Future-proof your business against Sugar Tax Policy

Future-proof your business against Sugar Tax Policy

Sugar, once considered to be the most superior ingredient out there, associated with ‘feeling good’, has now been reduced to one of the most controversial ingredients with links to multiple ailments.

Responding to the worsening situation, 50 nations have implemented a sugar tax policy which is mainly imposed on sugar-sweetened beverages.

The sugar tax policy, increasing consumer demand for low/no sugar content products, or growing competition – whatever be the reason, the era of low/no sugar products has arrived.

Sugar reduction is real, and it is happening on a large scale globally.

If you are an F&B business owner in one of these sugar tax countries or just looking to stay competitive in the cut-throat F&B industry, this blog will help you understand why there is a global momentum behind sugar reduction.

SSBs(Sugar sweetened beverages) are among the leading sources of added sugars in adult and children’s diets, with no nutritional value.

The sugar tax predominantly imposed on SSBs, also known as sugary drink tax, soda tax, or sweetened beverage tax (SBT) was introduced to curb the adverse effects of sugar by raising awareness and decreasing consumption of sugar.

The number of sugar tax countries is increasing at a monumental rate.

As of 2021, around 50 countries and jurisdictions have imposed sugar tax policies and several others are working towards a similar course.

The excise tax, which is the most commonly implemented tax measure, can be based on either the volume of the drink or on the sugar content in the drink.

Single-tier volume-based excise taxes are based on drink volume and focus on raising revenue for the state. In this case, companies have the option to avoid the levy by reducing portion size, as high- and low-sugar drinks are taxed equally

Many countries like the UK, Hungary & South Africa also have chosen to implement a tax based on sugar content. This way consumers in sugar tax countries can be incentivized to switch to healthier internalities and (lower-sugar) substitutes while simultaneously incentivizing manufacturers to reformulate their products.

The WHO recommends that jurisdictions with sufficient administrative capacity consider sugar-based taxes.

So does that mean that the industry response to a sugar tax policy- whether reducing portion size, reformulating existing products to reduce sugar content, or launching new product lines – is based on the structure of the tax in the region?

Similar cases where sales of taxed beverages fell significantly have been observed in other sugar tax countries including the US (Berkely, Oakland, Philadelphia, Seattle), Mexico, Catalonia, etc.

A strong correlation between sugar tax policy implementation, reduction in sugar consumption, and consumer purchase patterns have been observed in places where sugar taxes have been implemented.

Apart from Sugar Tax policies, there are many other reasons for the increasing popularity of sugar-reduced products: such as growing awareness of sugar-related health concerns, regulations, guidelines and availability of reformulated products with reduced sugar.

There might be many options to tackle the sugar tax policy but ‘product reformulation’ is the only solution that meets consumer demand for healthier alternatives, protects you from tax and various government regulations to dissuade sugar.

But, product reformulation is no simple process. Each time a new product formulation is developed, it must be thoroughly evaluated and tested by experts before introducing it to the market.

Maintaining product taste, texture, appearance, functionality, safety, and shelf life, and remaining price competitive can be a major task

Reformulations — are a delicate balance, requiring companies to avoid changing too radically and alienating their existing customer base, while also pivoting just enough to attract new consumers who will keep their brand relevant.

The first and the most pivotal step in your sugar reduction journey is to choose an alternate sweetener which if you make the right choice can enhance your product on the crucial parameters of Safety, taste, and cost, making it an instant hit with your consumers.

Consumers are intuitively more welcoming to natural sweeteners, with 66% of global consumers believing them to be a healthier sugar replacement.

Natural Sweeteners are sugar substitutes often extracted from plant sources. Natural Sweeteners in the market include – Stevia, monk fruit, coconut sugar, honey, agave nectar, maple syrup, etc. The sweetness from the plants and herbs is often extracted by steeping them in a liquid solution, filtering the decoction, and finally purifying the biomass to obtain the desired sweet compounds.

Stevia, on the other hand, checks all the right boxes to make a winning product with enhanced label claims, being zero-calorie with zero GI, suitable for a wide category, cultivated in several locations with multiple harvests possible in a year given the right conditions, therefore increasing the chance of winning consumer approval and making a premium product. Owing to its versatility, stevia can also be used to reformulate a variety of product categories from soda to snacks.

Also see this – How to Future-proof your business against Sugar Tax