Since its introduction in 2018, the sugar tax impact has been a major force reshaping the UK’s beverage industry. From reformulation efforts to rising production costs, the sugar tax impact is transforming how companies operate. But with the broader goal of improving public health, is this fiscal policy doing more harm or good?
Let’s explore the evolving sugar tax on UK beverage companies and what it means for business and consumers alike.
What is the Sugar Tax Impact?
The sugar tax began in April 2018 under the Soft Drinks Industry Levy (SDIL), a policy designed to tackle rising childhood obesity rates. It imposes charges on soft drinks that contain added sugar:
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18p per litre for drinks with 5–8g of sugar per 100ml
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24p per litre for drinks with over 8g per 100ml
The intent behind the sugar tax is clear: discourage excessive sugar consumption and promote healthier alternatives. Over 50% of soft drink companies reformulated their products before the tax even launched, cutting over 45 million kilograms of sugar annually.
For detailed legislation and updates on SDIL, visit the UK Government’s official guidance.
Reformulation: The Cost of the Sugar Tax Impact
Responding to the sugar tax impact, many companies have invested heavily in reformulation to avoid the levy.
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Suntory (Lucozade, Ribena) spent £13 million to lower sugar content.
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AG Barr (Irn-Bru) invested £1.4 million in product reformulation.
While necessary, these investments aren’t cheap. Reformulating a beverage often means reworking production lines, sourcing new ingredients, and conducting taste tests — a burden especially heavy on small and mid-sized companies.
According to the Food and Drink Federation, these reformulation costs could hinder innovation in other areas, putting smaller players at a competitive disadvantage.
Rising Prices: Another Effect of the Sugar Tax Impact
For companies unable or unwilling to reformulate, the sugar tax impact leads to substantial levies. Businesses may face additional costs of up to £259,000 annually, depending on product volume and sugar content.
To offset this, many brands pass the cost on to consumers through price increases — potentially shrinking market share in a highly competitive landscape. This pricing shift is especially problematic in today’s economy, already burdened with inflation and rising ingredient costs.
Future Expansion: Sugar Tax on Milk Based Drinks
Beginning in April 2025, the UK government proposes extending the levy to milk-based and plant-based drinks currently exempt from SDIL.
The new regulation would:
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Apply the levy to beverages with over 4g of sugar per 100ml (down from 5g)
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Affect products like milkshakes, flavored milks, and dairy alternatives
While intended to further reduce sugar intake, this extension of the sugar tax impact could strain manufacturers who already operate on thin margins.
Milk-based drinks contribute less than 4% of total calcium intake for teens, raising questions about the effectiveness of targeting this segment.
Health Outcomes: A Positive Sugar Tax Impact
Despite industry concerns, the sugar tax impact has yielded significant public health gains:
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A 10% reduction in overall sugar consumption from soft drinks
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A 46% decrease in sugar content across reformulated products
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In some regions like Newfoundland, similar levies resulted in a 12% drop in sugary drink purchases
The £1.9 billion raised from the levy also funds youth sports and health education programs, further reinforcing long-term behavioral change.
Business Challenges Amid the Sugar Tax
Yet, despite these wins, the sugar tax poses real operational threats:
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Small businesses lack the R&D budgets of their larger counterparts
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Reformulation often compromises taste or brand identity
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The levy doesn’t target other major sugar sources, like confectionery and bakery items
Some critics label it a “nanny state” policy, arguing that it disproportionately affects beverage companies while offering marginal obesity reductions.
A 2025 YouGov survey showed 88% of consumers felt the sugar tax didn’t significantly change obesity rates.
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Navigating the Sugar Tax: Industry Recommendations
To navigate the growing sugar tax, companies must innovate not just in formulation but also in marketing and policy engagement.
Some key strategies:
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Invest in natural sweeteners and low-calorie ingredients
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Educate consumers about health benefits to maintain brand loyalty
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Engage with consultations like the current UK proposal that includes a “lactose allowance” for natural milk sugars
For reformulation support and technical guidance, refer to the British Soft Drinks Association.
Balancing Health and Business in the Sugar Tax Impact
The sugar tax is clear it’s reshaping product lines, pricing strategies, and public health outcomes across the UK. While large companies adapt more easily, small firms face significant challenges.
If the policy expands further, striking a balance between health promotion and economic sustainability will be critical.
To stay informed about evolving health policies, visit Action on Sugar and explore how the Food and Drink Federation is supporting industry adaptation.
