Summary
There is growing evidence that taxes on the sugar content of beverages are having a proportional effect in reducing sugar consumption. This, along with new technological innovations which could see a similar reduced sugar consumption trend take hold in the food products sector, suggests ACP sugar exporters need to find new high sugar consumption growth markets. This will be complicated by the ongoing efforts of EU sugar companies to similarly identify new market opportunities for sugar exports, efforts which will be given an added stimulus by a ‘no-deal’ Brexit.
According to press reports a review of the UK Soft Drinks Industry Levy (SDIL) suggests an historic change in the use of sugar in carbonated drinks appears to be underway. A year after its introduction the SDIL has prompted an increase in sales of sugar-free drinks and a reduction of full sugar products. Coca-Cola reports a 50% increase in its Coke Zero Sugar sales, while Pepsi sales of sugar-free Max increased 17%. Full sugar product sales of both companies fell. Sugar free variants of a large number of other popular brands are also increasingly available, including energy drinks and Irn Bru (1).
This is a result of the price differential which the application of the tax is giving rise to. The impact of the SDIL is in line with the WHO principle that such taxes should change consumer behaviour in favour of low or no-sugar beverages. The uptake of low sugar products by major retailers has also helped boost sales, with accessibility being a crucial factor in changing consumer behaviour. However a factor identified as ‘limiting the shift towards reformulated drinks is the erratic price marking’ at the point of retail (1).
A key finding of the review of the impact of the SDIL from a public health perspective is that the SDIL ‘has rapidly produced a significant shift towards no/low drinks’ (1). This needs to be seen in a context where in the UK ‘children are consuming more than double the recommended intake of sugar per year’ (2).
Food and beverage industry critics of the SDIL claim the sugar tax does not change consumer behaviour but ‘simply becomes a source of government revenue which hits the poorest hardest’. Ironically the success of the SDIL ironically can actually be seen in the fact that during the first year ‘the sugar tax generated just half the revenue forecast’, since it proved so successful in getting manufacturers to reformulate and move towards lower sugar content products (2).
The move towards reducing sugar in food and drink products is not just underway in the UK, ‘in total 11 European countries now have some form of sugar or health tax’ (2). A recently published meta-analysis from the University of Otago in Wellington, New Zealand, which ‘systematically identify quantitative studies that evaluated the impact of real‐world sugar-sweetened beverages (SSB) taxes on sugar-sweetened beverages sales, purchases, and dietary intake’, found ‘compelling evidence that sugary drink taxes result in decreased sales, purchasing or dietary intake of taxed beverages’. Indeed it found that ‘a 10% tax on sugar-sweetened beverages (SSBs) has cut down purchases and consumption by an average of 10% in places where a tax has been introduced’. It was suggested that taxes which established sugar thresholds were particularly effective since they both discouraged consumer purchases and encouraged manufacturers to reformulate (3).
The trend towards reduced sugar usage in food and drink products received a boost in June 2019 with the launch in association with the German sugar major Sudzucker of Doux Matok, an enhanced sugar based sweetener which achieves greater sweetness with a lower sugar usage (4).
Potentially this could reduce sugar usage by 40% in the products in which it is used with no loss of sweetness of taste. The commercial launch of Doux Matok follows successful tests of it use in ‘chocolate, spreads, baked goods, cereal bars and gummies’ 4).
| Comment and Analysis
Given the progressive movement away from high sugar content drinks which is underway in the EU and which is only likely to accelerate as more EU member states come on board for public health reasons, demand for sugar in the EU is set to fall over time. This trend is likely to be accelerated as technological innovations lead to a displacement of conventional sugar from food products as well. This needs to be seen in a context where to date 70% of the sugar consumed in the EU takes place through the consumption of food and drink products. This trend is likely to leave less and less market space for ACP sugar exports to the EU. In this context ACP sugar producers will need to seek out other markets where sugar consumption growth is strong. This includes African markets. Unfortunately these African markets are also increasingly being targeted by EU sugar corporations, both for trade and investment purposes (see companion epamonitoring.net articles ‘EU Production Growth Impacts on Both Profitability of EU Sugar Companies and ACP exports to the EU in 2018’, 23 May 2019 and ‘EU Sugar Exports to ACP Markets Are Falling After Record Levels of EU Exports in 2018’, 8 May 2019). This focus on Africa is likely to be given a particular spurt by a ‘no-deal’ Brexit which will give an added urgency to the need to find alternative markets for EU sugar production. |
Sources:
(1) foodnavigator.com, ‘UK-sugar-tax-sees-historic-sales-shift-to-sugar-free’, 21 May 2019
https://www.foodnavigator.com/Article/2019/05/21/UK-sugar-tax-sees-historic-sales-shift-to-sugar-free
(2) foodnavigator.com, ‘Cost of reformulation offset by sugar taxes and improved value proposition’, 15 May 2019
https://www.foodnavigator.com/Article/2019/05/15/Cost-of-reformulation-offset-by-sugar-taxes-and-improved-value-proposition
(3) beveragedaily.com, ‘Sugar sweetened beverage taxes drive down consumption, meta-analysis shows’, 27 June 2019
https://www.beveragedaily.com/Article/2019/06/27/Sugar-sweetened-beverage-taxes-drive-down-consumption-meta-analysis-shows
(4) foodnavigator.com, ‘DouxMatok-s-40-reduced-sugar-allows-for-indulgence-Sugar-is-not-the-new-tobacco’, 15 May 2019
https://www.foodnavigator.com/Article/2019/05/15/DouxMatok-s-40-reduced-sugar-allows-for-indulgence-Sugar-is-not-the-new-tobacco