The UK Government has just implemented the Soft Drinks Industry Levy. What impact has this already had on the soft drinks industry since plans to introduce it were announced in 2016 and what are your predictions for its future effect?


Managing director at Beacon, a leading UK purchasing company, Paul Connelly

“Insight from our suppliers has suggested that the implementation of a price variation for customers, between full and reduced sugar offerings, is a smart business move for many operators across the hospitality industry, and goes hand-in-hand with the rising trend of healthier food and drink choices by consumers.

“It is the time for operators to stock a soft drink levy ready range, which reacts to rising consumer demand for a healthier beverage choice as well. Customer experience is more important than ever, so retailers must aim to offer innovative soft drinks, lower in sugar but perfectly served, to stand out from the crowd.

“There has been a major surge in embracing a healthier approach to food and drink consumption in recent years. Prior to the sugar tax, Consumers were already opting for lower calorie soft drink alternatives giving operators the opportunity to adjust their prices and differentiate between low and full sugar options with minimal detrimental effect.

“We are seeing low calorie soft drinks significantly outperforming full sugar options. According to our supplier Brakes, in terms of year-on-year volume growth, full sugar drinks have seen a 1.4% increase, whereas low calorie drinks have seen much larger growth of 14.6%.”


Jonathan Davison, beverage analyst at GlobalData Consumer

“The UK’s Soft Drinks Industry Levy is far more likely to succeed because of the tiered tax system.”

“Whilst the UK’s decision to implement a tiered tax system did cause a mass wave of reformulations, it also ensured consumers still had a choice to either stick with sugary brands or switch to healthier alternatives. Other countries, like Belgium for example, simply placed a tax on all soft drinks, so there was no incentive to go healthier. The UK’s Soft Drinks Industry Levy is far more likely to succeed because of the tiered tax system, although early research suggests the tax may have to rise further before the financial incentive is significant enough to reduce sugary consumption.

“Success is also far more likely among younger age groups. Three economists at the Institute for Fiscal Studies have predicted the tax will reduce young people’s sugar consumption through soft drinks by roughly 80%.”


Martin Hook, managing director of Ayming UK, a business performance consultancy specialising in research and development

“Two years later and Osborne’s Sugar Tax has arrived. Drinks companies have gone back to the drawing board across all their products. They have been steadily making their drinks healthier to combat obesity, sugar-free and diet versions have been around for some time, but recently there’s been a scramble to find innovative ways to rethink manufacturing processes and successfully reduce sugar content without a potentially profit devastating change in taste.

“It’s definitely been a long and thorny ‘trial and error’ period for drinks companies: all drinks manufacturers have been busy researching new, innovative ways to replace sugar with alternatives, all of which has incurred a burdensome research and development cost, which companies need to strike the right balance between reducing new tax costs and avoiding a consumer backlash.

“It’s encouraging to see so many companies rolling out new products.”

“It’s encouraging to see so many companies rolling out new products; the core Ribena and Lucozade owned products, for example, have cut sugar by 50%. Osborne’s initiative has evidently spurred investment into creating innovative ways to redevelop sweet drinks. Looking ahead, it’s likely the research will continue as the developed markets push in a healthier direction, so manufacturers should keep the ball rolling, take a long term view and continue successfully developing more consumer-friendly products.”

Gavin Parlington, director general of the British Soft Drinks Association, the collective voice of the UK soft drinks industry

“The consumer health trend has been clear for some time now, and soft drinks manufacturers have been responding to this years in advance of the sugar tax. The soft drinks industry has led the way in calorie reduction initiatives in the food and drink sector. As well as reformulating products, the industry has increased the range of portion sizes available to include smaller pack sizes, and switched marketing spend to lower and no sugar products substantially in recent years.

“In 2015, soft drinks became the only category to set a calorie reduction target of 20% by 2020, which we are firmly on track to achieving. Sugar and calorie intake from soft drinks is down by 18.7% and 16.8% respectively since 2013. The industry has also voluntarily agreed not to advertise regular soft drinks to children under 16 across all media channels; a year ahead of the CAP code revision. As a result no and low-calorie beverages made up the largest category in the UK soft drinks sector (58%) and sales of bottled water continued to rise (9.6%) in 2016, according to research by GlobalData.

“Current data illustrates that a tax of this sort on a single category will not have a meaningful impact on obesity levels. Sugar intake from soft drinks has been declining year-on-year since 2013, according to Kantar Worldpanel data, yet figures from the NHS state that obesity prevalence increased from 15% in 1993 to 27% in 2015. Also, latest figures from NHS Digital show that hospital admissions where obesity is a factor have more than doubled in England during the last four years.

“Current data illustrates that a tax of this sort on a single category will not have a meaningful impact on obesity levels.”

“In addition to this, recent reports from Food Standards Scotland outline that levels of obesity are not reducing and that the decline in sugar from soft drinks has been offset by increases in sugar from other foods. This is underpinned by data from Kantar, which states whilst sugar intake from soft drinks has decreased by 18.7%, it has increased in frozen confectionery (+8.7%), take-home confectionary (+2.3%), and biscuits (+1.4%) since 2013.

“However, [the soft drinks] industry does recognise it has a role to play in helping to tackle obesity and we hope our actions on sugar reduction, portion size and promotion of low and no calorie products set an example for the wider food sector.

“As with alcohol and tobacco, imports of these types of products will always present risks of duty evasion. Currently there is a lack of clear policy on compliance and how levy collection on importers will be enforced. The British Soft Drinks Association predicts that the Soft Drinks Industry Levy will result in an increase in illicit trade, from a current approximation of 5% to 20%.

“Our members have taken all possible steps to ensure compliance and any evasion of the levy by importers creates an uneven playing field for UK manufacturers. We would like to see more action being taken by government to prevent the potential rise of illicit trade in the soft drinks industry; the industry supports an £11 bn contribution to UK GDP and an estimated 340,000 jobs.”


UK food and drinks distributor Red Star Brands managing director Clark McIlroy

“The sugar tax is not a catch all answer to better health, nor is it a way to educate consumers – the industry needs products which challenge the status quo and show that sugar does not equal flavour.

“The definition of what is ‘healthy’ has changed – health is now a lifestyle choice. Once meaning ‘diet’ with a real focus on calories, health has now evolved to mean ‘healthful’ – more about the fuel going into your body than the absence of ingredients being left out. Healthful beverages add protein, antioxidants and vitamins.

“Taste cannot be compromised when creating healthier products, as better-for-you and great taste can go hand in hand.”

“Water is a key driver of value as consumers are making more considered choices and has added 28 million units in the latest year; Water+, functional water with added properties, such as antioxidants, contributed to over half of this volume.

“American brands, which have already provided a solution to the same sugar tax challenge across the pond, are now coming into the UK market. Brands like Sparkling Ice and Bai are well placed to meet this new consumer demand. Not only are they low in sugar and calories, but they resonate with the smart age millennial.

“Taste cannot be compromised when creating healthier products, as better-for-you and great taste can go hand in hand. Even more brands will follow the likes of Bai and Sparkling Ice who are looking to master the art of low sugar and maximum flavour, offering a lifestyle-led drink with no compromises.”


Ronan Stafford, lead analyst at GlobalData Consumer

“The main impact [of the sugar tax] has been the large number of companies that reformulated ahead of the tax, and the consumer reaction to this. Irn Bru was one brand that reformulated early to reduce sugar, but this stoked fears that the taste would change drastically – for example there was an online petition requesting the drink not be changed, and there were stories of people stock-piling drinks made according to the old formula.

“While this is an extreme reaction, and not indicative of the opinions of most consumers, it does show that there are two crucial periods for brands. The first period is internal to companies, where they have invested heavily to make sure that reformulation is effective in reducing sugar without altering the taste. The second period, which started in the past month or two, is a PR blitz, where brands need to invest heavily in convincing consumers that their drinks still taste great, and that in many instances you can’t taste the difference between the old and new products.

“Coca-Cola’s approach is interesting – they’re one of the few brands to not reformulate, and instead are sticking with the same recipe. Instead they’ll change pack sizes, in order to keep price points stable despite the extra levy. It’ll be interesting to see which approach wins out.”


Ashley Pollock, senior innovation consultant at Ayming UK

“If soft drinks companies have not successfully adjusted their products, they will have to pay the price, whether that means directly paying the tax or passing the costs onto consumers. Five to eight grams of sugar per 100ml is levied by 18p per litre and eight grams or more of sugar per 100ml will have a higher tax rate of 24p per litre. This, for example, could push up prices for an average personal 500ml bottle of soft drink by 12p. Which in reality is around a 10% rise on the average price – quite a significant jump.”

“The psychological effects of even a perceived change in taste could be extremely detrimental to sales, so it’s crucial to get the research and development right.”

“It’s imperative that the taste of the reduced sugar reformulated product remains consistent with the original. The psychological effects of even a perceived change in taste could be extremely detrimental to sales, so it’s crucial to get the research and development (R&D) right. Irn Bru made this mistake earlier this year by ceasing production of their original full-sugar product and replacing it with an almost half-sugar version. Fans have started a ‘Hands off our Irn Bru’ petition and taken to social media to protest against the change.

“This sugar tax trend may well spread to other sectors so companies will continue to experiment with new sources of palatable sweetness. It’s therefore important that manufacturers have a firm grasp on what constitutes as R&D for tax purposes in order to benefit from eligible development work undertaken. Of course, research into substitutes is the obvious example, but the activities surrounding this, such as new production methods or the adaptation of existing equipment, could also liable for tax credits.”


Steve Pearce, cofounder of Ωmega Ingredients, which produces ΩMegaSweet, a calorie-free, natural sugar replacement that can be used in a range of food and drink products

“Since the announcement of the UK sugar tax, global brands have begun to search for ways of reducing the sugar content across their ranges. When you replace natural sugars with artificial sweeteners, you don’t just lose the sweetness, you also sacrifice ‘mouth-feel’, which often creates a bitter or even astringent aftertaste. All of these facts combined can lead to a drastically different product, which may be alien to consumers. We have designed ΩMegaSweet to combat the challenges faced by the beverage industry ahead of the sugar tax.

“The feedback we’ve had from companies is overwhelmingly positive; they’re delighted with the results. It is a huge benefit to the industry that products like ΩMegaSweet allow them maintain a natural label declaration, especially as we enter a new era of ultra-transparency.”