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RETAILERS AND SOFT-DRINK manufacturers have altered the recipes of some of their products in order to avoid the new sugar tax, which comes into force today.
The new tax sees 30 cent per litre added onto sweetened drinks that have over 8g of sugar per 100ml. Drinks with a sugar content of between 5-8g per 100ml are taxed at 20 cent per litre.
It means that cans of popular brands like Coca Cola or Club Orange will go up by 10 cent.
Coca Cola has 10.8g of sugar per 100ml while Club Orange has 13g per 100ml.
Larger 2l bottles caught by the tax could increase by 60 cent and retailers have been reacting to the change.
Own-brand products generally sell at lower prices than their branded competitors and a 60 cent hike to these products could have a significant impact on their overall price.
It’s for this reason that retailers like Tesco, Aldi, SuperValu and Centra have all changed the recipe of their own-brand products to ensure that the sugar tax does not apply.
In most cases the sugar has been reduced and replaced with other sweetening ingredients.
Aldi said that it has worked with Irish drinks manufacturer C&C over the last 12 months to “reformulate” its own-brand products to ensure that they have less than 4g of sugar per 100ml.
“Our commitment to our customers is we will never be beaten on price and will always offer the best value possible. We are equally committed to supporting our customers in making healthy eating choices,” Aldi’s Finbar McCarthy said on the eve of the sugar tax’s introduction.
Tesco Ireland has made a similar change and the retailer said it has “worked hard” to reduce sugar while ensuring that the taste of the product does not change.
“We’ve also been working with our branded soft drink suppliers to minimise the risk of higher prices for consumers and encourage consumers towards lower sugar drinks,” a spokesperson added.
Musgrave, which owns the Super Valu and Centra brands, has also made changes to its soft drinks “to provide consumers with a healthier option at the same price”.
Other products which are subject to the tax will increase in price at SuperValu and Centra stores.
Regardless of the change in price difference between own-brand and branded soft drinks, DIT retail management expert Damian O’Reilly said he believes the sugar tax won’t have a huge impact on consumer behaviour.
“They’re impulse purchases. If they were moved to the back of the store like alcohol then you could see some change but I don’t think price is the biggest contributor to decisions on impulse purchases. What it could do is change their impulse purchases from sugary drinks to chocolate or something,” he says.
O’Reilly also says there is even less evidence to suggest that the tax will have a greater effect on the spending habits of people in lower socio-economic groups.
It could however see retailers advertising on the point that their products have lower sugar and make people think more about healthy options, he says.
Indeed, all of the retailers who provided details to TheJournal.ie mentioned the fact that their products are “healthier” or now have less sugar.
“I think people who want to buy a Coke will still buy a Coke if it’s on sale in the same place,” O’Reilly says.
“Personally I don’t think it will change purchasing patterns, customers will just spend a little bit more.”
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Looks like the financial faith in Ireland has been more than restored thanks to the efforts of this government and the patience of it’s people. This is excellent news. I look forward to an improved credit rating in the near future.
Your right, great news. Another step forward to recovery. Slow steady progress is all anybody can hope for.
It’s more debt that will force inflation! ………… How much more debt do we need ?
Why not buy them ??? Sure its such a safe bet. In any other investment there is chance of losing money.
But not with irish bonds nooooooo. We will pay out even if it means raping our own people
Why if the bond was 4 times over subscribed would you not lower the interest rate? I don’t get it
Good question … I also would like to understand that.
Maybe the rate is fixed before the auction, and they went for a high enough one to be sure it attracts enough people and doesn’t look like a failure?
That’s a brilliant question. Brian can you help us out again.
Presuming this is a zero coupon bond (no annual payments), it’s essentially a note saying “we will pay you €1000 in 10 years time”. The price the market is willing to pay for this dictates the interest rate, if I’m only willing to pay €800 for the deal then it’s a 25% interest rate over 10 years, which is 2.2% annually. Presumably selling more would have made them worth less, increasing the interest rate (also confidence might go down if we sold too many).
Thanks Brendan.
There is one thing I still don’t get. You explained that the price of the bonds (and thus interest rate) depends on the demand, and therefore if Ireland had sold more of them the interest rate would have been higher, right?
If I get that right, I don’t understand how it makes sense to say that there was an demand for 12 billions … As the 12 billions on offer would have been for something different than what was sold (bond with higher interest rate). And if lets say 12 billions were on the table for potential 5% bonds, and maybe by offering 5.5% we could have raised 20 billions?
You know what I a getting at? If you change the quantity sold you change the interest rate, so how can you say that for a given quantity that was sold with a given interest rate, the demand was actually higher?
Boris
Ireland (NTMA) was hoping to borrow €3bn. Various different investing institutions made offers of how much they were prepared to lend and at what interest rates. All offers totalled €12bn so in theory NTMA could have borrowed that much if it had wanted to. Instead it chose to borrow to the tune of €5bn at the best interest rates on offer.
I’m not really sure why they chose to borrow an extra €2bn above what was hoped for – my view is that if we had waited until that money was needed we might have got it at a better interest rate.
That’s my understanding of the situation anyway – maybe someone more knowledgeable than me can correct me if I’m wrong…
Ok, makes sense!
What exactly is going on here? What are these bonds and who wants to buy them? Does it mean that we get rid of the debt and just pay the interest instead? Can someone explain? Also I’m looking for facts, not opinion with no actual information.
This should explain everything, http://en.wikipedia.org/wiki/Trifecta
Regards,
Adeabyo
Thanks Adebayo, but i’m none the wiser. We’re probably talking about “donkeys” here in the financial markets, not races horses.
Anyone else? People seem to know what they are talking about here. Could someone explain?
In all seriousness. I would love a little refresher in all this bonds business myself as a lot of people just read the misinformed comments and regurgitate.
They are Sovereign Bonds issued at 10 years. This means that we have as most country’s normally do and we did up to September 2010 went to the market saying that we are looking to borrow money for 10 years. Every year we will pay a coupon or better known as the interest only back to the lender and at the end of the 10 years repay the full €5 billion we originally borrowed. What normally happens is we borrow another €5 billion to roll over the debt. Anytime we borrow this way we add to our national debt. This does not affect out existing amount of debt, it’s still there and growing :(
The reason the lending Is such big news is that we are borrowing money from the markets (Private investors, pension funds, banks and other such institution) instead of a direct loan from the EU or IMF where they instruct us on how the money is spent. When we borrow privately they for have any direct oversight in how we spend the money.
Hope that provides some clarity :-)
Kev – We’re spending about a billion euro a month more than we’re raising in taxes. We have to make up the gap by borrowing.
Before the bailout, the cost of borrowing got crazy, which effectively meant we had no choice but to go to the IMF, EU and ECB. They loaned us the money which kept public services running.
NTMA has now been able to borrow in the markets, which (probably) means that we won’t need a second bailout. We still have to pay it back eventually, but not for 10 years, at which point we will probably issue new bonds.
What we do have to pay every year is the interest. That looks to be somewhere less than €215 million a year. The bailout interest rate is 5.8%, so borrowing the same amount from the Troika would theoretically cost us €290 million a year.
The rest is opinion :)
It does Brian (and Emily), thank you very much (judging by my red thumbs this site is becoming less and less about actual information, nor do people want to seek it).
I’m assuming that inflation will mean that we would have to pay less in ten years time? But we would have returned to the markets, so we would actually have an economy at that stage hopefully? In saying that, and please correct me if i’m wrong but isn’t this whole “selling debts to lenders at interest” thing creating the bubble in the markets that is currently screwing us over?
Also Emily are you saying we’d have the option to push the bonds furter down the line in ten years by doing something similar? I think i remember hearing that the UK are still paying off WW1 and WW2 debts today, is this the same story?
Great work Stoksey
We’ll have to pay back €5bn, but you’re right, inflation may have eroded that. If we have inflation of 2.5% a year, that will only be worth about €3.9bn in today’s money. (Only!)
And yes, debt is regularly refinanced – in fact it has to be unless you can run budget surpluses. So we will borrow the same €5bn in 2023, or slightly earlier. If the economy’s prospects are better, then it should be at a better (i.e. lower) interest rate.
Lenders don’t actually want their capital back, except where they can get a better return for their perceived risk elsewhere.
Thanks very much Emily you have made all this much clearer to me.
Thanks Adebayo and likewise to Emily for a fantastic explanation.
But look Ignoreland!!! People reading these comments who would have an opinion without actually reading any information themselves, might actually learn something today thanks to Emily and Brians explanations.
For the benefit of readers who may not have seen it before…
Cheers Gavan
I did! thanks guys!
Bank of Japan, the US Fed and British Central Bank are lending at record low levels. ‘Investors’ borrow from them to lend to high yielding government bonds like Irish ones. A no-brainer, except it all it does is create another bubble and ultimately someone (typically your average tax payer) will pay!
Piling debt on debt. Sure why not. Those lavish salaries and pensions need a good servicing.
Well to be fair every state sells bonds as part of economic system. But like any investment it is a risk unlike here where your 100% assured of a profit
Do you know even the most basic concept of economic management? Practically every country in the world borrows money to run their economies and the debt that they take on is rolled forward over time. Debt is then reduced by inflation over a period of time and also by growth.
And by the way, as well as the lavish salaries and pensions you talk about, the money we borrow also goes to pay the average wages that pay for nurses, teachers, guards and many more essential services as well. As a country we can’t afford not to borrow at the moment. And its better than we borrow independently from the markets as opposed to a bailout and the restrictions that come with that.
No worries Kev.
You’ve nailed the issue of growth and borrowing on the head. The only way any society can pay down debt which has interest is by hoping to inflate away the real cost of it in the future. Being aboe to get money lent to us on the financial markets doesn’t guarantee that our economy will improve but some would take the confidence shown by other to lend tony as a sign that they believe we are a good bet to grow.
There is a important place for opinion in the comments section as long as its backed by facts but most important is that when people ask for some
clarity they get it.
Have a great day Kev
@ The Irish Bull – Bond selling essentially provides cashflow. If we don’t sell bonds in the international markets, the only income the state is the tax take, and a large chunk of the tax take comes in at one point in the financial year. I honest don’t any Irish government, composed of any party, would be able to keep the country running if it told it’s employees and service providers that they would get paid once a year, a year in arrears. If you have an alternative solution that does not involve selling bonds or regularly borrowing from an outside source, there’s a well-paid job and possibly a NObel prize waiting for you.
I see alot from party HQ are here today.
Yawn. Such lazy commentary. Why is that anybody who thinks that some of the government’s action are good is automatically labelled by people like you? You could be accused of the same for a different party!
Ultimately the fact the Ireland can borrow again in the market and not have to avail of a second bailout and the restrictions that come with that is good. No matter who was in government this was eventually what they were aiming for.
No Jim merely commenting on the red thumbs recieved by the first post.As for getting back into the markets why wouldn’t we?our government has proved beyond doubt no matter whether legitimate or otherwise all debts will be repaid.
@ Jenny – give it a rest, if you’ve nothing to say except blow raspberries..
Q a 2nd wave of property madness and sky high prices soon.
Somebody in the Sunday Independent just got a stiffy
Not really. If it’s a major success that the country can borrow at 4.3%, then there’s sod all chance of banks being able to make any money giving out mortgages at 4.5%. They really need to be able to lend at 6%, and that means about another quarter coming off property prices.
And that’s partly why they don’t want to write new mortgages. It undermines the capital values of the ones they have.
Ponzi fiscal scam and were still paying the price for this rip off. Biggest robbery of a nations coffers by the present political and business establishment ran up a €64 billion and counting.Euro being internal devalued in Ireland. since some group cleaned out one of the northern banks of £26 million was a halfpenny place in comparison.
Al
Face it . You’re economically and fiscally illiterate and can only resort to silliness when good news like this comes along!
@ Al – exactly what I wrote to Jenny above – If you’ve nothing to add except slurs and unfounded and uninformed rumours, then please give it a rest.
Not just economically and fiscally illiterate, but gramatically illiterate too…
Nicholas,
These bonds are being bought by the ECB to try and give the perception that the Irish economy is returning to a fiscal normality. If you can’t see that we’ll your loss.
Peter,
Only person who can’t see a Ponzi derived ECB bond buying scam and the illiterate fiscal falsehood of such an action is yourself.
@ Al – oh dear…
1. Where exactly are you sourcing your information? Have you a NWO cigarette-smoking man hidden int eh shadows. Could the rest of us just not handle the truth?
2. Why do the identities of buyers of these bonds make a difference to the yield that we’ve received on the bonds? No whatsoever.
A little less conspiracy theorising and a little more understanding of the subject at hand would do wonders for your credibility.
STOP PRESS: The DCC is cleaning the streets of Dublin to give residents the false perception that the streets are being cleaned. Don’t be a gullible fool and fall for their illusions. Just because the streets have been cleaned doesn’t mean that the streets are cleaner than before they were cleaned. Um…..?
Can you see the flaw in my argument here, Al?
Wonder
ryan o ,Frank and were jammin they must strangly not be available for comment on this ha !
The names Bond….. James Bond
As a farmer I would like to ask is inflation guaranteed ? I am only asking because in my particular occupation my wages from 2000 to 2003 were copperfastened with no indexlinking and now the sector as a whole is being “given” 10% less than what was set in 2000 which means for the next whatever years the sector as a whole is operating on an income that is 10% less than it was in 2000 to 2003. Although the details are sketchy it also seems that there may be a reduction (modulation) into the future !
The only way I can keep step with inflation is to increase the cost of my produce ………. that means I will have to get an increase of between 10 and 20 % in the price of my food to compensate ….. this can’t happen in a country with children already fainting in the classroom from hunger ! .
I’m not greedy but how am I going to survive without deflation? and this is not a “poor me rant” I don’t really care about money …I hate the bloody stuff actually but I would like to think that I could keep my children warm !
have your say