Should the announcement of a sugar tax in last week’s Budget have marketeers worried? It certainly represents a volte-face on the part of the government. In October, when the advisory group Public Health England (PHE) released a report recommending measures to tackle childhood obesity, including a sugar tax of 10 to 20 per cent, a spokesperson for David Cameron said that there were “better ways” of combatting childhood obesity.
But after a damning report by the health select committee, a campaign by Jamie Oliver, and a study which showed that a 10 per cent tax in Mexico had reduced sugary drink sales by 12 per cent after one year, the Prime Minister refused in January to rule anything out. So, with a sugar tax in the pipeline, how will drinks brands cope?
Trade bodies like the Advertising Association and the Institute of Promotional Marketing are urging the government to choose voluntary co-operation with the advertising industry and drinks brands to solve this problem. “Pepsi doesn’t advertise anything but sugar-free drinks,” says Graham Temple, chairman of the Institute of Promotional Marketing, whose members include Britvic and Coca-Cola. “It would probably have been better if the government was more collaborative than, perhaps, combative. It would be ridiculous not to support a measure if it does reduce obesity. But it’s an ‘if’. Sugary drinks are now in the ‘sin tax’ bracket along with cigarettes and alcohol.”
But where does this leave other proposals laid out by PHE and the health select committee, including curbs on the advertising of high fat, salt and sugar products (HFSS), a ban on such adverts until after 9pm, and measures to stop shops, restaurants and takeaways from using promotional offers to sell unhealthy food and drink?
Supermarkets are already feeling the pressure. Tesco has delisted Capri-Sun and Ribena and committed to a year-on-year decrease in sugar across its soft drinks range. “Although the focus for now is on drinks, attention will inevitably shift to encompass other HFSS and some brands will be looking at all of this nervously,” says Anthony Earley, director at shopper marketing agency Lick Creative.
In 2014, research by McKinsey into obesity in the UK put portion control, parental education and surgery above media restrictions on a hierarchy of obesity levers, ranked by cost-effectiveness and impact. “Restricting advertising of sugary products until after the watershed will not have the desired effect,” says ISBA, a trade body. “What will tackle the problem is education that excess sugar is bad for you and moderation is key.”
But some advertisers see the tax itself as an opportunity. “Sugar shouldn’t be an exception. Like lots of industries, it has externalities and should be taxed accordingly. That’s the principle of market failure,” says Jack Carrington, a strategist at 18 Feet & Rising. “The challenge lies with the manufacturers to innovate and bring new products to market.” Earley agrees. “The tax represents an obvious risk to some brands, but an opportunity for others to amplify their intrinsic nutritional values and gain market share.”