Sugar Tax Success for Mexico

23 Feb 2017 --- More than three years after Mexico enforced a one peso tax on sugary sweetened drinks, there is evidence that fewer people are buying sodas with an overall decline of 7.6%. The latest data shows purchases of taxed beverages decreased 5.5% in 2014 and 9.7% in 2015, yielding an average reduction of 7.6% over the study period.

Households at the lowest socioeconomic level had the largest decreases in purchases of taxed beverages in both years and meanwhile purchases of untaxed beverage increased 2.1% in the study period. 

Findings from Mexico may encourage other countries to use fiscal policies to reduce consumption of unhealthy beverages along with other interventions to reduce the burden of chronic disease, according to the authors of the study from the University of North Carolina at Chapel Hill’s Gillings School of Global Public Health and the Mexican Instituto Nacional de Salud Pública (National Institute of Public Health). 

As a result of government intervening more actively with promotional campaigns on sugar reduction and the introduction of so-called “sugar taxes” - the food industry is also responding with undertakings to reduce sugar content by reformulation of existing products and the launch of new lower sugar options.

The soft drinks category has led in terms of activity levels in reduced sugar products, with 18% of launches recorded by Innova Market Insights in the 12 months to the end of June 2016 marketed as low sugar, sugar free or no added sugar, rising to over 22% in North America. The highest levels of activity have been in juice/juice drinks and flavored bottled waters, where 21% of launches used one of these positionings globally.

Following the release of the results, the CSPI says Mexico is poised to reap “enormous benefits from soda taxes” in the form of reduced incidence of type 2 diabetes and other soda-related diseases.  

Legislators and health officials in Santa Fe, Seattle, and other American cities and states should carefully consider these early lessons out of Mexico and support soda taxes in their cities, according to the group. 

“If there were any lingering question about why the soda industry opposes taxes so vigorously, part of the answer lies in the findings released from researchers at the University of North Carolina’s Gillings School of Global Public Health: The taxes are driving down soda purchases, says CSPI executive director Michael F. Jacobson.

“In other words, the taxes are working as intended. Besides raising revenue, soda purchases declined more than 5 percent in the tax’s first year and another 4 percent in the tax’s second year.  And during the same period, sales of untaxed drinks like water went up slightly.”

Mexico was a pioneer in implementing the soda tax, initially enforcing regulations of one peso per liter on January 1, 2014. The country has very high obesity rates with more than 70% of the population overweight or obese. On top of that, around 70% of the added sugar in diet comes from sugar sweetened drinks and historically the population has been heavy consumers of soda, especially Coca-Cola. 

Health experts around the world have been watching the country closely over the years, monitoring the progress of the levy. The impact on public health remains to be seen. 

The study used store purchase data for 6,645 households from January 2012 to December 2015. Changes in purchases of taxed and untaxed beverages in the study period were estimated using two models, which compared 2014 and 2015 purchases with predicted (counterfactual) purchases based on trends in 2012–13.

BevSA Welcomes Further Consultation on Proposed Soft Drinks Tax

Elsewhere, the Beverage Association of South Africa (BevSA) have welcomed Finance Minister Pravin Gordhan’s announcement that there will be further consultations on the tax on sugar sweetened beverages before it is implemented.  

“Over the past few months we have continued to actively engage with government and other stakeholders to find a workable solution to the complex challenge of obesity in South Africa,” said BevSA executive director, Mapule Ncanywa. “We believe that through collaboration with all the relevant role players, we can find ways to create a win-win for all South Africans, contribute positively to health outcomes and avoid any job losses.” 

Following recent parliamentary hearings on the proposed tax, BevSA has been encouraged by discussions to identify the most effective solution to the obesity challenge and welcomed the opportunity for further consultation to underscore health outcomes.   

The industry has repeatedly called for a local dietary study to be conducted to determine the drivers of obesity as well as a wider socio-economic impact study to assess the cost-effectiveness of the tax.   

As an alternative to the tax, BevSA has proposed three distinct options to achieve results and these are:   
1.  Reformulating our products through lower to zero variants 
2. Committed to reducing three calories per day per person for 2016 and in this year five calories per person per day sugar reductions 
3. A consumer awareness drive

“We look forward to working with government to finding a solution to this serious and complex challenge that makes sense for all South Africans, while continuing to make an important economic contribution to the South African economy,” said Ncanywa.

by Gaynor Selby and Elizabeth Kenward

If you would like to contact the authors, email gaynor@cnsmedia.com or elizabeth@cnsmedia.com.