Sugar Tax: curbing marketers’ sweet tooth

Sugar Tax: curbing marketers’ sweet tooth

At the beginning of April, a sugar tax on sweet beverages came into force. Here we outline the response from the industry, in terms of the brands directly involved, and the regulator, the Advertising Standards Agency, and ask what lessons organisations can learn from the move.

What the sugar tax means for marketers

Earlier this year, the Soft Drinks Industry Levy – or sugar tax – came into force in the UK. While the tariff will mainly impact soft drink manufacturers, it is the latest development in a wider issue that every marketer is grappling with: the extent to which brands have a duty of care towards their customers.

Under the new law, drinks with a sugar content of more than 5g per 100ml will be taxed at a rate of a 18p per litre (rising to 24p for drinks with 8g of sugar or more per 100ml).

The government hopes the tax will dissuade customers from buying drinks containing high levels of sugar, thereby contributing to the fight against obesity. Government figures indicate that, in the UK, by the time they are 10 years old, more than 1 in 3 children are obese or overweight, while more than half of adult women (58%) and over two-thirds of men (68%) are overweight. Levels of obesity across the country increased from 15% in 1993 to 27% in 2015. Type-2 diabetes, which is linked to being overweight and having a poor diet, is also on the rise. 

The UK is following in the footsteps of Mexico, which, in 2014, levied a similar tax on sugary drinks. Sales of beverages affected by the tax fell by around 8% in the following two years (although it should be noted that no direct causal link could be established).

Jamie Oliver, chef and entrepreneur, who has long campaigned for such a tax, said the move was an important and symbolicmoment in the fight to protect children against diet-related diseases.    

The impact on brands

Clearly, there are strong arguments in favour of reducing the amount of sugar we consume as a nation. But where does it leave brands? If the example of Mexico is anything to go by, manufacturers of sugary drinks are likely to see sales fall as consumers face a higher price point.  

However, rather than wait and see, many businesses have already taken action. The Treasury has confirmed that over half of soft drink manufacturers reduced the amount of sugar in their products to avoid the levy.

Tesco has brought 85% of its own-brand soft drinks below the 5g tax threshold, while Britvic has managed to bring down 94% of its drinks.

Meanwhile, AG Barr, owner of iconic Scottish drink Irn Bru, faced stiff opposition from customers when it published plans to bring sugar levels down to 4.7g per 100ml. An online petition Hands Off our Irn Bruhas now been signed by 50,000 people.   

However, some brands have calculated that a major recipe change would be worse for sales than just absorbing the tax (or passing it on to consumers). Coca-Cola has confirmed it has no plans to change the recipe of Coca-Cola classic, which contains 10.6g of sugar per 100ml, and is subject to the higher rate of tax.

Instead, the brand has opted to reduce the size of its 1.75l bottle to 1.5l, and raise the price by 20p. The price of its 500ml bottle has gone up by around 14p.

The brand even decided to make a virtue of its intransigence by launching a new advertising campaign on the day the sugar tax was imposed, highlighting the fact the recipe has remained almost totally unchanged for 132 years.

The sugar tax is really the first step in what is a larger initiative, launched by Public Health England, to reduce the sugar content in food by 5% by August 2017 and overall by 20% by 2020.

In response, food brands such as Nestlé are already changing the recipes of products by replacing sugar with artificial sweeteners. Interestingly, this has raised concerns in some quarters about the health implications of such replacements. 

The response from the advertising industry

The advertising industry is taking steps to support the move towards greater consumer protection from unhealthy food products. In 2007, the Advertising Standards Authority (ASA) introduced rules to restrict the scheduling of adverts promoting products with high fat, salt and sugar (HFSS) within childrens media. Last year, the regulator expanded these rules to cover non-broadcast environments, for example social media and YouTube which have overtaken TV in terms of how such audiences consume content. This also includes companiesadvertising on their own websites and social media spaces. According to the ASA, these rules support wider efforts to tackle childhood obesity and respond to the reality of childrens multimedia lives. 

Figures released by the ASA suggest the restrictions are making an impact: childrens exposure to all TV food and soft drink ads is now 40% lower than it was in 2010. However, the regulator also notes that this drop has not been mirrored in the rates of childhood obesity, adding that it is widely acknowledgedthat exposure to advertising is only one among several factors, such as parental choice, school policies, and lack of exercise.

Days before the sugar tax came into force, the Committees of Advertising Practice (CAP), which is responsible for writing UK advertising rules, launched two initiatives: to examine the impact of TV HFSS food and drink advertising on children, and to review the impact of last years restrictions on non-broadcast media.

Further steps

In a recent debate in the House of Commons, concerns were aired by MPs about the sale of energy drinks to young people, raising the possibility that this class of beverages could be next in the crosshairs. The role of marketing through packaging, branding and promotion did not escape scrutiny, and calls were made to find ways to strengthen regulations around these products.

While the introduction of the sugar tax is likely to be celebrated as a public health success, time will tell how the move will impact the finances of the brands involved. It certainly appears a legislative approach was required to convince the industry to take action. Now the ball is rolling, however, marketers are advised to be on the lookout for further government intervention aimed at forcing brands to safeguard the health of customers. This is a case of government intervention enforcing a moral responsibility on the part of businesses. Such rules, although challenging, are far more manageable when they are anticipated or, better yet undertaken voluntarily. Instead of waiting for the regulators to show up, marketers must take the initiative now and make customer protection a top priority.

Q&A with Guy Parker, chief executive, ASA

What is the role of legislation and regulation in motivating businesses to deliver products and services in an ethical or non-harmful way? 

Effective regulation is good for companies because it helps provide a level playing field for everyone. Those who dont stick to the rules face consequences. By ensuring higher standards, effective regulation gives people more confidence in the claims companies are making. The ASA wants to see responsible advertising flourish and the ad industry thrive.  A strong, creative industry is important for the UK, contributing to job creation and economic growth.

What advice does the ASA give to marketers in terms of legislation aimed at promoting public health?

Our rules are clear when it comes to restricting advertising products that might raise public health or child protection issues, particularly e-cigarettes, alcohol, food and soft drinks, that are high in fat, salt and sugar. As well as enforcing our rules, we work with industry to help them get their ads right in the first place. We provide a free copy advice service, free information online and we run training courses and eLearning, including one on Food and Soft Drink Advertising. Further information on this is available on our website.

What responsibilities do marketers and brands have in terms protecting the well-being of their customers?

There are strict rules to protect people, with a particular focus on children, which is why, for example, children cannot be targeted with alcohol or gambling ads in childrens media or any media where children make up 25% or more of the audience. A big advantage of our self-/co-regulatory system is the flexibility it gives us to change our rules over time to reflect new products and services on the market, and to regulate new ways of advertising, such as social influencer marketing.

James Richards

CIM comment

“Whilst the Sugar Tax has left some soft drinks brands feeling flat, it’s clear that this is the first of a sustained approach from the government to increase the wellbeing of the general public – as well as putting the onus on businesses to act responsibly. While the tax affects a comparatively small portion of the marketers around the world, there are lessons for all marketers. It’s clear brands now have a greater duty of care towards consumers than ever before, and it’s up to marketing to ensure organisations understand their obligation.

"As marketers we must respond to changing consumer behaviours – and with the health and wellbeing sector set to grow by 17% in the next five years to exceed £600bn by 2021 – brands must adapt their offering accordingly, or risk the consequences.” 

Chris Daly, CEO

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