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MPs believe that the levy on sugary drinks will be extended

To the surprise of many food and drink manufacturers, the Chancellor announced in the last Budget that a levy on sugary drinks will be introduced in 2018. Most had thought that a sugar tax might be ‘held over the head of the food and drink industry’ while the Government ratcheted up the pressure on companies to reformulate products to include less sugar. However, the surprise move is likely to cost the likes of Britvic, Coca Cola and PepsiCo millions of pounds unless they decide to pass on the levy to consumers.

Many food companies see the sugar levy as only the first move in a change of approach to sugar from the Government. Some fear that levies and taxes on products with sugar will rise and be extended to other food categories.

Are they right to be worried?

Yes. According to research conducted before the Budget announcement in March, three in five Britons (62%) believe that sugar is the main reason for rising obesity in the UK and over half (53%) say that it would be acceptable to introduce a tax on sugary drinks. What’s more, MPs seem to see the Budget announcement as only the first step in action against sugar. While less than a third think that the current sugar levy will reduce obesity in the UK significantly, 73% believe that the levy will be extended to other products containing sugar in the next 5-10 years and almost as many believe that the levy will be increased over the same period.

Sugar Levy_July 16_V3-02

So, what food categories are in the firing line?

If you ask MPs, ready meals appear to be next in line. 53% of them say that they would support an extension of the sugar levy to these products. Other categories that are at risk include milk-based drinks, cakes and biscuits and chocolate/confectionary with high levels of sugar. Though more MPs say that they would not support than support extending the levy to these food categories, the margins are slim.

Sugar Levy_July 16_V3-03

Food manufacturers, particularly those focused on pre-prepared meals, milk-based drinks, cakes & biscuits and chocolate, have been relatively quiet over the last few months.  Perhaps they are waiting to see the details of the Government’s twice delayed Childhood Obesity Strategy and how the sugar levy will bed in. However, they should not presume that politicians will spend much time reviewing the effectiveness of the current levy on sugary drinks. Many MPs, particularly on the Labour and SNP sides, are ready to extend the levy to other food categories now.

The battle has arrived. It is time for Big Food to take more responsibility for the rising tide of obesity and demonstrate how it is helping people to control their weight with bold innovation and adventurous reformulation. While the industry is right to point out the limitations of the sugar levy and the negative impacts that stricter regulation has on consumers, without a new vision that challenges the loud and aggressive health lobby, legislators are likely to increase and extend the sugar levy.

In an environment where consumers and politicians agree that ‘something must be done’ to reduce obesity, it is not enough for the food industry to pick holes in the solutions put forward by others. It must put forward its own solutions; and it needs to sell these solutions to consumers and politicians better than the health lobby does.

David Racadio

David is responsible for Populus's industry studies, which help clients in a range of sectors, including banking, insurance, food manufacturing, pharmaceuticals and retail, to benchmark their corporate reputations and understand the attitudes of key stakeholders that impact on their industry.

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