George Osborne’s announcement of a tax on sugary drinks has sent shares tumbling in the soft drinks sector.
Osborne’s pledge in today’s budget that from 2018 there will be a levy paid by manufacturers on high sugar soft drinks caused an immediate sell off of UK-listed beverage firms.
Worst hit was Vimto producer Nichols (NICL), which saw its shares drop by more than 10% before stabilising to trade 4.6% down to 1,245p by late afternoon.
Also hit was Irn-Bru manufacturer AG Barr (BAG), which is currently down 2.6% to 539.5p but fell as low as 524p soon after the announcement in the Commons.
Robinsons owner Britvic (BVIC) – praised by Osborne for reformulating much of its range to lower sugar products – is down 2% to 695p.
Further afield, Coca-Cola’s European bottling operation Coca-Cola Enterprises (CCE) is down 1.4% to €49.52 and Coca-Cola (KO) itself is down 1.1% to €44.74.
No all companies were negatively affected by the news. Stevia producer PureCircle (PURE) leapt 7.2% to 412.7p on the announcement.
Tate & Lyle (TATE) was initially driven down 4% on the news despite its primary business now centring on sugar substitute sucralose and other ingredients after selling its sugar business in 2010. The shares subsequently recovered to trade 0.9% down for the day at 564.5p.
Analysts at Liberum commented: “While we expect a degree of reformulations will occur, we expect the tax will ultimately be passed on to consumers. Therefore the ultimate impact will depend on consumer preference and reaction.
“Ingredients companies that supply sugar alternatives such as PureCircle and Tate & Lyle are best positioned to win. The impact on beverage companies is less clear due to potential substitution within a diversified beverage portfolio.”
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