The soft drink market is one of the fastest growing in the world with annual sales at close to a US$1 trillion. However, with consumers being more health conscious than ever, activists are pushing for a new tax to be implemented on these sugary drinks – aptly titled, a sugar tax.
Despite resistance from major players in the market, some countries have already implemented the sugar tax and some in Southeast Asia are also looking to follow.
The rise in obesity and its effects on society now has research backing it up. According to the Institute of Health Metrics and Evaluation, the rise in global obesity rates over the last three decades has been substantial, widespread and is presenting a major public health epidemic in both the developed and the developing world with nearly 30% of the population classified as “obese”.
The research indicated that if left unchecked, the rise in obesity rates could lead to a decline in life expectancy around the world. One of the key findings is that 50% of the obese population resided in just 10 countries which includes the US, China, Mexico, India, and Indonesia.
Global Beverage Industry is a Target
Many activists believe that the size and the growth of the soft drink market is one of the driving factors of global obesity, especially as most of these drinks are classified as “empty calories” giving scant nutrition. Led by the two global brands of Coca-Cola Co and PepsiCo and valued at about US$870 billion in sales, the global soft drink market is huge and it is still growing at a rate to be reckoned with. However, the growth is not what many people would think of it as.
The soft drink market is not growing on a global basis. In developed markets, growth is actually negative as more people embrace the “healthy lifestyle” and switch to healthier alternatives. The main drivers of growth for this market are emerging economies such as India, Indonesia, and the Philippines: three countries which are looking to implement the sugar tax.
In all of these countries, the soft drink market has experienced double digit growth for the past 5 years according to stats from Euromonitor. India saw its market size for soft drinks double between 2010 and 2015. Indonesia and the Philippines also saw monumental increases of 45% and 30% in retail value, respectively.
However, just knowing the growth figures aren’t enough to know just how much bigger these markets are becoming. India and Indonesia are ranked the sixth and eighth largest market for soft drinks with about 23-24 billion liters of sugary water consumed annually.
As these countries look at the viability of a sugar tax, the expected move has met some resistance – especially from the very businesses that see their demise taking form. There have also been debates on whether the implementation of such a tax would actually improve public health.
Will a Sugar Tax Even Work?
Mexico has been the case study in a recent high profile debate about the impact of the tax. Having just put into place a tax on sugary food and drinks, Mexico has seen the public consumption of taxed items go down and the consumption of non-taxed items such as bottled water go up.
Even though Mexico claims that the “successful implementation” of the tax has made them a “leader in public health,” many others believe that the tax only shifts people’s purchases from taxed items to non-taxed items that are also part of the “empty calories” section of food.
The health impact may be up for debate, but the business impact is not. Analysts say that the implementation of the tax will undoubtedly affect many businesses. especially hurting small businesses who will be unable to absorb the costs.
MNCs like Coca Cola have expressed their concerns about a possible sugar tax. They said that the move would lead to a sharp decline in sales and inevitably force the closing down of certain factories, especially in India.
With countries in Asia looking implement a sugar tax to improve public health and increase tax revenue, more nations in the SEA region are bound to follow the trend.