In its Budget statement this week, the government introduced a levy that would equate to an increase of around 8p ($0.12) on a standard 330ml can of soft drink. The tax will come into force in two year’s time.
While the levy will apply only to sugar-sweetened beverages and not other food products, the Food & Drink Federation - which represents UK manufacturers - told BakeryandSnacks all food manufacturers need to consider the implications.
“While soft drinks producers are feeling bruised this week, I think the whole industry needs to be thinking about what this means for the government’s attitude towards all food,” said FDF corporate affairs director Tim Rycroft. “The idea that our food and drink is so harmful that it should be subjected to fiscal measures is a big public policy step.”
And he warned the use of such measures could grow.
“While we will do everything we can to ameliorate the impact I think all of us who follow public policy know that once a principle like this is established there is always a temptation to expand it,” he added.
Move sets strong precedent
His views were echoed by James Brown, a partner at pricing strategy specialists Simon-Kucher & Partners, who said the tax on sugary soft drinks was seen as a strong precedent and “a statement of intent from the government to tackle obesity by influencing consumption and calorie intake.”
“For now, soft drinks have been singled out, but the expectation is that other sources of our sugar (and salt) intake may also be affected in future, such as processed foods and confectionery,” he added. “This is a clear signal to manufacturers of ‘every day treats’ such as chocolate bars and biscuits that they may be next.”
Future actions may not necessarily be limited to a tax, said Brown, but could also include measures such as restrictions on in-store promotions and TV ads, or clearer pack labeling guidelines.
'A slippery slope'
Also warning that taxation could extend is 'free market think-tank' the Institute of Economic Affairs.
“This is a slippery slope to a much wider tax on sugar in general," said communications director Stephanie Lis, adding "there isn't a scrap of evidence" that such taxes impact consumer health.
“It's a shame the Chancellor decided to ignore all this evidence," she said. "Many will now worry this is just the thin end of the wedge, and could lead to more government interference in the food industry whether through taxation or regulation.”
The Action On Sugar campaign – which works to bring about a reduction in the amount of sugar in processed foods – said it had been “delighted” by the tax announcement, and welcomed the possibility of it being extended.
Levy on bakery products
“We would welcome discussion around including a levy on bakery products that are high in free sugars but offer little nutritional value,” said nutritionist and Action On Sugar campaign manager Jennifer Rosborough.
Rycroft added that one of the ironies of this week’s announcement was that the soft drinks industry had been one of the most active in reformulating products to make more healthy options available, although was not alone.
“Breakfast cereals have done a lot of reformulation around sugar, bakers have done a lot of reformulation around salt,” he said. “The industry has been wide awake to the health and wellbeing agenda.”
What does health debate mean for manufacturers?
News of the sugar tax came just weeks after the Food & Drink Federation held the ‘Staying on Shelf’ conference on what the health debate means for keeping products listed with supermarkets.
Attended by senior figures from Tesco, Mars and Coca-Cola, delegates discussed topics including overcoming reformulation issues, whether health can be a competitive advantage, and understanding shopper health concerns.
“The health and wellbeing debate has been dominating the agenda in the UK food and drink industry and it felt like a good opportunity to bring people up to date with what is going on and to make people aware of some of the threats and opportunities out there,” said FDF corporate affairs director Tim Rycroft.
“A lot of businesses that have sugar in their products will have been caught up in the health debate for some time but I think the renewed focus is a threat to the industry – as we’ve seen this week [with the introduction of the soft drinks sugar tax],” he added.
Threats and opportunities
Issues discussed at the event included threats and opportunities around health, as well as practical issues with reformulation.
“In food, sugar plays a variety of roles, not just giving sweetness – it provides texture, it provides bulk, it has preservative qualities,” he said. “The technical issues of taking sugar out will require a lot of businesses to seek outside help, and they will then have to change packaging and labelling. It isn’t a cheap process.”
Rycroft said much of the industry had already undertaken voluntary reformulation work – which hadn’t been driven by fear or threat of regulatory intervention.
Toughest regulator of all
“It is driven by consumer taste,” he added. “I always say our industry is already regulated by the toughest regulator of all – the consumer. And if they don’t like what you put on the shelf they won’t buy it.”
“When I talk to ministers and health officials about reformulation I say you can only go at a speed that consumers will accept.”
“And that isn’t the industry stalling - you can’t force the industry to put products on shelf that consumers won’t buy, you have to change taste profiles over time, gradually.”
He added that although much of the focus in the UK was currently on sugar, old issues could not be forgotten.
“Saturated fat has fallen a long way down the agenda, but not off it. I think sat fat will come back.”