Sugary Drink Tax. The next health frontier

A sugary drink tax, soda tax, or sweetened beverage tax is a tax or surcharge designed to reduce the consumption of drinks with added sugar. Drinks covered under a soda tax often include carbonated soft drinks, sports drinks and energy drinks

Advocates such as national medical associations and the World Health Organization promote the tax as an example of Pigovian taxation, aimed to discourage unhealthy diets and offset the growing economic costs of obesity.

The State of Sugar and Health Taxes in 2021

2016 was widely regarded as “the year of the sugar tax” due to widespread legislation spurred by a 2015 World Health Organization report, which outlined the negative public health effects of sugar consumption. Although health-related taxes are not new, sugar taxes have gained traction at a remarkable pace in recent years, with around 50 countries and jurisdictions currently enforcing such measures and others requesting voluntary recipe changes.

As a result, many manufacturers are reformulating sugar-sweetened beverages — which are often the primary target of sugar taxes — creating products with sugar volumes that fall below the taxation threshold.

Following the 2015 publication of the World Health Organization’s “Global Action Plan for the Prevention and Control of Noncommunicable Diseases 2013–2020”, 20 governmental bodies introduced taxation intended to reduce obesity and rising levels of diabetes, most often by targeting sugar-sweetened beverages (SSBs). By mid-2018, 39 countries, states and cities had introduced nutritional taxation with more work toward voluntary sugar reduction approaches to encourage optimised nutrition.

Today, that number continues to grow, with around 50 countries or jurisdictions having implemented taxes on sugary drinks as a way to discourage consumption. Among the latest places to turn to taxation as a means of encouraging healthy habits and fighting obesity-related illness are Spain and Poland, which introduced new sugar taxes in January 2021. In North America, there’s no national strategy for SSB taxation, although city authorities such as those in Berkeley, California, and Boulder, Colorado, have introduced local measures.

In addition to applying pressure to cost-conscious consumers, sugar taxes incentivise manufacturers to rethink recipes and create healthier soft drinks and beverages.

In the UK, A study in BMC Medicine found that 6 of the top ten brands affected by the SDIL (Soft Drink Industry Level) reformulated more than half of the products in their portfolios between 2015 and the end of 2018. As these products hit the market, the total volume sales of high- and mid-sugar soft drinks were cut in half, while volume sales of low- and zero-sugar drinks rose by 40%.

What’s at stake

The United States Sugar Manufacturing Industry Sales were $10.4 Billion in 2018, that’s not including Coca Cola whose revenue grew to $11.7 billion in 2019 to $11.34 Billion in 2018 in the United States alone, some of their arguments against the sugary drinks tax are:

• The criteria on what drinks are taxed may not include equally bad substitutes like fruit juice, energy-dense snacks and biscuits.
• The tax is regressive since consumers on lower incomes will be more negatively impacted by higher prices than consumers on higher incomes.

The U.S. Department of Health and Human Services reports that a national targeted tax on sugar in soda could generate $14.9 billion in the first year alone. The Congressional Budget Office estimates that a nationwide three-cent-per-ounce tax would generate over $24 billion over four years.

What are the health concerns related to excess sugar in the diet?

Type II diabetes is a growing health concern in many developed and developing countries around the world, with 1.6 million deaths directly due to this disease in 2015 alone. Unlike sugar from food, the sugar from drinks enters the body so quickly that it can overload the pancreas and the liver, leading to diabetes and heart disease over time. A 2010 study said that consuming one to two sugary drinks a day increases your risk of developing diabetes by 26%.

Heart disease is responsible for 31% of all global deaths and although one sugary drink has minimal effects on the heart, consuming sugary drinks daily is associated with long-term consequences. A study found that for men, for every added serving per day of sugar-sweetened beverages, each serving was associated with a 19% increased risk of developing heart disease. Another study also found increased risks for heart disease in women who drank sugary drinks daily.

Obesity is also a global public and health policy concern, with the percentage of overweight and obese people in many developed and middle-income countries rising rapidly. Consumption of added sugar in sugar-sweetened beverages has been positively correlated with high-calorie intake, and through it, with excess weight and obesity. The addition of one sugar-sweetened beverage per day to the normal US diet can amount to 15 pounds of weight gain over the course of 1 year.

A French study published in 2019 in the British Medical Journal also enlighted a possible link between the consumption of sugary drinks (beverages containing more than 5% of sugar) and a higher or increased risk of developing cancer.

Comparison to tobacco taxes

Proponents of soda taxes cite the success of tobacco taxes worldwide when explaining why they think a soda tax will work to lower soda consumption. Where the main concern with tobacco is cancer, the main concerns with soda are diabetes and obesity. The tactics used to oppose soda taxes by soda companies mimic those of tobacco companies, including funding research that downplays the health risks of its products.

Australia: The People vs Sugar Australia

In 2017 I wrote about the Sugar epidemic and its health consequences, as it’s been called “the new tobacco” by Simon Capewell, a professor of clinical epidemiology at the University of Liverpool and “the alcohol of childhood“ by Robert Lustig, Professor of Paediatric Endocrinology at the University Of California, San Francisco

In that post, I highlighted how the Australian government and the Australian Beverages Council are blocking any progress.

Turnbull commented, “Australians pay enough tax at the moment. I don’t believe that another tax is going to be what Australians need or want at this stage”.

Australian Beverages Council (a group that represents the interests of Australian manufacturers, importers and distributors of non-alcoholic beverages, and paid by the companies that profit selling drinks with sugar) commissioned a poll and found that two-thirds of Australians feel a tax on soft drinks would be ineffective in reducing obesity and the majority of those surveyed were against the introduction of such a tax. 12-ounce can of regular Coke contains 39 grams of total sugar = 9 1/3 teaspoons of sugar

Obesity Policy Coalition leads a plan drawn up by a group of 34 leading health and community groups including the Cancer Council, Heart Foundation, several universities and Nutrition Australia.

Last year, 2020 Australian of the Year Dr James Muecke says a sugar tax could be used to combat diabetes

Sugary drinks have been linked to type two diabetes independent of obesity in many studies now and in 17 separate countries a levy on sugary drinks has been shown to reduce purchase and consumption. If we look at it, 20 per cent levy on sugary drinks would raise over $600 million which could be then used to fund heath awareness initiatives and to reduce health inequalities that exist in our society.

It is a David and Goliath battle to get a sugar tax introduced because the sugar cane industry is a significant money-maker and employer, I’ve written to all the major supermarket chains and stores asking them to remove the sugary products from checkout counters where they’re preying on our addictions, they’re preying on the vulnerable and our kids, another thing I’ve been doing is writing to all the major universities in South Australia, the women’s and children’s hospital asking them to remove sugary products from vending machines in those institutions, and fortunately that’s happening.

Australia’s Cancer Council says we should throw its weight behind a sugar tax

if you’re thinking that some countries face obesity crises that are foreign to Australia, think again. Despite our (largely historical) reputation as a fit, sporty nation, Australia is among the five fattest members of the 35 developed countries that make up the international Organisation for Economic Co-operation and Development.

They continue explaining how even countries with less alarming obesity rates than Australia, such as France and Finland, have introduced a levy. They’re ahead of the curve; we’re falling behind, while, unlike tobacco, which is gradually costing the community less as fewer people smoke, the cost burden of obesity is rising and was estimated to include $3.8 billion in direct healthcare costs alone in Australia in 2011–12.

We know that there are 11 types of cancer linked to obesity. Cancer Council research shows that almost 4000 cancer cases each year are linked to weight alone. Another 1,800 cases a year are linked to physical inactivity and 7000 Australian cancer cases each year are linked to poor diet. If we don’t act now these numbers will continue to grow.

Australian government takes action

5 December 2018, the parliament committee, recommended that the Australian Government introduce a tax on sugar-sweetened beverages, with the objectives of reducing consumption, improving public health and accelerating the reformulation of products with an Obesity epidemic in Australia Report

The Australian Beverages Council announced in June 2018 that the industry would cut sugar content by 10% by 2020, and by another 10% by 2025. This was seen as an attempt to stave off a sugar tax. There were no plans to reduce the sugar content in the high sugar drinks. The plan is primarily to increase the consumption of low-sugar or no-sugar drinks. Sales of Coca-Cola Amatil’s fizzy drinks have fallen 8.1% by volume from 2016 to 2018.

Chapter 6 on Tax on sugary drinks, highlights

• 6.2. WHO (the World Health Organization) recommends that governments tax sugary drinks to address type 2 diabetes, obesity and tooth decay. See the WHO paper here
• 6.3. Over 30 countries and sub-national jurisdictions around the world have introduced taxes on sugar-sweetened beverages (SSBs), in line with the WHO recommendations.
• 6.5. The vast majority of submitters, with the exception of the food and beverage industry, are of the view that a tax on SSBs is an important piece of the puzzle of multiple strategies required to address obesity. They all recommended the introduction of an SSBs tax.
• 6.6. Parents’ Voice recently conducted a survey which showed that a levy on sugary drinks had the support of 90 per cent of Australian parents who participated in the survey.
• 6.10. Diabetes Australia said there is clear evidence, though, that a sugary drink tax discourages consumption. One study found a 20 per cent levy could reduce consumption by around 12.6 per cent. This could lead to 800 fewer people developing type 2 diabetes annually.
• 6.13. The Royal Children’s Hospital Melbourne provided an example from the United Kingdom, where as soon as the government committed to introducing a sugar tax in 2016, companies elected to reformulate the sugar content of their drinks. Within months of the proposed tax, the amount of sugar was halved in the formulation of Sprite and the sugar content of Fanta fell from 7 to 4.5 grams.
• 6.23. Coca-Cola Amatil and other submitters also claimed there is very little evidence that taxes targeting SSBs actually work to reduce obesity rates.

Sugar Australia & Friends

Sugar is Australia’s second-largest export crop, after wheat, with total annual revenue of almost $2 billion. Australia exports 80%-85% of its raw sugar to buyers overseas, making it the second-largest raw sugar exporter in the world

Coca-Cola Amatil is one of the largest bottlers of non-alcoholic ready-to-drink beverages in the Asia-Pacific region and one of the world’s five major Coca-Cola bottlers operating in Australia, New Zealand, Indonesia, Papua New Guinea, Fiji and Samoa with a 2014 Revenue of A$5.12 billion

Just last year Coca Cola Australia announce to be sold for $9.23bn to Coca-Cola European Partners, while Coca-Cola Amatil group managing director Alison Watkins explains how sales in Australia were fuelled by double-digit growth in Coca-Cola No Sugar and strong demand for energy and dairy drinks, to continue in 2020 and generate low-single-digit profit growth.

In The business of sugar, the global sugar confectionery market size is anticipated to reach $69.5bn by 2026, growing at a rate of 4.3%, according to the latest research published by Polaris Market Research. Asia-Pacific is expected to grow at the highest rate during the forecast period.

In the Australian market, confectionery saw sales of AUS$49m ($34m) in 2018. Sugar confectionery is the strongest performer in the category, accounting for 60% of the growth.

Confectionery remains a highly impulsive category in convenience stores and even in tough retail conditions, performs well as consumers seek out small treats for themselves​

Mars Wrigley CEO Jeff Rogut told c-store.com.au/​.

A breakdown of results showed chocolate confectionery accounted for 57.3% of the category, sugar confectionery (including gum and mint) made up 38.9% and nutritional bars totalled 3.8%.

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