In mid-March it was announced that the government would be introducing a “sugar tax” as of April 2018 on soft drinks such as Coca-Cola, Pepsi and Red Bull. Britain is joining a growing list of countries such as France, Mexico and Finland in taxing these sugary drinks in order to try and reduce consumption rates, particularly amongst young children. We have been informed that there will be 2 levels of tax; 5g of sugar per 100ml will be charged at one level and 8g per 100ml will be charged at a slightly higher rate and that the money raised from this tax is to be used to help fund sport in schools.
The results from a Harris Interactive poll we conducted in conjunction with The Grocer show that over half of our respondents agreed that the sugar tax was a good idea. However, around 1/6 stated that no price increase would stop them from buying sugary carbonated drinks. So while the general consensus is that the sugar tax is a good idea, it does seem that there is a small proportion of people who will continue to consume their favourite drinks, no matter the cost.
In spite of this, it is clear to see that drinks companies will make an effort to change their recipes (even if only slightly) to remove some of the sugar content from their drinks to avoid paying this tax. Does this mean that they will just cut the sugar all together, or will they develop new low calorie drinks in order to offer their consumers sugar-free alternatives? Coca-Cola certainly know from the launch of “New Coke” in the mid-80’s that completely changing a recipe can be highly detrimental to the brand. However, the potential for new product development in light of the sugar tax in this category is vast and I, for one, am very excited to see what the drinks companies bring out.
In addition to the changes that we expect to see in carbonated drinks, it will also be interesting to see how the other drinks categories react to the sugar tax. While drinks such as fruit juices and hot drinks with added syrups/flavours currently aren’t affected by the sugar tax, this does not mean that this will continue to remain so. Mexico’s sugar tax includes these beverages, and while carbonated drinks can contain a lot of sugar, so can these drinks too. So should the UK government be including these drinks in the sugar tax as well?
So what exactly does the sugar tax mean for drinks companies? Will they change their recipes to avoid paying the tax or passing the costs onto their consumers? Or will they keep the “full fat” version of their drinks and add low in sugar variants to their drinks portfolio to avoid the same outcry that “New Coke” caused in the 80’s? And how will the sugar tax impact on other sugary drinks such as smoothies, fruit juices and hot drinks with added syrups? We can only presume that Mars Food believe that the sugar tax will eventually affect other categories of food and drink with their recent announcement that they will distinguish between ‘everyday’ and ‘occasional’ items on packs and on their website for their Dolmio and Uncle Ben’s ranges. What can be said for sure is that not only will the sugar tax make us, the consumer, think about how healthy the food and drinks we consume are but it also marks a real opportunity for brands to innovate.