Soft drink brands should embrace the sugar tax

With a sugar tax set to be introduced on the soft drinks industry by the end of 2018, brands risk damage by being too critical of the government’s move according to experts.

The imposed sugar tax on the soft drink industry will raise £520m, which will be used to help support school sport and fitness programmes.

The government will apply the tax in two bands: the lower band will see brands pay a tax on drinks that they produce or export containing 5g or more of sugar for every 100ml. A higher band covers drinks containing 8g or more of sugar on every 100ml. Milk shakes and fruit-based drinks, however, will not be impacted.

Coca-Cola has been very critical of the move, with its vice president Leendert Den Hollander telling Retail Week: “We just believe there’s no proof or evidence that sugar tax works. There’s no evidence that calories significantly reduce after sugar tax.”

READ MORE: Coca-Cola and Britvic hit back at sugar tax for ‘singling out soft drinks’

A Britvic spokesman, meanwhile, said the soft drinks industry had been “unfairly singled out” and that the tax “would not solve the nation’s obesity problem.”

Embracing the sugar tax

However, Joe Wade, director of creative agency Don’t Panic, is surprised a high-profile soft drinks brand has yet to support the sugar tax.

He advises: “Even if it wasn’t their true belief, if someone like Coke embraced it they’d steal a march on their rivals. They’d look less guilty. The more a big soft drink brand whines, the more it risks looking like a guilty tobacco company in the public’s eyes.”

coke 2
Low calorie soft drink sales grew 2.3% to £1.5bn in 2015 while full sugar soft drink sales fell -2% to £4bn [Source: Nielsen Scantrack Data]

Britvic stating that it is being singled out by the government might not be wise, according to Brand Union’s senior strategist Emma Rose Hurst. She adds: “Defending themselves is different from attacking government or disregarding public health. The former is okay, the latter risks damage.”

Despite high-profile launches of diet variants such as Coca-Cole Life over recent years, data suggests brands have not done enough to reduce sugar levels. In 2013, white sugar was present in 59.13% of British soft drinks, according to Mintel. And this has dropped by just 2% in 2015 to 57.23%.

Health-conscious marketing

The same report found that 46% of UK adults now view low sugar content as more important than a brand itself and Wade says brands must now ensure they make radical changes to their marketing.

“Perhaps Coke knew this was coming as just a month ago it took out ads in the quality press talking about how 80% of their drinks were sugar free,” he adds. “I think the typical TV ad that shows a family sharing a two-litre bottle will become redundant. Coke has to now focus on doing tie-ups with health brands as this won’t go away and the soft drinks industry cannot risk becoming the new cigarettes in advertising terms.”

While the creation of new sugar-free products will help soft drink brands, there could also be an argument for natural sugars, with 55% of Brits deeming products high in natural sugars to still be healthy [Mintel].

24p a litre: the cost the sugar tax will add to a litre of a soft drink that is put into the higher band

READ MORE: Jamie Oliver: Brands need to do more to tackle sugar

However Rose Hurst does not believe health-focused messaging or natural ingredients are the only answers. She says producers such as Coca Cola and Britvic must take note of the sector’s wider struggles.

She concludes: “In isolation the UK is only 2% of Coca Cola’s market but this, like soda taxes elsewhere, is a manifestation of the largest threat to the soda industry: increasing concerns about health, specifically obesity and related diseases.

“State level concern is one thing, but these are consumer concerns too. A quarter of Brits are drinking less soda than even six months ago, 49% of soda consumption is low- or no-calorie, and people are even drinking less fruit juice. This sugar tax has struck an extra blow, hitting share price as well as exacerbating the consumption shift.”

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