Sugar levy did not decrease the domestic sales of UK soft drinks manufacturers

Sugar-sweetened beverage (SSB) taxes are widely supported by the public and health professionals to reduce the consumption of sugar and thus improve public health. Such policies have generally met with strong opposition from soft drinks industry with claims that it will result in economic losses to the industry, and therefore have negative impacts overall on economies. 

The Soft Drink Industry Levy (SDIL) announced by the UK government in March 2016 was of no exception. Unlike the SSB taxes in many countries, this levy was designed to incentivise reformulation of SSBs by providing a 2-year delay between the announcement and the enforcement of the levy, and adopting a two-tiered rate based on the sugar content of the drinks. After the announcement, an industry-sponsored modelling study quickly followed suggesting the SDIL could reduce the direct contribution of the soft drinks industry to the UK economy. 

These concerns about economic harm to the industry, however, do not appear to have materialised, according to a recent research, published in Economics & Human Biology, led by PHI|Lab members Dr Cherry Law, Dr Laura Cornelsen and Professor Richard Smith, in collaboration with researchers from Cambridge and Bath Universities. 

Using Office for National Statistics monthly data from April 2010 to March 2019, we assessed the changes in the domestic sales of the UK soft drinks manufacturers* after the SDIL announcement in March 2016 as well as the implementation in April 2018. An interrupted time series analysis was conducted to identify the actual changes in domestic sales while controlling for underlying trends, overall economic environment and changes in soft drinks prices. 

Our results show some evidence of a short-term negative impact of the SDIL announcement on the domestic turnover of the UK soft drinks manufacturers. This effect, however, did not continue post-implementation. This suggests that manufacturers were, to a large extent, able to mitigate the effects of levy before it came into effect. 

This research showcases that SSB taxes, such as the SDIL, do not necessarily cause significant losses to soft drinks industry if the tax structure is carefully designed to motivate reformulation and thus achieve the goal of sugar reduction. More broadly, it also illustrates that by giving sufficient time for industry to react to policy changes, governments can potentially achieve the goal of improving public health while minimising negative impacts on industry.

*This includes the manufacturers of soft drinks, bottled waters and non-alcoholic flavoured and/or sweetened waters, but excludes the manufacture of fruit and vegetable juice, milk-based drinks, coffee, tea, maté products, alcohol-based drinks, non-alcoholic wine, non-alcoholic beer and ice. 

Law C, Cornelsen L, Adams A, Pell D, Rutter H, White M, Smith R (2020) “The impact of UK Soft Drinks Industry Levy on manufacturers’ domestic turnover” Economics & Human Biology