The Blog

An Independent Soft Drink Producer's Response to the Sugar Tax

As a small producer, and working with many other start-ups and other small producers, we have perhaps a unique position from which to view the proposed sugar tax, due to take effect from 2018.

As a small producer, and working with many other start-ups and other small producers, we have perhaps a unique position from which to view the proposed sugar tax, due to take effect from 2018.

Why unique? Because we're not 'corporate', everything is viewed from a more personal level, but more importantly because we will likely be exempt from the proposed sugar tax under the small producer exemption (although details on this are currently hard to find). As we are a family run business then we have no shareholders to answer to and our thoughts can be forthright.

As a father and husband

Let me tell you how we approach soft-drinks in our household (2 adults, 2 children - 2 & 7): They are for occasional treats, not daily consumption. Soft drinks, and be that fizzy pop, or pure fruit juices, are generally either by nature or design, highly acidic (that's part of how they're preserved), and that's not good for the teeth. Nor is letting our children believe that either sugary drinks, or drinks that taste like they're sugary (children don't know the difference), should be a part of a daily healthy diet. This is also part of what we teach children when we do tours, demos, or school visits.

As a producer

As a producer, and a consumer, we do not have any real problem with some kind of government intervention in this area (that's not to say that we're 'pro' sugar tax either). Encouraging consumers to be more mindful of their consumption in this day and age is difficult, but everyone notices the pennies in their pocket - from the affluent to the less so.

Why do we not have a problem with government intervention in this area? It's not because we're believers in 'big government', but because the general public (which includes me and all those working with me), are hard to reach via education programmes.

Soft drinks are mostly empty calories. There's no nutritional value to the extra calories in there, but sugar is a simple way of making soft drinks 'work' without adding extra agents like gummes, thickeners and the like - aka 'chemicals' in the public mind - which are off-putting to the consumer and can be expensive in their own right, as well as expensive to formulate or process. But there are already alternatives. For the vast majority of 'main brand' soft drinks you can already find a diet or low-cal alternative.

This raises two questions: why do people drink the 'full fat' version, and should we be forcing them to do so?

Let's be frank here - if you want to have what is termed a 'clean label' product in the soft-drinks world then you'll be hard pressed to do it without sugar (at least without confusing the situation more). Consumers are pressing more and more for 'all-natural' products. Now, as an industry-insider, I can tell you that the line between 'natural' and 'non-natural' is about as fine as the difference between a politicians sound-bite or statement, and the 'real' answer: it contains truth, but it's often more about the language rather than the substance. Thus the consumer is going to have to accept alternatives that are either lacking, accept the price increase, or accept 'chemicals' in their products. Which they have for years anyway, albeit under the 'natural' nomenclature. Thus, many people drink 'full fat' versions of drinks to avoid the 'chemical' or 'non-natural' alternatives to sugar. Should we be forcing them to drink 'non-natural' products? Well, that's a good question, and it depends on the definition of 'natural', but that moot point aside no-one would be forcing them to do so - but they will be taxed for the privilege of opting for a more 'natural' product.

Will it work?

There have been studies, notably by Professor Ivan de Araujo of Yale University School of Medicine that state that by switching to a zero sugar product your brain will still crave the sugar as although your taste-buds perceive sweetness your body does not receive the calories:

The results of the new study imply that it is hard to fool the brain by providing it with 'energyless' sweet flavours. Our pleasure in consuming sweet solutions is driven to a great extent by the amount of energy it provides: greater reward in the brain is attributed to sugars compared to artificial sweeteners.

Professor Ivan de Araujo, who led the study at Yale University School of Medicine USA, says:

"The consumption of high-calorie beverages is a major contributor to weight gain and obesity, even after the introduction of artificial sweeteners to the market. We believe that the discovery is important because it shows how physiological states may impact on our choices between sugars and sweeteners. - Source

So, opinion may be divided insomuch as removing calories in one place may cause the craving to be displaced somewhere else.

Effect on low income households

There's a discussion to be had on the effects on household budgets. The Tax Payer's Alliance (TPA) have stated:

Sugar Tax is a deeply regressive consumption tax, which will hit those on lower incomes the hardest. Dia Chakravarty - Tax Payer's Alliance Political Director - Source

Do I believe this? No. That's an either-or fallacy - or a 'false choice dilemma'. People are not forced to buy sugary drinks - it's a decision, and the brands that lower-income families purchase would tend to be big-brand, low(er) priced, or supermarket own brands. These are almost always available with Diet alternatives. This kind of argument really fouls the water, and is, in my opinion, a bit of a cheap-shot without substance.

As a producer, here is what I have noticed through experience:

What people say, and what they do are often very dissimilar. People will rather trade truth for a comforting lie and self-imposed ignorance. You could take 'vitamin waters' as an example; people know that they really don't need all that extra in their drink, but it makes the purchase more comforting and can be justified as 'being good', even if the product might otherwise be called 'bad'. People will decry sugar, and yet often purchase the worst sugary offenders without pricking their conscience. Righteous anger in the abstract, hypocrisy in daily life. It's very easy to blame an anonymous industry or figure for a lack of self-control or care. I include myself in this. So taxing people to make them sit up and listen is a simple way of forcing them to notice what they're paying for and consuming.

If, and that's a big if, sugary soft drinks really are a leading cause of obesity, type II diabetes and the like, then the truth is, that like alcohol & tobacco, those products that cause conditions that the public should run from, and that tax-payers are paying for in NHS bills, should be taxed. But we're in another area of false-equivalence. Alcohol & tobacco are not the same as sugar. There are very real cause-and-affect relationships between the two and their associated medical conditions, and the bill that the tax-payers have to pick up for NHS costs. Sugar is seemingly in everything. Your fat-free healthy yoghurt? Packed with sugar to make up for the fat. Sauces, ready-meals, in fact it's difficult to think of a processed food that doesn't contain sugar. You know what you're buying when you purchase alcohol or tobacco, that's not the case with sugar.

Can this tax mislead the public?

30g of sugar a day is what the NHS states as your maximum 'added' sugar intake (5% of total calories) - Source.

A mini-mars bar (you know, the ones you can eat 4 of without noticing) contains 11.5g of sugar - a mini Milky Way has 10g. A Yazoo 400ml chocolate milkshake contains 37.6g of sugar. Milkshakes and confectionery are exempt from the sugar tax. Oh, and the shake is 2.5 servings according to the label. That means that you're expected to share it with 2.5 friends, or drink it over 2.5 days. No-one does that - but maybe 'portion size' which is often used as a calorie/sugar counter should be left for a separate discussion.

If we solely tax soft drinks then there's an argument to be made that people will believe that it is soft drinks that are causing them the majority of weight issues. "If this were not the case", the public could think, "then why would only they be singled out"? This is really rather a dangerous case of the law of unintended consequences.

So, if we are going to have a sugar-tax, I do believe that it should be applied to other non-nutritional products, or treats, like confectionery, like milkshakes. Otherwise it isn't a sugar tax, it's a sugary drink tax. Unless your sugary drink has milk. Or is juice. Other than political pressure, and the thought of having every choc-a-holic crying foul at the government there is no reason in principle not to.

Will it cause the industry problems?

So, in short, will this cause problems for the industry. Yes and no, and these are big generalisations. The big-boys have the ability to reformulate, or to charge more and their customers will inevitably pay, and it'll almost certainly be used as an excuse for a price-hike by some which won't be solely due to the tax. There will be some losers - sales will go down. In the big-boys league they'll simply migrate to Diet/Zero/Sugar Free versions, no big losses. Will that stop a lot of arguing and bluster? No, if for no other reason than to set their stall out against further intervention in other areas. For smaller producers it may cause issues, although we're yet to see what level the exemption kicks in. For the smallest producers, then they are exempt. That may actually be good news for people like us. However, everyone is likely to find that this tax will be costing them something, large or small, in PR, good-will, governance costs, admin, formulations and the like.

The Take-Home

If cutting obesity/diabetes is the goal then this should only be the start. If we don't see this rolled out to other products in the next 5-7 years or so then it will show that there are other reasons behind this tax, or that there is not enough political backbone in our governments to follow through on what they believe.

Are we pro, or anti sugar tax? Well, neither. There are valid points to both sides. We're in the camp of 'be careful what you wish for, you might just get it'.

We would really encourage everyone to be more aware of what they consume, and where they place value. We've produced amazing all-natural products with fresh, natural ingredients with provenance, and they've flopped. Whereas the otherwise identical product (but cheaper), made with 'flavours' have sold by the bucket-load. If you want better products then show producers that there is a market for it. Their job is to sell to you what you will buy.