Sugar tax effect smaller than thought - Pioneer

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While the levy was expected to "add materially to the costs of certain products", Pioneer said "the impact will be considerably smaller than initially mooted".

The tax is due to come into effect in April 2018 and will apply to sweetened beverages based on their sugar content. Unsweetened pure fruit juices will be excluded.

Pioneer, the brands of which include Ceres, Liqui-Fruit and Fruitree, said the levy would apply to about 45% of its beverage portfolio. The group was taking measures to mitigate the effects thereof.

"Beverage reformulation, including innovation centred on reduced-sugar products, is far advanced, and already completed in most key categories."

For instance, Pioneer said the Lipton iced tea brand, which it bottles and sells as part of a joint venture agreement, was recently reformulated "to achieve the lowest sugar levels in the category".

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Tiger Brands, meanwhile, wants the tax to be withdrawn. It said in its integrated report it agreed with industry body the Beverage Association of SA such a tax "would have far-reaching socioeconomic repercussions without a substantial effect in reducing obesity".

The group was waiting for the outcome of a review by the Treasury into potential job losses and "labour impact" that may arise from the levy.

Tiger's beverage brands include Energade, Oros, Hall's and Rose's.

It said although the tax should not be implemented, efforts by the Department of Health and Industry to deal with obesity "should continue".

But Pioneer said there had been a noticeable shift in consumer behaviour, which included the adoption of "mainstream concerns" about sugar.

"'Factory fear' has given way to informed sceptics who demand label and origin transparency. With this has emerged a mainstream focus on sugar and its causal relationship with noncommunicable diseases, such as raised blood pressure and diabetes," Pioneer said.

Major retail customers in the country were committing to health-conscious products and if leading brands did not respond or improve their offers, "these products will ultimately be delisted".

"Interestingly, consumers are not abandoning their 'sweet tooth', but rather seeking alternatives that are perceived to be healthier," Pioneer said.

Source: Business Day