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Real Economy News in Real Time
R/€ = 15.73 Change: -0.01
R/$ = 14.01 Change: 0.00
Au 1421.02 $/oz Change: 17.16
Pt 850.34 $/oz Change: 11.94
 
 
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Coca-Cola reformulates drinks following tax

23rd May 2019 BY: African News Agency

Coca-Cola South Africa has cut the sugar in its drinks by a quarter (26%) since government introduced a tax on sugary drinks, according to Camilla Osborne, Head of Communications for Coca-Cola Southern and East Africa.

On 1 April 2018, Treasury imposed a Health Promotion Levy of 2.1 cents per gram of sugar on all sweetened drinks but made the first 4g of sugar per 100ml exempt from taxation as an incentive for manufacturers to cut the sugar content.

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“In South Africa, over a two-year period, we had reduced average sugar content across our portfolio by 26%, ahead of industry commitments of 15%,” Osborne said.

“We recognise that too much sugar isn’t good for anyone and support the current recommendation by several leading health authorities, including the World Health Organisation (WHO), that people should limit their intake of added sugar to no more than 10% of their total energy/calorie consumption,” she said.

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“We have launched a range of no-sugar and low-kilojoules options and have shifted marketing investments, including in-store, to lead with our no- or low-sugar options. To aid portion control, we offer different pack sizes too. We are also offering preferable pricing for no-sugar products in South Africa.”

CANNOT DISCLOSE
When asked about the sales of these reduced sugar products and how consumers are responding to the smaller bottles, Osborne said: “While we cannot disclose detailed sales figures since the sugar tax was introduced, what we can say is that more South Africans are choosing no- and low-calorie options across our portfolio and we remain committed to helping our customers make informed dietary choices as part of a balanced lifestyle.”

Over the past few years, a range of countries including Mexico, the United Kingdom, Ireland, Portugal, France, Saudi Arabia and the United Arab Emirates (UAE), as well some US states, have introduced a tax on sugary drinks.

Coca-Cola recently reported a 5% growth in global income for the first quarter of 2019, bringing its net revenue to $8-billion – despite its claims that taxes on sugary drinks imposed by a growing number of countries would harm the company and cause job losses.

The company experienced the biggest growth in Latin America although Mexico was one of the first countries in the world to tax the sugar content of sugary drinks. Coca-Cola’s net revenue in Latin America grew by 10% while operating income – the amount of profit after deducting operating expenses such as wages, depreciation, and cost of goods sold (COGS) – grew by 13%.

GROWTH
Europe, the Middle East and Africa are grouped together as one region (with sugar taxing countries including the UK, the UAE and South Africa), and here Coke reported a 5% increase in net revenue and 7% growth in operating income. In North America, where a number of US states have a sugar levy, the company’s achieved a 1% net revenue growth and 16% growth in operating income.

Meanwhile, at the Coca-Cola Company’s 2019 annual shareholder meeting in late April in Atlanta, USA, shareholders demanded that the company issue an independent report by November 2019 on the health effects of its sugary products and marketing.

Harrington Investments, supported by US and Latin American health and labour organisations, filed a shareholder resolution demanding that the company give feedback on its targeted marketing of sugar products to consumers, especially children and youth.

At the meeting, Coca-Cola came under fire for interfering in health policies in Latin America and distorting China’s obesity policy for over a decade by influencing policymakers to focus exclusively on physical activity rather than diet and limiting child-targeted marketing.

INTIMIDATION
Dr Esperanza Cerón-Villaquiran, who had advocated for a tax on sugary drinks in Colombia and experienced threats and intimidation for doing so, was present at the meeting but not allowed to speak.

“What were executives afraid of hearing today?” Cerón-Villaquiran asked. “Coke must stop interfering with policies our countries try to adapt to prevent the obesity epidemic, an epidemic that Coke’s products fuel.”

The Coca-Cola board rejected the proposal, saying that this information was already available in the Access to Nutrition Index.

However, the proposal received 4.8% of the shareholder vote, making it viable for reconsideration at the 2020 annual meeting.

In 2014, Mexico introduced a 1 peso per litre soda tax owing to the country’s growing problem with diabetes – and fizzy drink sales decreased by 5.5% in the first year and 9.7% in the second year. The UAE introduced a strict sugar tax in October 2017 – a 100% tax on energy drinks and 50% tax on soft drinks – and has since reported high compliance with its excise taxes.

It is too early to tell whether South Africans have reduced their consumption of sugary drinks as a result of the tax, but Treasury is researching both the impact of the tax on consumption and job losses. 

EDITED BY: African News Agency
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