Drinks Industry Reacts with Anger at UK Sugar Tax, Labeling it “Absurd”

17 Mar 2016 --- The UK soft drinks industry has reacted with anger at the government’s introduction of a sugar tax, pointing out that it has been unfairly singled out and that such a tax “flies in the face of evidence from around the world.”

Chancellor George Osborne shocked the drinks industry – and the wider public – when he announced yesterday in the Budget that the government was imposing a levy which could hit Coca-Cola, Red Bull, Pepsi, independent fizzy drinks makers and suppliers of sugar such as Associated British Foods (ABF).

The tax, which aims to raise £520m (US$746 million) in the first year, will come into force into two years, so fizzy drinks manufactures will have time to cut sugar levels if they want to avoid the tax. The money raised will fund sport in schools for children, the government said.

It follows campaigning from the health campaigners including celebrity chef Jamie Oliver, who believe the tax will help reduce childhood obesity.

The tax is being levied in two bands - one for total sugar content above 5 grams per 100ml and a second band for most sugary drinks with more than 8 grams per 100ml.

Drinks such as Lucozade Sport and Volvic Touch of Fruit fall below the 5 gram threshold so will be exempt from the levy, as will milk-based drinks and pure fruit drinks.

But it is likely to have a big impact on Coca-Cola’s and PepsiCo’s UK operations, as well as Red Bull amongst others.

The tax could even hit fans of gin & tonic, as Schweppes Indian tonic has enough sugar to fall into the bands.

Jon Woods, general manager, Coca-Cola, said: “If the aim is to reduce obesity, this levy flies in the face of evidence from around the world, which shows taxes do very little, if anything to reduce sugar and calorie intake or obesity levels but do add to people’s cost of living.”

“We understand obesity is an issue that needs to be addressed and will continue our work to reduce the sugar and calories consumed from our drinks. We have already done a great deal and our actions are doing more to reduce sugar and calorie intake than a tax will.”

Gavin Partington, director general of the British Soft Drinks Association, said: “We are extremely disappointed by the government’s decision to hit the only category in the food and drink sector which has consistently reduced sugar intake in recent years- down 13.6 percent since 2012.”

The chancellor’s idea is that drinks’ manufactures will be hit by the levy and not pass it on to consumers, though it is unclear if they will do this.

Shares in the drinks’ companies listed on the London stock market fell after the announcement.

Shares in Nichols, the maker of Vimto, were down seven percent, AG Barr, maker of Irn Br, was down four percent and AG Barr, the producer of Robinsons, down two percent.

While drinks’ manufactures will be hit, it is also likely to impact those companies which supply sugar as they may have to reduce their prices.

Katharine Teague, head of advocacy, AB Sugar, said: “There is no conclusive evidence that a sugar levy on soft drinks would have the desired effect on consumers and lead people to change their behavior when it comes to health and diet.”
“AB Sugar is supportive of measures that help people better manage their diet and address some of the key health concerns in the UK such as obesity. However, obesity is a complex issue and a result of many different lifestyle factors - there is no silver bullet to solving this problem.”
 
“In fact, the government’s own figures show that while obesity rates continue to rise, total sugars in the diet have actually fallen by 15.4 percent per capita since 2001.”
 
“What’s required is collaborative action and we are committed to finding workable solutions to the obesity crisis as well as helping address consumer confusion about what a balanced diet really means, based on accurate information and scientific facts.”

While health campaigners think the levy will help reduce the childhood obesity problem, the imposition of a tax on food and drinks manufacturers in other countries has not always worked.

For instance, a saturated tax was scrapped after one year in Denmark while a tax on sugary drinks in Mexico hit sales more than the government anticipated.

By introducing the tax, Britain is joining France and Finland which also have tax on sweetened drinks.

The food and drinks industry believes that a sugar tax would not change consumer behavoir to the extent that its supporters think it will.

What they said on the sugar tax:

Britvic 
“We are extremely disappointed that the government is proposing to introduce a soft drinks tax from 2018. Singling out soft drinks alone will not solve the obesity problem, given the small proportion of calories they contribute in the average diet.”

“As the chancellor recognised during his speech, Britvic has already voluntarily made significant progress in calorie and sugar reductions, taking bold steps to remove over 18 billion calories since 2012. Britvic is also committed to continuing to materially reduce the average number of calories consumed per serve.”

Food and Drink Federation
Ian Wright, director general of the FDF, said: "We are extremely disappointed by today's announcement of a new tax on some of the UK's most successful and innovative companies. For nearly a year we have waited for an holistic strategy to tackle obesity. What we've got today instead is a piece of political theatre.

“The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs. Nor will it make a difference to obesity. Many of those singled out today by the Chancellor have been at the forefront of efforts to provide consumers with healthy choices. The industry will now ask whether such efforts are still affordable." 

British Soft Drinks Association
Gavin Partington, director general, said: “We are extremely disappointed by the government’s decision to hit the only category in the food and drinks sector which has consistently reduced sugar intake in recent years- down 13.6 percent since 2012.”

“We are the only category with an ambitious plan for the years ahead-in 2015 we agreed a calorie reduction goal of 20 percent by 2020.

“By contrast sugar and calorie intake from all other major home food categories is increasing – which makes the targeting of soft drinks simply absurd.”

Nichols
Marnie Millard, chief executive, said: “In 2015 alone, we reduced total sugar usage by 8 percent on year. Whilst we recognize sugar consumption is a shared responsibility, we do not believe a tax on soft drinks is an effective solutions or fair to consumers.”

by John Reynolds