Thesis
The price is right? : producer, retailer and consumer decision making within the UK soft drinks market
- Creator
- Rights statement
- Awarding institution
- University of Strathclyde
- Date of award
- 2026
- Thesis identifier
- T17985
- Person Identifier (Local)
- 201486604
- Qualification Level
- Qualification Name
- Department, School or Faculty
- Abstract
- The main thread that runs through this thesis is one of ‘price’. The study is based on a combination of academic research and the experience gained through a thirty-year career working as a practitioner in the soft drinks industry. The thesis is supported throughout by access to high quality electronic point of sale (EPOS) data and rigorous econometric analysis. The thesis contributes to existing research in two specific ways. The first relates to consumer decision making at point of purchase and the influence of the behavioural concept of left digit bias, with the associated practice of ‘pricing in the 9’s’. This is examined in chapter 1, which reviews the basis for the concept and the near century long history of existing literature on this behavioural heuristic. The chapter shows that the largest UK grocery retailers’ pricing strategies are inconsistent with this substantive body of academic research, which proposes that profit optimisation is best delivered through the use of psychological 9 ending price points. Indeed, the study shows that across the top 100 grocery brands the three largest UK retailers, accounting for over 50% of the market, actively avoid the use of 9 ending price points. The chapter further highlights a unique market where the actual brand owners themselves rather than retailers set the individual product price points. This occurs through the extensive use by retailers of price marked packs (PMP’s) within the 34,000 UK Symbol and Independent (S&I) grocery stores in the UK. This study shows that brand owners, who choose and then print the prices on these packs, are some 18x more likely to use 9 endings than their three largest retail customers. Finally, within these S&I stores the study takes advantage of a natural experiment where the iconic and popular UK soft drinks brand IRN-BRU increased its PMP level by 1p from 99p to a £1 ahead of any pricing moves from close competitor PMP’s. Using two different, difference-in-differences (DiD) methodologies the analysis shows that the 1p increase and move away from a 9 ending to a round pound had no impact on unit sales. The second area of research, which is the substantive part of the thesis and covered in both chapters 2 and 3 is a comprehensive review of the impact of the introduction of the UK Soft Drinks Industry Levy (SDIL) more commonly referred to as the sugar tax. The SDIL was both a surprising and significant exogenous shock to the industry when it was announced in March 2016 with a deferred implementation date of April 2018. The structure of this ‘tiered tax on the use of sugar as a raw ingredient’ was unusual in that some soft drink brands and categories were already exempt, whilst for the remaining brands it could be partially or even fully avoided if substantial reformulation was undertaken. Chapter 2 provides both an overview of the structure of the UK SDIL and existing literature on sugar taxes before focusing on the supply side response to this potential significant increase in the cost price of such a key ingredient. The analysis combines the EPOS data with longitudinal nutritional information and a variety of event-study specifications to show that all but a few global soft drinks brands reduced their sugar content and hence avoided the SDIL. Furthermore, the study shows that this reformulation accounted for the substantive part of the circa 6,600 calories per capita reduction delivered through the policy with more than 80% of the reduction occurring due to the decisions and actions taken by brand owners and producers in the two-year period between announcement and implementation date. Chapter 3 considers the more traditional demand side impact of a sugar tax by analysing the way the SDIL was passed through to shoppers on the brands who choose not to reformulate. It shows that the tax was at least fully passed through with both some actual over-shifting and some significant mix effects creating an illusion of over-shifting. The analysis shows that consumers responded by reducing their consumption of levied drinks by around 18%, indicative of an inelastic response, especially in the drink-now and energy segments of the market. The analysis also reviews changes in the pricing of brands who were either exempt, or had reformulated to avoid the levy, and the substitution from regular into diet drinks in response to the SDIL. Finally, following the first inflationary plus increase in SDIL rates in April 2025, a practice that will now take place on an annual basis, the chapter examines the hypothesis that the retail price impact of these annual increases will be very different to the initial SDIL implementation, with significant over-shifting and some potential unintended consequences. At the end of the 3 chapters there is a final section to the thesis which looks forward to consider future developments in both UK grocery market pricing and the UK SDIL. It considers the link between the SDIL and UK health outcomes, before discussing how the success of the SDIL could inform policy in other countries and other categories which contain products considered to be high in fat, sugar and salt (HFSS). With the Oct 2024 announcement that a consultation is to take place on the future development of the UK SDIL, the thesis concludes by considering what these policy developments might be, and what impact they may have on the market.
- Advisor / supervisor
- Dickson, Alex, 1979-
- Gehrsitz, Markus
- Resource Type
- DOI
- Embargo Note
Relations
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