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An Industry update on Sugar Taxes

2017-04-25 foodingredientsfirst

Tag: Sugar

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he soft drinks industry at large has been facing the sugar tax challenge for several years now against a backdro of consumer demand for reduced-sugar products and increasing calls for governments to legislate on the issue. Reformulating a much-loved product by removing or replacing the sugar, while maintaining the familiar taste is a challenge for most companies. But that has not stopped the majority of key players from adding a wealth of no- or low-sugar lines to their portfolios.

But one recent case in point demonstrates that industry doesn’t always get it right. Consumer acceptance is the ultimate benchmark. 
 
Stevia-packed low sugar Coca Cola Life is to be phased out in Britain in June after sales of the soft drink have nosedived. The move comes as Coca-Cola increases its investment in Coca-Cola Zero Sugar as part of its on-going zero sugary strategy, canning the stevia drink in the process.

According to Coca-Cola, this will allow the company to “simplify consumer choice between sugar and sugar-free formats” as it continues to focus on the growth of Coca-Cola Zero Sugar and Diet Coke.

Nevertheless it does show that consumers didn’t really take to the distinctive green-label version as much as Coca-Cola would have hoped. Indeed consumer uptake has not met expectation, sales have been flagging and distribution was pulled back over the last year. The variant has built a “loyal and niche” following during that time, accounting for just under one per cent of the Coca-Cola trademark sales, according to the drinks giant, but that’s nowher near enough to justify a continuation of the line.

And so it will be no more, in the UK at least. This is what can happen when the consumer is not satisfied with taste.

Of course the reason why the global soft drinks industry is working so hard on low sugar reformulations is, in part, a reaction to sugar taxes popping up all over the world, driven by the notion that cutting sugar in soda is the answer to the world’s obesity problems.

This is still a highly questionable ethos; health organizations fully support it as do many others, while others sectors really do not believe that adding a levy on sugary soft drinks will not have any significant long-term impact on the number of overweight or obese people there are in any given population.

Last year the UK government announced its forthcoming sugar levy could raise £520 million (US$665 million) in the first year. It will come into force in 2018, so fizzy drinks manufactures will have time to cut sugar levels if they want to avoid the tax, while the money raised will fund sport in schools for children, the government said. The tax will form part of the government’s overall Childhood obesity strategy.

FoodIngredientsFirst spoke with the UK’s Food and Drink Federation to get its latest viewpoint on the issue.

“We strongly believe that action is needed to tackle obesity. Equally, we believe that interventions shown by robust evidence to present the greatest chance of being effective should be adopted. For manufacturers, that means innovating to help lower calorie intakes,” a spokesperson says.

“FDF has consistently said that a soft drinks levy is not a proven tool for achieving sustained calorie reduction in the national diet. Given the scant evidence to support its introduction combined with the period of huge uncertainty the country is currently experiencing, we would stress the importance of the actual impact of this fiscal measure being closely monitored and evaluated.”

UNESDA – which represents the European soft drinks industry which comprises: still drinks, cordials, dilutables, carbonates, fruit drinks, energy drinks, iced teas and coffees, squashes and sports drinks – echoes the FDF’s point.

“Taxation is the wrong tool to address obesity and make our diets healthier,” it says.

“The impact of food taxes is unpredictable and can result in product substitutions to other food and drink categories containing similar or higher calories, thereby negating any positive health impact.”

“It’s tempting to single out soft drinks but the reality is much more complex.”

UNESDA data shows that over the past decade while obesity rates have increased, the contribution of soft drinks to the daily calories intake in Europe has decreased to just 3%. The average calories per 100ml has gone down by 11.5% and the availability of smaller pack sizes has gone up by 150%. Meanwhile no- and low-calorie drinks account for up to 30% of sales in many markets.

“There is no correlation between soft drinks consumption and obesity levels,” UNESDA adds.

Children’s consumption of soft drinks in the Netherlands is five times higher than in Greece, yet obesity and overweight rates are three times lower.

Even if soft drink companies and the organizations representing them do not believe there is a real link between sugar reduction and obesity levels, it is not stopping the reformulation drive and new product developments hitting the shelves.

Britvic has been a critic of the UK sugary drinks tax but is doing very well with its plans to reformulate ahead of time.

There has been good growth in its sugary drinks division largely driven by an increase in sales of Pepsi Max and 7UP Free with its “no sugar, no caffeine” label.

Paul Graham, managing director GB at Britvic recently said: “We’re starting to see real change in consumer tastes this year, which is driving sales in low and no sugar products as well as a strong demand for premium drinks.”

And industry is being put under further pressure as other initiatives to cut the amount of sugar in the nation’s diet are gaining momentum.

Last Friday (April 21) the NHS in England and Wales said it was stepping up its obesity, diabetes and tooth decay efforts, by announcing that sugary drinks will be banned in hospital shops beginning from next year unless suppliers voluntarily take decisive action to cut their sales over the next 12 months.

NHS England said that leading retailers have agreed to continue voluntarily reducing sales of sugary drinks to 10% or less of their total drinks sales within hospitals over the coming year. WH Smith, Marks & Spencer, Greggs, the Subway brand, Medirest, ISS and the Royal Voluntary Service are the leading suppliers who have so far pledged to cut sales.

“Remaining retailers are now being urged to join them in order to kick-start a major health drive and ensure the NHS leads the way on tackling the devastating impact of the country’s sweet tooth on public health,” says NHS England.

However, it is important to note that NHS England’s efforts to reduce sugar are not just singling out soft drinks. There are also plans to build on this and by April 2018 hospitals must make further efforts, including; 60% of confectionery and sweets stocked do not exceed 250 kcal, rising to 80 per cent of confectionery and sweets in 2018/19; 60% of pre-packed sandwiches and other savory pre-packed meals to contain 400 kcal or less per serving and do not exceed five grams of saturated fat per 100g, moving to 75 per cent in 2018/19.

“A spoonful of sugar may help the medicine go down but spoonfuls of added sugar day-in, day-out mean serious health problems. Its’ great that following discussion with NHS England, big name retailers are agreeing to take decisive action, which helps send a powerful message to the public and NHS staff about the link between sugar and obesity, diabetes and tooth decay,” says NHS England Chief Executive, Simon Stevens.

What about the latest numbers?

Across the Atlantic and Berkeley, California, was the first US city to introduce a sugar tax in March 2015 in a bid to reduce obesity – and just earlier this month the first set of results came in.

According to a recent study, taxes on sugary sweetened drinks have indeed brought consumption down, while sales of water have increased. One year after the introduction of the tax, sales of sugary drinks fell by 9.6%, compared with sales in surrounding area wher there was no levy going up by 6.9%.

Commenting on the evaluation of sugary drink taxes in Berkeley, published in the PLOS Medicine, Nancy Brown, American Heart Association CEO, describes it as compelling evidence that cannot be ignored.

“The residents of Berkeley, who voted for a sugary drink tax in their community, are now seeing the benefits of significantly reduced consumption of sugary drinks, significantly increased consumption of water and consumers are switching to healthier drinks. Additionally, Berkeley small businesses have not seen a dro in overall sales. This positive impact is magnified by the fact that the revenue from the tax is being invested in health and wellness across the city.”

“I urge the beverage industry to pay attention to this growing evidence and embrace these policies that benefit the health of communities, local businesses, their company employees and the very customers they serve. By doing so even more communities, and especially children, will experience a lifetime of health benefits. Spending millions to fight local citizens working tirelessly to improve their community puts the beverage industry on the wrong side of health and history.”

Mexico was an early adopter of the soda sugar tax in a bid to stem massive consumption linked to obesity and imposed a peso per liter excise tax at the beginning of 2014. Mexicans also cut their soda purchases by 5.5% in the first year and by almost 10% in the second year, according to one study.

No doubt the debate will rage on and sugar taxes will continue to be levied as a solution to public health problems – and the soft drinks industry will continue to respond. It will be interesting to see the results of studies in five or ten years’ time. Is this demonization of sugar in soft drinks destined to continue? Will the soft drinks sector by singled out, or will the tax trend ripple through other food and drink categories with the same conviction?

Whatever the answer to these questions, new product developments – successful and not so – will continue to be launched from the soft drinks giants as well as the smaller niche players.

The consumer will ultimately decide.

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