The UK Soft Drinks Industry Levy

“Insight from our suppliers has suggested that the implementation of a price variation for customers, between full and reduced sugar offerings, is a smart business move for many operators across the hospitality industry, and goes hand-in-hand with the rising trend of healthier food and drink choices by consumers. 

“It is the time for operators to stock a soft drink levy ready range, which reacts to rising consumer demand for a healthier beverage choice as well. Customer experience is more important than ever, so retailers must aim to offer innovative soft drinks, lower in sugar but perfectly served, to stand out from the crowd. 

“There has been a major surge in embracing a healthier approach to food and drink consumption in recent years. Prior to the sugar tax, Consumers were already opting for lower calorie soft drink alternatives giving operators the opportunity to adjust their prices and differentiate between low and full sugar options with minimal detrimental effect. 

“We are seeing low calorie soft drinks significantly outperforming full sugar options. According to our supplier Brakes, in terms of year-on-year volume growth, full sugar drinks have seen a 1.4% increase, whereas low calorie drinks have seen much larger growth of 14.6%.” 

Paul Connelly, Managing director at Beacon, a leading UK purchasing company

“Whilst the UK’s decision to implement a tiered tax system did cause a mass wave of reformulations, it also ensured consumers still had a choice to either stick with sugary brands or switch to healthier alternatives. Other countries, like Belgium for example, simply placed a tax on all soft drinks, so there was no incentive to go healthier. The UK’s Soft Drinks Industry Levy is far more likely to succeed because of the tiered tax system, although early research suggests the tax may have to rise further before the financial incentive is significant enough to reduce sugary consumption. 

“Success is also far more likely among younger age groups. Three economists at the Institute for Fiscal Studies have predicted the tax will reduce young people’s sugar consumption through soft drinks by roughly 80%.” 

Jonathan Davison, Beverage analyst at GlobalData Consumer

“Two years later and Osborne’s Sugar Tax has arrived. Drinks companies have gone back to the drawing board across all their products. They have been steadily making their drinks healthier to combat obesity, sugar-free and diet versions have been around for some time, but recently there’s been a scramble to find innovative ways to rethink manufacturing processes and successfully reduce sugar content without a potentially profit devastating change in taste. 

“It’s definitely been a long and thorny ‘trial and error’ period for drinks companies: all drinks manufacturers have been busy researching new, innovative ways to replace sugar with alternatives, all of which has incurred a burdensome research and development cost, which companies need to strike the right balance between reducing new tax costs and avoiding a consumer backlash. 

“Whilst the UK’s decision to implement a tiered tax system did cause a mass wave of reformulations, it also ensured consumers still had a choice to either stick with sugary brands or switch to healthier alternatives. Other countries, like Belgium for example, simply placed a tax on all soft drinks, so there was no incentive to go healthier. The UK’s Soft Drinks Industry Levy is far more likely to succeed because of the tiered tax system, although early research suggests the tax may have to rise further before the financial incentive is significant enough to reduce sugary consumption. 

“Success is also far more likely among younger age groups. Three economists at the Institute for Fiscal Studies have predicted the tax will reduce young people’s sugar consumption through soft drinks by roughly 80%.” 

Martin Hook, Managing director of Ayming UK, a business performance consultancy specialising in research and development 

“The sugar tax is not a catch all answer to better health, nor is it a way to educate consumers – the industry needs products which challenge the status quo and show that sugar does not equal flavour. 

“The definition of what is ‘healthy’ has changed – health is now a lifestyle choice. Once meaning ‘diet’ with a real focus on calories, health has now evolved to mean ‘healthful’ – more about the fuel going into your body than the absence of ingredients being left out. Healthful beverages add protein, antioxidants and vitamins. 

Clark McIlroy, Managing director, UK food and drinks distributor Red Star Brands

“Since the announcement of the UK sugar tax, global brands have begun to search for ways of reducing the sugar content across their ranges. When you replace natural sugars with artificial sweeteners, you don’t just lose the sweetness, you also sacrifice ‘mouth-feel’, which often creates a bitter or even astringent aftertaste. All of these facts combined can lead to a drastically different product, which may be alien to consumers. We have designed ΩMegaSweet to combat the challenges faced by the beverage industry ahead of the sugar tax. 

“The feedback we’ve had from companies is overwhelmingly positive; they’re delighted with the results. It is a huge benefit to the industry that products like ΩMegaSweet allow them maintain a natural label declaration, especially as we enter a new era of ultra-transparency.” 

Steve Pearce, Cofounder of Ωmega Ingredients, which produces ΩMegaSweet, a calorie-free, natural sugar replacement that can be used in a range of food and drink products