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The Soft Drink Sugar Consumption Challenge

2/28/2019
Nathanael Lim Profile Picture
Nathanael Lim Bio
Jarred Neubronner Profile Picture
Jarred Neubronner Bio
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With increasing concerns over diabetes in Southeast Asia, various governments have been taking proactive action to curb sugar intake in packaged beverages. Most recently, Malaysia announced a sugar tax implementation from April 2019. The Singapore government is currently conducting a public consultation to reduce consumption of sweetened beverages.

Impact of sugar tax on beverage

Sugar taxation is set to impact sales of beverages with high sugar content such as carbonates. Beverages with healthier ingredients and hydration properties such as bottled water stand to benefit, as consumers opt for healthier beverages.

Varying tax structures would also have different impacts on beverage categories. For instance, a flat tax imposed on carbonates in the Philippines would lead to a decline in sales of carbonates regardless of the amount of sugar. On the other hand, a tiered tax implemented based on sugar content will impact carbonates with higher sugar content. In addition, the large in excise tax for RTD tea in Thailand as part of the sugar tax implementation sees the category most impacted in terms of higher prices and huge declines in volume sales.

While there is perception on the correlation between high sugary drinks consumption and obesity, there is little evidence to show they are directly correlated. There are various factors contributing towards obesity including diet, genetic makeup and local taste preference for sweet food and beverages including bubble tea, kopi (coffee) and tea could contribute to obesity. In other countries, such as Mexico and France, where the sugar tax has been introduced the percentage of obese population of (BMI 25kg/sg M or more) rose from 62% to 64%.

Product reformulation to circumvent sugar tax

The introduction of a sugar tax in countries like Thailand has seen players reformulate their products towards reduced sugar variants to reduce exposure to the tax, to protect their bottom-line. Lipton launched the reduced sugar Lipton Mango and Pandan Green Tea in early 2018, just months after the sugar tax was implemented there.

Similarly, players in countries due to implement the tax or are considering a tax, have embarked on product reformulation to futureproof against such a tax. In Malaysia and Singapore, various reduced and even zero sugar variants have been released in soft drinks categories like carbonates, RTD tea and sports drinks.

Apart from reducing liability to sugar taxes, product reformulations provide the added benefit of being able to target consumers abiding by the healthy living trend. Bearing this in mind, the use of natural sweeteners such as Stevia and monk fruit could become more common, as players look for healthier alternatives than artificial sweeteners as sugar substitutes.

More holistic approach towards dealing with obesity

Besides the role of sugar tax, a multi-pronged approach needs to be adopted by various stakeholders, including the government and manufacturers. Consumer education through schools is expected to encourage young consumers to consume healthy beverages, while nutritional labelling such as Healthy Choice Symbol and clean labels help educate consumers on making healthy choices.

On the manufacturer front, introducing healthier variants with lower or zero sugar content, as well as smaller pack to size to promote portion control is set to appeal to consumers.

Amidst product reformulation, it is important to take into consideration other factors such as maintaining the taste product. According to our Euromonitor Trends Survey 2017, superior taste continues to be one of the important features of beverage consumption. Therefore, consumers’ taste cannot be compromised while introducing healthier ingredients.

All in all, the role of sugar tax itself is insufficient to curb diabetes. Continual efforts including education and reformulation remains vital so that consumers will shift their consumption habits towards healthy living in the long haul.

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