Canadean’s thoughts on UK sugary drinks tax

The UK government’s announcement of a new sugar tax on soft drinks may only serve to underpin the efforts of an already evolving market, rather than driving any real change, warns Canadean.

Canadean analyst Fiona Baillie says, “The low calorie still drinks segment saw a growth of 6% in 2014, a much stronger increase than the 2% that the regular calorie segment experienced. This shows that consumers are already switching to sweetened drinks that will not face high taxation, as trends towards health and wellness endure.

“Furthermore, with pure fruit juices and milk based beverages exempt from the tax, the declining trend juices have seen due to sugar concerns may see a turnaround, with consumers migrating back to these drinks due to better pricing and a change in consumer perception about natural fructose.”

A number of other nations have already experienced similar sugar taxes, which may act as a guide to how the UK will fare. Mexico, for example, pushed through a sugar tax in 2014, with mixed results.

Baillie continues, “While Mexico has seen migration towards the packaged water category, and has seemingly prompted a similar trend in neighbouring countries, there has also been social outcry that the tax affects the poorest, with many seeing it as an infringement on their daily lives.

“With a link between lower income consumers and high sugar intake in the UK, the tax may face similar criticisms. However, it is worth noting that the UK has seen larger declines in carbonates than Mexico since the introduction of the Mexican sugar tax, showing that it is currently a decline driven by consumer choice and therefore less likely to prompt such an outcry.”

Ultimately, with consumer attitudes towards soft drinks currently undergoing significant changes, it is difficult to predict how much impact the government’s new tax will have on the market, Canadean says.

Baillie concludes, “It has been argued that reformulating and reducing pack sizes will be more effective in tackling obesity than a sugar tax. However, it may require a more visible, media orientated approach to really kick start a nationwide reduction in soft drink sugar consumption.”

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