The new tax on sugary sodas sold in the U.K. doesn't go into effect until April 6, but it has already resulted in a big drop in the amount of sugar in certain products, according to The Washington Post. So far, Coca-Cola cut the amount of sugar by 30% in its Fanta Orange soft drink by using the artificial sweetener acesulfame (Ace K), while Nestle is reducing the amount of sugar in its San Pellegrino sparkling fruit-based beverages by 40% by incorporating stevia.
The U.K. soda tax has two different rates depending on the sugar level of the particular beverage. The lower rate is about 6 cents per serving and will apply to products with about 12 to 19 grams of sugar per 8-ounce can. The higher rate will be about 8 cents per serving and will apply to those beverages with more than 19 grams of sugar per can, the Post reported. Drinks containing less than 5 grams per 100 ml will be exempt, along with fruit juices and milk-based drinks such as frappuccinos.
The British Treasury had originally anticipated a revenue influx of about $733.6 million the first year from the new soda tax. However, because of these voluntary sugar-reduction efforts, it has now trimmed that expectation by nearly 50%, the Post reported.
How is it that a U.K. soda tax that isn't even being collected yet has already been more effective at cutting sugar levels in some beverages than one-size-fits-all soda tax approaches in the U.S.? One big reason is the financial incentive manufacturers have to reduce sugar content before the tax starts being collected — products are exempt if they contain below 5 grams per 100 ml. Not surprisingly, the reformulated Fanta Orange has 4.6 grams of sugar per 100 ml.
According to Coca-Cola UK, there are typically 10.6 grams of sugar in 100 ml of Coca-Cola Classic. Other sugary beverage makers — such as Dr Pepper and its 7-UP brand, and PepsiCo and its Mountain Dew brand — are also at risk of paying the higher rate if they don't start limiting the sugar in their products.
It takes time and focused effort to reformulate food and beverage products to reduce sugar. According to Stefano Agostini, CEO of Nestle UK and Ireland, two years of work went into changing San Pellegrino's recipe in order to reduce the sugar content by about 40%.
"Our work towards these achievements is actually as much about taste as it is about reducing sugar and calories," he said in a release about the change. "It is not as simple as just removing sugar from a product, the skill is in making that product taste just as good or, ideally, better. We have an unrivaled research and development network across the globe that makes this possible."
Coca-Cola is launching three new beverages in response to the new tax. The company announced in January that it will debut non-dairy drink brand AdeZ in May and cold drink Honest Coffee in September. A new iced tea drink called Fuze Tea has already hit the marketplace. The company also said that, by 2020, it intends to double sales of still drinks in the U.K. and that 50% of new revenue will be emerging from innovations or new products by then.
The soda tax was part of the U.K. government's 2016 budget proposal and was pushed by Chancellor of Exchequer George Osborne. He said the tax might make a dent in U.K. childhood obesity rates, which are a serious problem — one in five children are obese, starting in primary school, according to the London-based government.
An incentive rewarding sugar reduction might be a more productive long-term approach in this country than punishing companies after the fact. Consumers typically don't want to pay soda taxes, and that sentiment helped jettison Cook County's penny-per-ounce soda tax last fall after only four months. Currently, soda taxes are in effect in Berkeley, Albany and Oakland, California; Boulder, Colorado; San Francisco; Philadelphia and Seattle.
There's another big difference between U.S. soda taxes and the U.K. plan. Distributors of sugary beverages in cities where the tax exists pay them and may pass the cost on to retailers, who may then pass them on American consumers. The U.K. soda tax will be paid by manufacturers, although they're also free to pass the cost on to consumers. Considering the power of state and local governments today — and the current anti-regulation mood in Congress — it's hard to imagine the federal government passing a national soda tax, no matter how it was structured or how it was going to be collected.
Some U.S. soda makers and CPG manufacturers have been busy reducing sugar in their products in anticipation of the requirement that added sugars be included on the Nutrition Facts label by 2020. Between consumer demand, the possibility of more state and local soda taxes and the federally mandated added sugar labeling, many in the food and beverage industry will likely have to find methods to limit sugar content one way or another.