SPECIAL REPORT: Finding a Sweet Balance Amid a Taxing Environment

19 Dec 2016 --- Concerns about sugar intake has never been higher up on the agenda and dominated food industry headlines throughout 2016. One of the most talked about issues of this year has been the highly debated sugar tax, spurring the need for alternative and natural sweeteners and seeing promising innovation in beverages. The debate around sugar reduction is entering a new stage, with sugar taxes becoming a reality in a number of countries in 2017 and 2018 and reformulation efforts following suit.

Particularly in the UK, manufacturers and retailers have been quick to reformulate in fear of falling on the wrong side of the tax threshold. For example in early November 2016, it emerged that Tesco has cut more sugar out of its own brands of soft drinks as part of a reformulation strategy to offer healthier alternatives. The supermarkets says the move aligns to recommendation that sugars should make up no more than 5 percent of people’s daily diet and halves the sugar content in some products including Tesco Cola. 

The retailer first reduced sugar in its soft drinks range in 2011 and now the final 50 products in the 251-strong range have been reformulated to less than five grams per 100ml which means on average 20 percent less sugar from Tesco branded soft drinks compared with five years ago. Regular Tesco Cola previously contained 9.7g of sugar per 100ml and now contains 4.8g of sugar per 100ml. All products now contain less than 5g of sugar per 100ml.

WHO Among the Voices to Cut Back
Official bodies from the World Health Organization downwards have been focusing on the levels of sugar in the diet and its role in the growth in obesity and chronic health problems globally. It is recommending reducing sugar intake to less than 10% of total energy intake, with 5% a better option still in terms of improving health. While sugar intake varies considerably by age and country, a report by Sensus suggests that it is currently as high as 17% of total adult energy intake in some countries and can be even higher in children.

The likelihood of the implementation of a sugar tax in numerous markets became an even bigger possibility in October 2016, when it emerged that the WHO is officially encouraging governments to impose legislative measures by taxing sugary drinks. It says that rolling out laws around the world would curtail sugar consumption and impact on diabetes rates. Fiscal policies where at least a 20 percent increase is introduced to the retail price of sugary beverages would result in “proportional reductions in consumption,” according to the WHO. The reports discusses lowering the intake of “free sugars” – monosaccharides like glucose and fructose and disaccharides such as sucrose or table sugar, as well as sugars naturally present in honey, syrups, fruit juices, and fruit juice concentrates – that are added to foods and drinks. Reducing consumption of these “free sugars” will improve nutrition among populations, with fewer people suffering from overweight, obesity, diabetes and tooth decay.

Portugal announced policies introduce a tax on sugary soft drinks, with government plans to bring in a levy next year. The Portuguese sugar tax will follow similar laws in France, Hungary and forthcoming legislation in the UK and South Africa where there is heavy opposition to the plans.

Spain and Estonia are the latest countries planning to implement a sugar tax. Spain’s Finance Minister Cristobal Montoro has outlined proposed tax rises to cut the country’s deficit, including a new sugar tax on soft drinks. While details are sketchy at this stage, the sugar tax is expected to bring in €200 million in 2017. At the same time, it was reported that the Estonian minister of health and labor hopes to impose a sugar tax on sweetened drinks, predicting that the tax rate should be at least 10-15 percent to reach its desired outcome.

These announcements come as the UK government publishes the draft legislation for sugar tax on sugar-sweetened beverages, which is set to begin from April 2018. The highly anticipated soft drinks levy noted that there will be two bands – one band for soft drinks with more than 5g of sugar per 100ml and the other for drinks with more than 8g of sugar per 100ml. Pure fruit juices will be exempt from the sugar tax, but health officials insist people should not consume more than 150ml of pure fruit juice per day. Milkshakes and yogurt drinks will also be excluded from being taxed. The government has said it expects the levy to raise £520m (US$663.5 million) in the first year. The Office for Budget Responsibility estimates the levy could add 18-24p to the price of a liter of a soft drink if the full cost is passed. This amounts to an extra 6p on a regular can of Fanta and Sprite, and an extra 8p on a regular can of Coca-Cola, Pepsi and Irn-Bru.

Also recently, a Grattan Institute report argued that Australia should introduce a tax on sugary drinks to help recoup some of the costs of obesity to the community. A sugary drinks tax: recovering the community costs of obesity calls for a new excise tax of 40 cents per 100g of sugar, on all non-alcoholic, water-based drinks that contain added sugar. The tax would increase the price of a two liter bottle of soft drink by about 80 cents, raise about AU$500 million a year, and generate a fall of about 15 percent in the consumption of sugar-sweetened beverages. The report calculates obesity costs Australian taxpayers more than $5.3 billion a year. One in four Australian adults is now classified as obese, up from one in ten in the early 1980s.

In the meantime, the rest of the world have been keeping a close eye on Mexico as a leading protagonist of the sugar tax on soft drinks, some in the country are calling for an increase on the levy. A roughly 10% nationwide tax on sugar-sweetened beverages was introduced in Mexico in January 2014. In recent months there has been much debate over whether or not Mexico’s sugar tax has led to a fall in obesity statistics, particularly the direct impact the levy has had on consumers and the market.

Industry Reformulation Efforts
The current environment is leading to a wave of reformulation efforts. The use of “no added sugar” claims is growing significantly in share of total global new product launches tracked. The share of new product launches tracked with “no added sugar” claim rose from 2.6% in the first half of 2013 to 3.3% in the first half of 2016. The fastest growing sugar claim is “low sugar” with an average annual increase in product launches of +32% from 2011 to 2015. 

At the end of November, Yoplait said it is cutting the sugar content of its UK children’s dairy brand Petits Filous by 17%, with further decreases planned across the portfolio, including Frubes. The company said recipe changes across the Petits Filous fromage frais small and big pots range will see sugar levels reduced to 9.9g per 100g, while vitamin D fortification will increase to 50% NRV per portion.

The biggest recent news coming from Nestlé, who have reported the development of a technology that has the potential to reduce total sugar by up to 40% in their confectionery. Using only natural ingredients, researchers have found a way to structure sugar differently. So even when much less is used in chocolate, the tongue perceives an almost identical sweetness to before. By hollowing out the crystals, Nestle said each particle dissolves more quickly on the tongue, so less sugar can be used in chocolate. 

Nestlé is patenting its findings and will begin to use the faster-dissolving sugar across a range of its confectionery products from 2018 onwards. Details are limited at this stage, with further information on the technology and its applications only being revealed once the patent has been published. The company expects to provide more details about the first roll-out of reduced-sugar confectionery sometime in 2017.

“Nestlé has a strong commitment to reduce sugar, salt and fats in its products. For example a study of 99 of our most popular products in the US and France showed that between 2009 and 2015 Nestlé cut salt by 22% on average in eight food categories, and total sugars by 31%,” Michael Jennings, Senior Corporate Spokesperson at Nestlé S.A told FoodIngredientsFirst.

The Need for a Sweet Balance
But there is another side to the discussion too, which is what to replace the sugar with, as consumers look for a sweet balance? Sugar is under pressure, but it's still the key ingredient that delivers the sweetness and great taste that consumers are looking for. 

The trend of natural ingredients, such as stevia, in beverages has been a huge driver of innovation in 2016. But the rise of ingredients such as stevia presents its own challenges, as there is a paradox in going clean label with sweeteners and it is about finding the right sweet balance. Manufacturers are being forced to ask themselves who their consumer is: the diet cola drinker, the full sugar fan or the natural purist?

In November 2016, Innova Market Insights listed “Sweeter Balance” as one of its key trends for 2017, noting that “industry is posed with a challenge of balancing the public demand to reduce added sugars, create indulgent experiences and at the same time present clean label products.” Alternative sweeteners are part of the solution to finding a sweet balance, which can include calorie containing alternatives to regular white sugar, such as agave, but even “brown” and “golden” sugar.

For example, the number of launches that claim “sweetened with agave” quadrupled from 2014 to 2015. The amount of launches tracked in the first 10 months of 2016 has already exceeded 2015, showing the huge growth opportunity for this ingredient positioning. Brown & golden sugar inclusion is also growing significantly – up by more than +40% annually. In 2015, 1 in 10 new product launches tracked with brown sugar as ingredient is also claiming it on its packaging. There was a particularly strong hike in new products featuring this claim (+45%), between 2014 and 2015.

The benefits of alternatives to regular sugar are being touted, with honey, oat syrup and coconut sugar among the tips for growth. Belgian supplier Meurens Natural recently strengthened its clean label solutions with the launch of a sugar substitute, an oat syrup range for bakery applications, which taps into the demand for natural, traceable and transparent food, with a new range of syrups and hydrolyzed flour made of oat. These original and natural ingredients enable several different functionalities including sweetness, sugar substitution, glucose syrup substitution, cereal taste, natural color, crispness, proteins and higher cereal value limiting the viscosity. On top of this, the one big advantage is they offer a much more natural labeling opportunity; oat syrup instead of sugar or glucose syrup.

Honey is also trending as a more natural (albeit hardly low calorie) alternative. For example, Dutch company The Fruit Lab has launched a new green tea fusion concept in two varieties: Fresh Lime & Mint and Fresh Pomegranate. The fresh fruit products are 100% natural and sweetened with honey. Hydrated Honey Water (Bee Hydrated): Bee Hydrated is Australia’s first line of honey water drinks that contain 100% natural Australian honey, which has been cold extracted and infused with natural extracts.

The honey industry notes that a quick fix to the global obesity dilemma is the inclusion of pure honey in production of sweets, food products and drinks. “Easy availability and organic nature of honey make it one of the most aptly-applicable sweet in the world. Furthermore, the sugary content in honey renders it edible for diabetic patients, encouraging food and beverage producers to replace any other sweeteners with honey. Food preparation methods, as common as baking, have integrated the use of honey, while consumers are buying packaged honey to replace sugars from their morning beverages such as tea or coffee,” according to a report from New Zealand’s Honey Lab. 

Honey will be one of the sweet ingredients that enjoys a revival amid the industry’s scour for a sweet balance during a taxing environment that will only gather pace in 2017 and beyond.

by Robin Wyers