The war on sugar

How have the big players reacted to the impending sugar levy, and will it affect what's on our supermarket shelves? James Ashton investigates.

Illustration of none branded fizzy pop.

Illustration by Nathalie Lees

It was a bitter pill for food and drink manufacturers to swallow. Standing at the despatch box to deliver his Budget statement in March 2016, former Chancellor George Osborne had bad news for anyone with a sweet tooth. "I'm not prepared to look back at my time here in this Parliament, doing this job and say to my children's generation: I'm sorry," Osborne said. "We knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing." He proceeded to set out to do something – namely introduce a £520m sugar levy on the soft drinks industry from 2018.

Obesity campaigners were cock-ahoop. Chef Jamie Oliver, who had already slapped a sugar tax on fizzy drinks sold in his own restaurants, hailed the measure on Instagram as a "profound move that will ripple around the world". The drinks industry was less thrilled. "We are extremely disappointed by the Government's decision to hit the only category in the food and drink sector which has consistently reduced sugar intake in recent years – down 13.6% since 2012," the British Soft Drinks Association's director general Gavin Partington said, adding that his members were targeting a 20% reduction in calories by 2020.

The health debate

Both arguments are well rehearsed. Health experts say something must be done because Britain's unhealthy youngsters, some of whom consume three times the recommended level of sugar, increase their risk of heart disease and type 2 diabetes in later life. Those that take the opposite view say the evidence is flimsy that higher taxes reduce obesity and consumers are entitled to make their own choice. And that choice is a healthier one already, as shown by the 44% decline in the purchase of regular soft drinks between 2004 and 2014, according to government data. Nevertheless, Osborne's decision suddenly made the war on sugar a numbers game. The levy's two bands – for total sugar content above five grams per 100ml or eight grams per 100ml – promise to drive up the price of a can of Coca-Cola by around 8p.

Grocery groups fear the levy will open the floodgates. The Scottish government is proposing to extend the soft-drinks tax to food and introduce minimum pricing for alcohol to deter binge drinking. The British Medical Association has discussed a proposal to introduce minimum pricing to make sweets less accessible for children. A ban on the advertising of high fat, salt or sugar food and drink during children's TV programming and online came into effect this summer.

Even without extra tax to contend with, it is a time of great upheaval for some of the world's largest food and drink companies. Profits are being squeezed by the unending supermarket price wars, higher raw material costs and soaring marketing budgets. Toughest of all is keeping up with unpredictable consumer tastes which have switched from processed, full-fat goods to gluten-free and organic options. Some of that shift comes from the desire for healthier lifestyles. Witness the smaller brands that are gaining traction including Pip & Nut peanut butter, with no refined sugar and palm oil. Another is the Coconut Collaborative, run by Gü founder James Averdieck, whose yoghurts are free from dairy, soya and gluten.

Time to go low

In the face of such competition, the biggest food groups – including Unilever, Nestlé, Procter & Gamble and Coca-Cola – are faced with reforming old favourites or buying up the upstarts. Product relaunches have been given extra impetus by the looming sugar tax.

The biggest food groups are faced with reforming old favourites or buying up the upstarts

AG Barr, home to Irn-Bru, committed to reducing sugar in 90% of its drinks to less than five grams per 100ml – beneath the levy's lowest threshold. Last summer, Coke brought out its new, improved Coca-Cola Zero Sugar. The company declared it had made the can look more like Coke and the contents taste more like Coke to encourage more consumers to try a no-sugar drink. In a blog post, Jon Woods, general manager, Coca-Cola Great Britain and Ireland, emphasised that this was part of an ongoing process because since 2005 it had launched 27 new or reformulated drinks with lower or no sugar. He wrote: "We believe our actions will prove more effective in helping people reduce their sugar intake than a tax. We will continue to listen and respond to consumers and encourage more people to choose one of our many no sugar options."

Old favourites, new recipes

Meanwhile Nestlé has taken the bold move of tinkering with decades-old recipes instead of offering healthier alternatives to full-fat, full-sugar classics. First, it rolled out a KitKat with 10% less sugar content. Now it is repurposing its Milkybar after 81 years to increase the proportion of milk and reduce the sugar content. Nestlé's UK chairman, Dame Fiona Kendrick, said: "We have used our strength in research and innovation to develop a great recipe that replaces some sugar with more of the existing, natural ingredient that people know and love." Lucozade tried something similar, halving the sugar content of its energy drinks by mixing glucose syrup with artificial sweeteners. But it suffered a social media backlash, with customers bemoaning the new "horrible" taste.

A year before the sugar levy comes into force, Osborne's successor, Philip Hammond, declared that the tax would raise only £400m a year because manufacturers have been quick to make changes. However fast they move, the war on sugar will keep raging. So too will the battle to keep consumers satisfied with the food and drink that is stacked on supermarket shelves.

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