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Will sugar levy be a bitter pill to swallow for Irn Bru-maker AG Barr?

The “sugar levy” which was introduced in the March budget is a bitter pill to swallow for soft drinks companies. The tax will be levied in two bands; a higher rate for drinks with more than 8g of sugar per 100ml, adding 8p to the price of a can and a lower band for drinks with between 5g and 8g of sugar which would add 6p per can.

Irn Bru-maker AG Barr reports earnings this week and investors will be looking for some guidance from the company on the possible impact of the sugar levy and what actions the company plans to take. The way it addresses the issue could be a big factor in the share price performance following earnings.

Soft drinks companies are considering suing the UK government for singling out the industry which is one of many that make sugary products. It seems likely AG Barr will pursue all of its legal options first before taking further action to hike prices, remove sugar from its drinks or more actively promote diet alternatives.

The change to disability benefits didn’t last long in Chancellor George Osborne’ s budget so AG Barr will be hoping the sugar levy has a similar fate.

Chart of AG Barr from March 16 to March 23

 

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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.