UK Bakery & Confectionery could be the next Sugar Tax Victims!
In 2018 the food and drinks industry have taken a good bashing from the government, the media, celebrity chefs, Public Health England and various health campaigners in respect of the sugar content in products available on the market. The argument will be ongoing for years to come with health organisations now wanting to introduce an Energy Density Levy on confectionery and bakery products, but what does this mean for consumers and manufacturers if the government agrees?
Early this year, Action on Sugar and Action on Salt launched an evidence-based plan to help prevent obesity and other health problems, including type 2 diabetes, amongst children.
Sweets and chocolate confectionery provide 10% of the total sugar in diets of children under the age of 10 and 11% in teenagers. The findings of this plan suggested that an energy density levy of 20% should be introduced on confectionery and bakery goods with an energy density higher than 275kcal per 100g.
In the UK we already have the ‘Soft Drinks Industry Levy’ which was introduced in April 2018; a levy that has been met with mixed reactions. According to evidence presented by economists of the Institute for Fiscal Studies the levy will be most effective in younger people, but “those with high-sugar diets are relatively price inelastic and therefore fail to lower their sugar consumption in response to the tax.”
Manufacturers are under immense pressure to conform with these new enforcements, some have opted to introduce new brands containing no or minimal sugar, or to reduce portion sizes, while other companies have reformulated their existing beverages.
When it comes to confectionery and baking, the good news, for now, is that these industries have narrowly missed their own regulation, even though Public Health England have introduced voluntary sugar targets for confectionery and baking manufacturers of achieving a 20% reduction in sugars by 2020. However, these targets are voluntary and not enforceable, so it’s up to the discretion of individual food and drink manufacturers if they decide to reduce sugars; even the UK Food & Drink Federation have said that the 20% reduction is unlikely to be met.
Research by Oxford and Cambridge Universities and the London School of Hygiene and Tropical Medicine, revealed that by adding say 10% to the price of confectionary, cakes and biscuits could lead to a mere 7% drop in purchases.
Economic evidence shows that consumers and shoppers respond to these tax enforcements in a variety of ways. Some people purchase cheaper supermarket own brands, others simply pay the higher prices and other people turn to different products which can equally be as energy-dense, but all in all research shows that consumers’ calorie consumption remains similar to what it was before the taxes were brought into effect.
Christopher Snowden, the Head of Lifestyle Economics at the Institute for Economic Affairs suggests that shoppers tend to be “quite unresponsive to price hikes and do not significantly change their habits.” The taxes on food and drink merely prompt criticism from the ordinary consumer and unfortunately, the only group really affected by the hike in prices are the poorest people in our society.
Other European countries have tried enforcing sugar taxes on food and drink products, but to little effect. In 2011, the Danish government implemented a universal tax on fat, but the policy was abolished by 2013 as shoppers either absorbed the extra costs by making savings elsewhere in their lives, or they started doing their shopping internationally.
Here at Ragus we are continuously working with our clients to adapt to their manufacturing needs; creating bespoke pure sugar products where needed. We know that pure sugars are used within food and drink products, not just for their sweetening properties, but to also add taste, texture and appearance benefits, thus it takes time, technology and a lot of research before manufacturers can even begin to meet any of the targets set by the government and PHE.