Health based sugar taxes are increasingly a global phenomenon, with sugar taxes now in use or pending in Europe, the Caribbean, Latin America, North America, Asia, Australasia, the Middle East, and Africa. The prospect of sugar taxes is also stimulating food and drink industry product reformulation initiatives, with varying levels of industry commitment. Some ACP sugar exporters are responding to shifting patterns of global demand growth and moving away from their traditional EU focus. All ACP sugar exporters will need a better understanding of the end use to which their sugar exports are put in order to assess their vulnerability to trends in reduced use of ‘hidden sugars’ in the food and drinks industry.
At the close of 2017 beveragedaily.com posted a review of the global situation in regard to the introduction of sugar taxes aimed at reducing consumption of “hidden sugars” in processed food and drink on health grounds. Proponents of sugar taxes see them as a means of tackling the obesity crisis by curbing consumption and encouraging manufacturers to reformulate their products to reduce sugar usage. Opponents argue there is little evidence that such taxes are effective in reducing obesity (1).
In 2017 the UEA, Portugal, and Sri Lanka all introduced taxes on sugary beverages, while the UK, Ireland and South Africa are scheduled to introduce such measures in the first half of 2018. In the US meanwhile sugar tax initiatives are being launched at city and country level, although there is a strong push back from industry associations affected by the sugar tax measures (1).
In some countries, such as the UK, Ireland and France, the tax is ‘tiered’ with higher sugar content drinks attracting a higher tax rate (1).
These measures come on top of existing taxes aimed at reducing sugar usage in food and drink products (see table) (1).
Sugar Taxes to Date, Pending or Under Discussion
|Country||Date of Introduction|
|France||2013 (reformed to tiered system in 2017)|
|Canada (provincial level)||2017|
|Finland (7)||2017 (all categories after product specific taxes ruled illegal)|
|Spain (Catalonia only) (8)||2017|
|Lithuania||Suspended with voluntary scheme adopted|
In terms of the impact of sugar taxes on consumption an analysis of the experience in Mexico shows that a 1 peso per litre soda tax caused a ‘5.5% drop in the first year after the tax was introduced…followed by a 9.7% decline in the second year (1).
In the UK meanwhile Public Health England (PHE) has described the UK food and drink industry as showing ‘promising leadership’ in efforts to reduce sugar in processed food and drinks, particularly from ‘some of the big players who have a huge influence’ (2).
According to PHE ‘over the last 12 months, we have seen a shift in the industry’s attitude towards sugar reduction’, with a genuine sense now emerging that ‘the industry is finding solutions, doing the right thing and rising to the challenge’. It is maintained that ‘rather than just ticking boxes’ the UK food and drink industry is ‘embracing change’. Overall PHE described the industry response to the dual approach of voluntary guidelines for sugar reduction and taxes on the sugar content of drinks as ‘hugely positive (2).
PHE is scheduled to publish its first report on the success of efforts to reduce sugar usage in food and drink products in March 2018. This will review ‘progress towards the initial 5% reduction and overall 20% by 2020’ by ‘individual companies as well as the products contributing the most sugar to our children’s diets’ (2).
In Lithuania meanwhile the prospect of a sugar tax has seen leading local and multinational confectionary product manufacturers sign up to a voluntary agreement to reduce sugar, salt and fat usage in major product lines. Representatives of the Lithuanian food and drink manufacturers association acknowledged the voluntary agreement was seen ‘as an alternative measure to sugar taxes’ and was adopted ‘in order to avoid such taxes’. Initial commitments by some countries have established sugar reduction targets of up to 35% for some products, although most product specific sugar reduction targets are in the range of from 5% to 10% (3).
While this remains a voluntary scheme from which companies can withdraw at any time and only 10 companies have so far signed up, its success will be monitored by the Ministry of Health. The issue of a sugar tax will be revisited if the voluntary reformulation scheme proves unsuccessful (3).
A potential benchmark for the success of the voluntary scheme is the Hungarian health product tax, which according to assessments by the National Institute for Health Development gave rise to a situation where ‘approximately 40% of unhealthy food product manufacturers changed their product formulas to either reduce or eliminate unhealthy ingredients’ by 28% and 12% respectively. It also saw consumers changing their consumption patterns and moving to healthier food options (6).
The WHO meanwhile has published a report entitled ‘Incentives and disincentives for reducing sugar in manufactured foods: an exploratory supply chain analysis’, which seeks to identify why the European food industry uses so much sugar. This WHO report maintained ‘decisive action was needed to bring down levels of sugar in manufactured foods in Europe’ (4).
WHO representatives argued there are already examples of successful initiatives aimed at reducing sugar usage in processed food through the establishment of ‘specific time bound targets for sugar reduction and interpretative front of pack labelling’. The report highlights six inter-connected insights which could help reduce sugar intake:
- ‘creating disincentives for manufacturers and retailers to add sugar to manufactured foods and drinks’;
- ‘using policy to set a level playing field for manufacturers and retailers that allows a “race to the top” by ensuring they are competing to achieve public health goals’
- the adoption of policies which help reduce demand for sugary food and drinks;
- support initiatives to encourage consumers to switch to healthier food choices rather than consuming manufactured food;
- the maintenance of a focus on what replaces sugar to ensure this is nutritionally positive
- effective engagement with the transformation of the ‘sugar system’, which currently de facto provides a commercial incentive for using sugar since this is an attractive and affordable ingredient.
Overall the report concludes ‘there is significant scope to reduce the amount of sugar added to manufactured foods’ (4).
Overall according to reports carried on foodnavigator.com ‘the message to reduce dietary sugar is having the desired effect. 49% of global consumers try to limit their sugar intake, while 23% try to eat a moderate amount of sugar and 14% avoid it entirely’ (5).
|Comment and Analysis
While moves to curb consumption of ‘hidden sugars’ through the use of sugar taxes and industry wide voluntary codes and guidelines are seen as largely a European phenomenon, the beveragedaily.com review highlights how this is now a global trend. Tax measures aimed at curbing consumption of ‘hidden sugars’ are now in place, pending or under discussion not only in Europe but also in the Caribbean, Latin America, North America, Asia, Australasia, the Middle East, and Africa.
However higher population and income growth in developing countries, particularly in African and Asian countries continues to drive global growth in sugar demand. This shift in global patterns of demand for sugar is something which African sugar producers who traditionally focused on the EU market are increasingly adjusting to.
Shifting sugar marketing efforts to non-European markets is likely to offer only short term to medium term solutions, given the global nature of the move away from the consumption of ‘hidden sugars’.
Individual ACP sugar exporters will increasingly need to analyse the end uses to which their sugar exports are put: specifically whether they primarily serve direct consumption markets or their sugar is used more extensively in food and drink industries. If the latter, an analysis will then need to be made of the specific food and drink industries and products served. This will be essential to understanding the likely impact of sector, product or company specific sugar use reduction targets.
ACP sugar exporters will need to try and develop strategies to get closer to their end users, so as to better refine their marketing strategies. They will also need to monitor public announcements by major corporate players of their specific sugar reduction targets. Only on this basis will it be possible for individual ACP sugar exporters to assess their short, medium and long term vulnerability to trends in reduced use of ‘hidden sugars’ in the food and drinks industry.
(1) beveragedaily.com, ‘Sugar taxes: the global picture in 2017’, 20 December 2017
(2) PHE, ‘An update on sugar reduction’, 14 November 2017
(3) beveragedaily.com, ‘Voluntary reformulation plan puts Lithuanian sugar tax on hold’, 23 January 2018
(4) foodnavigator.com, ‘Why sugar and why so much. WHO investigates the food industry’s sweet tooth’, 6 December 2017
(5) foodnavigator.com, ‘Barry Callebaut sweetens appeal of healthier chocolate with low-sugar range’, 12 December 2017
(6) WHO ‘Public Health Product Tax in Hungary’
(7) confectionary.com, ‘Confectionary taxes doomed to fail in EU after Finland ruling’, 14 December 2016
(8) Bord Bia, ‘The sugar tax arrives in Spain via Catalonia’, 9 June 2017