The sugar tax will simply speed up the inevitable

Soft drink companies already had an eye on the health-conscious consumer. They just need to up their game.

by Jack Torrance
Last Updated: 12 May 2016

It has been decried as a PR tactic to distract from the government’s less than spectacular financial forecasts. But George Osborne’s decision to introduce a tax on sugary drinks has at least been cheered by health campaigners – not least Jamie Oliver who promptly tipped up to Parliament Green to express his excitement.

The drinks industry itself is less likely to regard the levy as ‘pukka’ though. Shares in Britvic, which makes Pepsi and Tango in the UK, and Irn Bru maker AG Barr, have fallen several digits in the hours since. ‘What we've got today... is a piece of political theatre,’ said Ian Wright, director general of the Food and Drink Federation. ‘The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs. Nor will it make a difference to obesity.’

The tax will go after importers and manufacturers directly rather than being levied at the point of sale and will be charged at a unit rate per litre, rather than varying according to price. It will only add about 8p to the cost of a can of Coke but would raise the price of a two litre bottle by a not insignificant 48p. That means big bottles of supermarket and other cheap soft drinks could more than double in price.

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Osborne said he hoped manufacturers would change their products rather than pass the cost on to consumers, but price rises seem likely. And higher prices are likely to mean a significant decline in consumption, which would obviously be bad for drinks companies.

To maintain their revenues soft drinks manufacturers will have to entice more of their customers towards healthier options. Coke already makes two sugar-free varieties (Diet and Zero) and most of its competitors do the same. Even rust-coloured Irn Bru, not exactly a brand you would associate with health-conscious consumers, has a light version.  

'Big Soda' has been in trouble for a while. When more and more consumers are plumping for coconut water, smoothies, matcha tea and craft beer, a sugar tax is probably the least of its worries. 

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