In April 2018 a tax of 20% will start adding to the prices of added-sugar soft drinks such as Coca-Cola. A surprisingly early hit from this tax has affected sales of Lucozade Energy. In the year to September 2017 Lucozade sales in the UK were 8.4% down on the previous year. This represented a £25 million loss of revenue. When he first heard about the tax, Lucozade’s boss Peter Harding decided to ‘reformulate’ his products – changing the recipes to avoid the tax. In July 2017 the new version of Lucozade Energy Orange was launched, with 65% less sugar. At 4.5 grammes of sugar per 100ml it was below the tax trigger point of 5 grammes. Lucozade Original now has 48% less sugar than its previous 8.7gm.
At the time of its July launch Lucozade announced triumphantly that ‘advances in sweeteners had allowed it to get the same taste (for Lucozade Original) with far less sugar.’ Unfortunately some users didn’t agree, including several who tweeted comments such as: ‘Oh dear, just had my first bottle of Lucozade in ages. What is that taste? It’s rank!!’ Another described the recipe as ‘the worst I’ve ever tasted.’ Lucozade regulars were complaining that the artificial sweeteners were the cause of the ‘horrible’ taste.
In November 2017 Harding kept a smile on his face, announcing that “We know these shoppers will return. We’re delighted that 13 million shoppers have already converted to our new lower sugar recipe.” But Mr Harding would not be pleased at the sales figures shown in the graph below. And he might wonder whether he should have followed the Coca-Cola approach: keep the recipe unchanged and just pay the 20% tax. Outline two reasons why Lucozade might have used market research before deciding whether or not to reformulate Lucozade Energy.