The Soft Drinks Industry Levy
The Soft Drinks Industry Levy was one of the more notable inclusions in the March 2016 UK budget. Similar schemes are already in place in France, Hungary and Mexico, while many other countries are giving it serious consideration.
Nicknamed the ‘Sugar Tax’ by the media, the levy is forecast to raise around £520m in additional revenue. At the same time, it is expected to bring significant health benefits, and help towards combating the growing childhood obesity epidemic in the UK.
The UK tax will be levied in two bands. The lower band will see soft drinks brands pay a tax on drinks containing 5g per 100 millilitres of sugar. A higher band is imposed on sugary drinks containing 8g or more of sugar on every 100 millilitres. Even though many pure fruit juices, milk based drinks and smoothies contain more sugar than soft drinks, they will be exempt from the tax.
The Challenge for Soft Drink Manufacturers
The Sugar Tax poses an urgent and serious challenge to the big players of the soft drinks industry. They’ve been forced to evaluate their operations. Consequently, many manufacturers are considering their long-term strategies as they weigh up how the value of their business could be impacted by the proposed tax.
Although the levy isn’t due to come into effect until April 2018, many manufacturers are already taking bold steps and have begun to reformulate their beverage portfolio to include sugar substitutes. Reformulation using sugar substitutes is one of the options for manufacturers.
Broadly speaking, there are three categories of sugar substitutes. There are natural sweeteners, which are generally calorie-free and don’t contain any sugar. Then there are artificial sweeteners such as aspartame and sucralose. The third category comprises of natural alternatives to table sugar including honey, coconut palm sugar and agave nectar. Despite these all containing sugar, they are often marketed as being a ‘healthier’ alternative.
So, what’s the best option for soft drink manufacturers?
Stevia as Sugar Alternative
One of the most obvious ways to get around this new tax is to follow the route taken by a leading multinational beverage company, who reduced the sugar and calorie profile of a lemon-lime beverage by around 30% in March 2013. This was achieved by replacing a third of the sugar with a natural substitute known as stevia (to be exact, steviol glycosides).
More so than ever, soft drinks firms are using stevia as a viable sugar replacement. That’s because it contains no calories, has no sugar or carbohydrates and boasts a glycaemic index of 0. What’s more, it’s not chemically composed like artificial sweeteners. Therefore, it’s no surprise it’s an attractive substitute used to satisfy a sweet tooth!
So, stevia has lots of benefits and was supposed to be the solution to the pressing dilemma. But, there’s a huge problem. While it tastes very similar to sugar, it’s not exactly the same. In fact, many consumers don’t seem to like it that much! That’s because it’s burdened with a bitter metallic lingering aftertaste, which some individuals find objectionable.
When stevia was incorporated into the recipe of a lemon and lime beverage, sales crashed by 9.4%. Likewise, the beverage company attempted a similar manoeuvre with a different product, but again faced consumer backlash because of the taste of the new formulation. As such, the multinational firm swiftly reversed course.
The verdict? Stevia may not be the answer just yet. Especially, if it’s just used on it’s own.
Other Sugar Substitutes
What other options are left for the soft drinks industry?
There are a variety of artificial sugar substitutes available these days, ranging from saccharin, sucralose, xylitol to the controversial aspartame already used in many diet drinks.
However, the problem with ‘artificial’ sweeteners is the negative stigma attached to the majority of them. They have been singled out in the media for being potentially harmful and unhealthy and as such are linked to a cascade of negative health implications.
Since these health concerns gained momentum, sales of diet drinks have decreased dramatically. For instance, in the US, sales of diet drinks dropped by nearly 20% since reaching a peak in 2009 ($8.5 billion), as consumers turn to beverage alternatives that they deem ‘healthier’.
Natural alternatives include products such as agave nectar, date syrup, honey and coconut palm sugar. In comparison to artificial sweeteners, these have a wholesome reputation that they are better for us, but is that really the case?
Despite their reputation, natural alternatives such as honey contain similar (or even more) calories than sugar. Both also contain fructose and glucose, which means they have the same effect on blood sugar. For this reason, these natural sugars should be used in moderation.
It’s likely that if soft drink manufacturers do decide that their sales will decrease because of the proposed tax, they will look to tweak their formulas using a mixture of stevia, sugar and aspartame rather than turning to expensive natural sugar alternatives.
Risky Road Ahead
The soft drinks industry has got a challenging road ahead of it. Reformulation can be extremely risky and technically demanding. Removing sugar while keeping the taste, texture and other sensations is a tough task. Soft drink manufacturers face the risk that if the taste of their product does change consumers might switch to alternatives offered by competitors.
What’s This Got to do with HPS?
HPS Product Recovery Solutions has installed thousands of pigging systems throughout the world. These include solutions for many businesses that process soft drinks, smoothies, fruit juices and dairy products, and for the likes of Coca Cola, Britvic, and many more. Here you will find some case studies on product recovery systems used in beverage processing and production.
While our solutions can’t help the dilemma in regard to the Sugar Tax, they can certainly help to increase yield, reduce waste, save water, speed up changeovers and improve your sustainability credentials.
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Alternatively, if you are new to pigging and require further information please have a look at our what is pigging page.