The State of Sugar and Health Taxes Around the World

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With sugar linked to a host of public health problems, a growing number of governmental bodies are launching sugar reduction plans


KerryDigest Fast Facts:

  • 2016 was "the year of the sugar tax”, an event triggered by nutrition advocacy from social media influencers, celebrity chefs, and health and political groups as well as the publication of a 2015 World Health Organization report, which detailed the negative health effects of sugar.

  • Over 35 national governments, states and cities now have sugar taxes; 20 have been introduced since 2015.

  • Some locations have introduced “health taxes” beyond sugar-sweetened beverages, such as taxes on products with excess sodium, saturated fat and trans fats. Areas with sugar taxes already in place may be more likely to extend taxation to additional food and beverage categories.

  • Health taxes have raised significant funds with little public opposition. Industry and political opposition has had mixed impact with only a few countries fully abandoning taxation efforts.

  • In response to current and pending taxes, many global brands have committed to significant nutritional optimisation. Reformulated products can deliver better nutritional profiles but maintaining taste is a challenge. The launch of low-, reduced- and no-added-sugar products have been muted but steady.

The Long Year of the Sugar Tax
Food industry watchers dubbed 2016 “the year of the sugar tax,” and for good reason. This was the year when public disquiet about sugar reached its crescendo with the World Health Organization (WHO), celebrity chefs and social media influencers uniting with national and local governments to endorse taxation.

Following the 2015 publication of the WHO's Global Action Plan for the Prevention and Control of Noncommunicable Diseases 2013–2020 (GAP), 20 governmental bodies have introduced taxation intended to reduce obesity and rising levels of diabetes. As of May, 2018, 39 countries, states and cities have introduced nutritional taxation, and more are working toward voluntary agreements with manufacturers that encourage optimised nutrition. In most cases the primary targets of these actions have been sugar sweetened beverages (SSBs), but broader health taxes covering products high in fat and sodium have also been introduced.

The structure of the taxes follow a similar pattern, usually with a tiered system that awards a higher tax for products with higher sugars. In most cases the tax is passed on to the final consumer, though there is some evidence that manufacturers have managed to mask price increases through the introduction of smaller pack sizes.

KerryDigest Key Takeaways:

  • Sugar reduction became a focus for industry following the release of the WHO Global Action Plan for the Prevention and Control of Non-Communicable Diseases 2013–2020.

  • Taxes on sugar—plus the occasional tax on salt and fat—have spread globally with 39 individual cities, states and countries implementing tax measures.

  • These taxes are generally shouldered by consumers, although some manufacturers have been able to mask a price increase by reducing product size.


A Global Phenomenon with Unexpected Origins

The use of taxation to tackle non-communicable disease is not new. For instance, tobacco taxes have proven effective at reducing smoking. But the speed with which sugar taxes have been introduced is unusual: over 20 new taxes have been introduced since 2015 and more are planned. The WHO's GAP sets an ambitious agenda to improve global nutrition and halt the global rise in obesity, and with it, diabetes. To achieve this, the report proposes that “countries consider the use of economic tools that are justified by evidence, and may include taxes and subsidies, to improve access to healthy dietary choices and create incentives for behaviours associated with improved health outcomes and discourage the consumption of less healthy options”.

Although sugar taxes are now a developed world phenomenon, some of the earliest and most enthusiastic adopters were emerging markets. Mexico, with one of the highest rates of diabetes globally, has had a sugar tax targeting SSBs since 2014. Chile also introduced a tax in 2014, coupled with warning labels on foods high in fat or sodium. In the Caribbean, Dominica and Barbados introduced taxation in 2015. Hungary introduced a broad “health” tax in 2011 aimed at a range of products containing high fat and sodium; more recently, the United Arab Emirates (UAE) introduced a tax on SSBs, due in part to the rapid speed with which diabetes is spreading throughout the country.

In North America, city and state authorities such as those in Berkeley, California and Boulder, Colorado have led the way in introducing sugar taxes. In Europe, it has been national governments that have led, with six countries introducing sugar taxes since 2015. As of June, 2018, 11 European countries that now have some form of sugar or health tax, including the UK, Ireland, France and Portugal. Among Middle East and North Africa nations, there are now four sugar taxes in play with the recent introductions by Saudi Arabia and the UAE. In the Asia Pacific, several long-standing sugar taxes are in effect with three introduced in 2017.

Despite the seemingly universal vilification of sugar, there are still geographic pockets with a strong opposition to sugar taxes. Countries including Denmark and Iceland have reduced or abolished existing taxes, citing a variety of reasons.

We’ve created this global sugar tax infographic to show, geographically, how the sugar tax trend has spread.

KerryDigest Key Takeaways:

  • Although health-related taxes are not new, the speed at which sugar taxes have been implemented is unprecedented.

  • Contrary to many trends, the push for sugar taxes began in emerging markets then spread to more developed regions.

  • Sugar taxes are now represented in every region, globally. See our global sugar tax infographic for a regional breakdown. 

 

A Healthy Push for Reformulation

Ahead of the introduction of the UK sugar tax in April, 2018, many manufacturers undertook extensive reformulation work. Some brands managed to reduce sugar levels to below the taxable threshold across their entire range of products. Significant reductions have been achieved across the beverage market, particularly in the sports and energy drinks category, in which sugars have essentially been halved. This is important work considering research shows that controlling obesity is significantly harder for individuals who increase their caloric intake of nutritionally devoid added sugars.

Of course, sugar reduction is more complex than a single recipe change. Low sugar, no added sugar and reduced sugar claims (L/N/R claims) have gradually become more prominent in new product launches, but their use has been restrained due to negative perceptions by consumers who assume such products are taste-compromised. Still, evidence from Mintel has shown that no added sugar claims have a better health perception amongst UK consumers than low sugar claims, which is an important consideration for manufacturers.

The regulatory environment for sugar reduction is also tricky to navigate with complex rules regarding sweeteners and the additives needed to replace the functionality of sugar. Negative public perception of these additives is also a challenge but technological innovation is adding "clean label" solutions to the sugar reduction toolbox.

Also hampering use of L/N/R on pack claims are strict sugar reduction regulatory requirements. Particular challenges come from defining “added sugar” as opposed to the many naturally occurring dietary sugars such as the milk sugar lactose and honey and the more controversial sugars derived from concentrated fruit juices. Guidance to address this is gradually improving, which may lead to more regular use of L/N/R claims but in the short term, capitalising on a sugar reduction with an L/N/R claim still requires regulatory expertise.

KerryDigest Key Takeaways:

  • Many manufacturers are pre-emptively taking on reformulation work to reduce sugar in advance of new sugar legislation.

  • Although consumers are sceptical about the taste of reformulated low- and no-sugar products, the most appealing claims (to UK consumers) reference “no added sugar”.

  • With more consumers paying close attention to sugar claims, regulatory clarification is needed to define labels such as “low sugar” and “no added sugar”.

 

Voluntary and Enforced Efforts Toward Better-for-you

Even in many places without formal legislation, there is still considerable pressure on manufacturers to nutritionally optimise their products. Germany and Lithuania have introduced “voluntary targets” for sugar reduction and Malta plans to introduce voluntary targets and increase funding for health education. In Germany, for example, the federal ministry of food and agriculture is working with industry to meet a target of 10% reduction in sugar and a 30% reduction in salt.

In the UK, voluntary targets were perceived to have failed ahead of the introduction of the Soft Drink Industry Levy (SDIL), a sugar tax aimed at sugar sweetened beverages. The introduction of the SDIL shows that the UK government is serious about the use of taxation to achieve targeted reductions in sugar. Manufacturers are now be watching to see if the SDIL model will be extended to other food and drink categories following Public Health England's (PHE) recent assessment of progress on the government’s sugar reduction programme. PHE had, in 2017, set a 20% sugar reduction target for all sectors of the food industry by 2020, aiming for a 5% reduction in the first year (2016-2017). The latest progress report, from May 2018, indicates that the food industry achieved only a 2% reduction in year one while the beverage market for drinks subject to the SDIL has achieved an 11% reduction. It remains to be seen what conclusions will be drawn from this; media reports have emphasised the limited progress made so far but the report itself is more balanced.

One unconventional attempt at dissuading the public from buying unhealthy foods focuses on the advertising of products. For instance, the UK government's Health and Social Care Committee is betting on an “out of sight, out of mind” approach, calling for a ban on price promotions and “junk food” advertising before 9 p.m.—therefore largely missing typical viewing hours for children.

Retailers are getting in on the anti-sugar action, too, “nudging” customers to make healthier choices through innovative solutions. One such example: New electronic ordering systems have been installed in some outlets. Rather than defaulting to the traditional product, the reduced sugar option is preselected and the price difference is highlighted. Customers must opt-in when purchasing the higher sugar—and therefore higher cost—beverage option, which is a reversal of common practices.

KerryDigest Key Takeaways:

  • Sugar reduction has been encouraged within the industry by voluntary target agreements, often set by country.

  • So far, these government-proposed voluntary sugar reduction targets have had less success than taxes.

  • Unconventional approaches have been implemented to help discourage consumers from buying unhealthy foods, such as prime-time advertising bans.

  • Retailers are investing in technologies that guide consumers to healthier, lower tax options.

 
The Unfolding Future of Sugar Reduction
Sugar reduction is trending globally, and there are several countries where sugar taxes have been recently implemented or are close to passing. Spain's sugar tax is currently held up in the courts, though Catalonia has already implemented one of its own. Italy will not pass a tax in the near future, but the topic is on the legislative agenda.

Many countries are also watching their neighbours to help gauge when and if to introduce their own sugar tax. Europe has urged regional groups such as the Baltic states to work together to create  a consistent tax structure. Estonia had planned one of the most comprehensive sugar taxes with increased support for fruit consumption, but it has stalled over legal challenges; if it proceeds, Lithuania and Latvia will likely partner with Estonia to reduce cross-border shopping that would offset the tax.

Outside of the EU, where tax policy is under greater local control, sugar taxes are slowly but steadily passing in U.S. states, counties and cities. Countries in the Middle East, which have some of the fastest growing obesity rates, are looking to Saudi Arabia and the UAE as examples—it may be only a matter of time before the other members of the Gulf Cooperation Council pass “sin taxes” that include sugary drinks. In Asia, there is continued speculation on the possibility of Thailand and Vietnam implementing legislation. Taxes on sugar-sweetened products are strongly opposed in Russia, but a tax on sugar imports from outside the Eurasian Economic Union is in effect. In several other locations, including Canada, Australia and Singapore, there is talk of sugar reduction efforts—be it through taxation, education or another approach.

It remains to be seen if voluntary efforts will have the desired effect or if taxes are the best approach for guaranteeing industry-wide sugar reduction. As the results of these opt-in reduction strategies are reported, countries with subpar results may decide to go ahead and implement taxation.

In places with established taxes, broader, more inclusive measures may be introduced. For example, in the UK, the UK Commons Health Committee has called for an end to the exemption of milk based beverages from the soft drinks levy that recently took effect. The same governmental body stated in its most recent report, "Childhood obesity: Time for action", “The next Government childhood obesity plan must signal that further fiscal measures are being designed to encourage reformulation of products where targets are not being met."

Statements such as these signal that the global shift toward healthier food and beverage requirements—implemented through a variety of measures and social movements—may still be in its infancy. Media speculation suggests that in Europe and elsewhere, taxes on other food categories are likely on the horizon, as governments scramble to slow and possibly undo some of the negative health effects that result from obesity. For now, although the lasting health effects of such actions remain unclear, sugar taxes are proving to be a useful source of revenue for governments and are providing a common cause for governments, celebrities and consumers to rally around in the name of better health.

KerryDigest Key Takeaways:

  • More taxation and health education efforts are on the horizon, with a host of new countries exploring ways to join the sugar-reduction movement.

  • Locations with sugar taxes may begin to exert pressure on their neighbours in an effort to ensure sales of taxed goods don’t diminish due to nearby tax-free options.

  • As governments measure the presumed and actual successes of sugar taxes (financial and public health), many may be inspired to levy taxes on additional food and beverage categories.

  • Speculations suggests that the demand and requirement for healthier products is just beginning.

Trends in the food and beverage business change readily, and so do industry rules and regulations. That makes it vital to have a strong regulatory guidance. To learn how to partner with Kerry, including gaining access to our regulatory professionals, contact Kerry.

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