The soft drink market is one of the fastest growing in the world with annual sales close to US$1 trillion. However, with consumers being more health conscious than ever, activists are pushing for a new sugar tax in ASEAN.

Despite resistance from major players in the market, some countries have already implemented the sugar tax. Other nations 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. Nearly 30% of the population is classified as “obese”.

The research indicated the rise in obesity rates could lead to a decline in global life expectancy. A key findings is that 50% of the obese population resided in just 10 nations. They include 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. Most of these drinks are classified as “empty calories” giving scant nutrition.

Led by the two global brands Coca-Cola Co and PepsiCo and valued at about US$870 billion, the global soft drink market is huge. It’s still growing at a rapid pace. However, the growth is not what many people would think.

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. All of these countries are looking to implement the sugar tax.

Each of these three nations also saw double digit growth in their soft drink markets for the past 5 years according to 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. Each consume around 23-24 billion liters of soda annually.

As these countries look at the viability of a sugar tax, the expected move is meeting resistance from the very businesses seeing 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 in ASEAN 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 saw 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 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 which 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. It will especially harm small businesses which 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 factories to close, especially in India.

With countries in Asia looking implement a sugar tax to improve public health and increase tax revenue, more places in Southeast Asia are bound to follow the trend.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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