This post was updated August 1, 2017.
A Cook County-mandated sugar-sweetened beverage (SBB) tax (or “soda tax”) went into effect August 1, 2017, that adds one-cent-per-ounce of beverages containing sugar or artificial sweetener, including juice drinks, soda, sports drinks and flavored waters. The revenue from the tax is set to be allocated toward promoting public health and reducing obesity rates in Cook County. Similar taxes have been proposed or have already been implemented in many localities including Berkeley, Calif.; Boulder, Col.; Philadelphia; and Seattle—but with varying results and amid much protest.
For many people supporting the mandate, the increased revenue and health-positive motives behind the tax outweigh the burden. But understandably, retailers and beverage manufacturers alike are concerned about what a price hike on their merchandise could mean for sales, and many are fighting the county to overturn the ruling. We can look to Philadelphia to see that the tax has decreased sales of these types of beverages, clearly affecting the retail economy there. Now that the law has officially done into effect in Cook County, what will be the implications for our industry? How can businesses adjust?
Politics aside, this type of tax is something that many retailers and manufacturers around the country may have to deal with sooner or later. And it’s something that is very relevant to us here at InContext, because it drives us to work with clients to figure out how our VR solutions can help them take steps to minimize the negative impact.
How will a tax affect shoppers?
Let’s say a soda tax is headed your way. Before sales are actually impacted due to an increase in prices from the tax, virtual testing can help determine how shoppers’ behaviors would change. Maybe some shoppers are more loyal to certain brands than others. Or perhaps you want to test how exposure to literature or social media messaging on the effects of sugar will alter their mindset. We can conduct shopping exercises in a VR environment against a control to learn how a price hike will alter pick up rate and buy rate. This can help you understand exactly how the tax will affect sales before anything goes into effect.
What will it mean for shelf space?
Now you know how brand and category sales could look, but how will it affect inventory and space on the shelf? If you’re a retailer or category captain, you want to make sure you have the right assortment, arrangement and grouping of products that will offer the most beneficial return. By running a ShopperMX™ Shelf Indicator that captures attitudinal and sales metrics, you’ll be able to quickly make data-based decisions on how to manage the shelf—from where to place products to optimal number of SKUs—in order to reduce risk.
Is it too late to adjust?
Fortunately, VR allows companies to work faster for less spend—which means even if you’re a manufacturer or retailer already dealing with a tax like this today, there are still measures you can take to make sure you’re maximizing your returns when it comes to in-store planning. Perhaps you want to know if new packaging or signage will help offset the revenue lost from the sales tax: instead of spending time and money developing prototypes to then test in a costly mock center, save resources with VR by learning how a new concept will resonate with shoppers before you invest.
And when it comes to category reviews, VR solutions can give you a leg up from the competition with accurate behavioral and attitudinal data that will help convince your retail partners to execute your concept.
Whether it’s a sugar-sweetened beverage tax, or another obstacle that affects the CPG and retail space, VR helps companies become innovative and agile while helping then save on their bottom line. In an industry that is constantly moving and evolving with the changing times, VR is a valuable catalyst for positive growth.