Sugar reduction: a taxing problem?

Intended by the Government to curb the consumption of sugary soft drinks in an attempt to mitigate the obesity crisis, the levy will apply to drinks that contain greater than 5g per 100ml of sugar, at 18p per litre and 24p for drinks of 8g per 100ml.  Manufacturers have responded in different ways. AG Barr for example has reformulated its portfolio to reduce its exposure to the sugar tax from c.60% of products to close to zero, whilst Coca Cola has insisted that consumers want choice and hence will continue to offer its iconic full sugar recipe.

Initially anticipated to raise £520 million in its first year, reformulation efforts prior to the deadline have caused forecasts to halve to £240 million^[1], with Coca Cola touted to contribute in excess of 40% of this.

How will consumers respond?

Does this mean the sugar tax is already working? In one sense, potentially. It has certainly influenced or at least accelerated the behavior of some manufacturers, although it would be unfair to say this wasn’t firmly on the agenda for many producers many years ahead of the tax. The reality is that no-one is quite sure how consumers will respond to the tax, or indeed how (or if) the tax will be passed on to consumers. The choice of whether or not to eat, drink, or experience a particular thing is a multifaceted, highly complex topic with conscious, subconscious and cultural influences all at play.

Granted, the tax is one of many potential levers to influence behavior. You do not have to look far, even within the food and drink sector, to find successful and unsuccessful consumer influence campaigns leveraging education, advertising and price to drive particular behaviors. 

However, if the tax and broader sugar reduction campaign is deemed to be successful, it is highly likely that a similar mechanism could find its way to categories where the process of sugar reduction is far more complex. 

Are there solutions beyond the obvious?

In March 2017 PHE requested that the food industry reduce sugar content by 20% by 2020 and 5% in year 1, across 9 categories. 

Whilst sugar reduction in soft drinks is not straightforward, it is by no means as complex as achieving similar levels of reduction in food products where sugar has a much more multifunctional role. In these categories the direct substitution for sweetener can be a less applicable solution.

Technologies and approaches new to the industry will undoubtedly play a role with Nestlé’s announcement about its new sugar crystallization technique a prime example.

Despite cost pressures in the industry, there is a clear business case to fire up the R&D activity in this space and to look for fundamentally different ways of reducing or replacing sugar. Consumers will get tired of portion reduction (if not allied to commensurate price reduction) and the well-documented trend for more natural ingredients and 'clean labels' surely hints at a limited 'shelf-life' for some artificial sweeteners. R&D functions need to look at the physical and chemical properties of sugar, for example its crystal structure, and those of the product within which it sits, to see how sugar or alternatives can be leveraged to deliver the experience and benefits sought by the consumer.

It is a process that will unpick some of the basic assumptions about how food is made but it is needed if manufacturers want to deliver consumer-friendly solutions that go beyond the paradigm of incremental change. And it goes without saying, all of this needs to sit within a framework centered on what the consumer wants.

Time to act

Time will tell how consumers react to the sugar tax but what is clear is that food manufacturers across the industry need to have a clear vision for how they will achieve their own sugar reduction targets.

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[1] Financial Times (2018). Sugar tax leaves bitter taste for drinks makers. [online] Available at: https://www.ft.com/content/66cafab8-33cb-11e8-a3ae-fd3fd4564aa6 [Accessed 5 Apr. 2018].