitability of your hospitality sector business, please get in touch.
