For example, Mexico set a tax on high calorie food and beverages with added sugars in 2014. This meant an increment of MX$1 per liter for sugary drinks, and an 8% tax on foods such as snacks, ice creams, chocolate, and confectionery.
Decrease in consumption linked to GDP
“The outcome of such taxes continues to be debated, but the case of Mexico suggests there is an impact on sales in the short term, with volume growth declining by three percentage points in the year it introduced a calorie tax,” said Jack Skelly, food analyst, Euromonitor.
In his report, ‘Packaged Food: Quarterly Statement Q3 2016’, Skelly suggests a calorie tax could deter sales growth in countries where consumption is more linked to gross domestic product (GDP), such as India.
A list of 13 countries considering taxes, such as France, the UK and India, account for 18% of total volume sales of chocolate around the world.
The tax in Mexico was implemented to reduce obesity growth in the country, which has the second-highest level of obesity in an adult population among the OECD (Organisation for Economic Co-operation and Development) countries, and 34% of its children are overweight or obese.
Data from WHO (World Health Organization); ‘Using price policies to promote healthier diets’ 2015, also shows more than 50% of adults are overweight or obese in 46 countries across Europe.
France, Denmark, Finland, and Hungary are other examples of countries that have set taxes on high sugar and high calorie products like sweetened soft drinks, sugar confectionery, chocolate, ice cream, chewing gum, and energy drinks.
For example; in October 2011, Denmark became the first country in the world to introduce a “fat tax” – a tax of DKr16 (€2.15) per kg of saturated fat, including all foods containing saturated fat (eg, meat, dairy, edible oils and fats, margarine and blended spreads).
Finland has a long history of taxation on food products, with a tax on sweets and non-alcoholic beverages from 1926 to 1999. In 2000, however, the sweets component was abolished, with the non-alcoholic beverage component remaining.
In Hungary, in 2011, motivated by the population’s high salt consumption (among the highest per capita in the world), the fact that around two thirds of the adult population were obese, and the heavy consumption of food products high in fats, salt and sugars, the government introduced a public health product tax on products where healthier alternatives were available.
According to Javier Gonzalez, researcher, Canadean, the taxes have achieved their objective and consumption of high calories foods has decreased.
“According to a national statistics survey conducted in August 2014, 52% of Mexicans admit to having reduced their carbonates intake, while consumption of water has increased,” he said.
“Likewise, consumption of high calorie foods has decreased. Elsewhere, the taxes are also working: in Hungary, according to a study supported by the WHO, 30% of consumers have changed their consumption patterns; approximately 80% of this shift was due to the price change, and the remainder due to increased awareness and other factors.
“In France, consumption of both regular and low-calorie cola contracted by 3% annually in the first two years following the tax.”
Gonzalez said in countries such as the US, UK, and Australia, many voices call for a tax on these foods, in the same way as tobacco. It is argued the decline in rates of obesity and diabetes would be beneficial for the state coffers, being that the current cost of treating these diseases in the public health services is high.
“In reality, consumption of soft drinks is already declining in some markets like the US, driven by consumer preferences for more natural and healthy beverages. Some companies have already got down to work, and have begun to diversify into segments that offer more growth, like Coca-Cola entering the dairy market with its Fairlife acquisition,” he said.
“Even though manufacturers have been innovating with low-calorie products and healthier sweeteners for many years, they should persevere on decreasing the quantity of added sugar and calories in their products. They should also diversify their portfolios by entering other product segments if they want to ride out the storm in the event that these tax policies expand to other countries.”
World Health Organization
According to WHO (‘Using price policies to promote healthier diets’, 2015), the most basic theoretical models of supply and demand stipulate that in a simplified, perfectly competitive world dealing with standard products, an increase in price will result in a decrease in the quantity of the product sold, and vice versa.
“Frequent consumption of products high in energy, saturated fat, trans fatty acids, sugar or salt is associated with increased risk of overweight, obesity and some noncommunicable diseases (NCDs). The increased illness and disability associated with excessive consumption of such products is likely to result in increased health and social care costs in addition to lost economic productivity,” it said in the report.