A Bittersweet Future for Sugar Consumption in Packaged Food

At the start of the last century, most people worried whether they’d be able to put food on their plate: today, they’re more concerned about whether their plate has too much food. Almost every day, there are cautionary tales regarding the health risks of consuming excessive calories, fat or sugar. A modern-day version of Oliver Twist would likely be clinically obese rather than going hungry.

In Western Europe and North America, there is subsequently more pressure on soft drink and confectionery manufacturers to act responsibly. In the UK and US, there has been much effort by companies to reformulate their products, with Mars, Mondelez and Nestlé all aiming to reduce the calorie content within their countlines. As data from Euromonitor International’s Nutrition research demonstrates, many chocolate bars sold in the UK now meet a voluntary target of less than 250 calories per pack. However, will continuing concerns regarding sugar consumption affect sales?

The dangers of sugar consumption

Sugar has become one of the most vilified ingredients within food. Daily sugar consumption is particularly high in the US, UK and Germany, which are three of the top 10 global spenders on packaged food. On average, these countries consume 73.3 grammes per day of sugar from packaged food – nearly double the global average. As the graph below demonstrates, the largest contributors to daily sugar consumption vary across these countries.

 

Popularity of Sugar: Volume Growth for the Largest Contributors to Daily Sugar Purchase 2014-2019

Sugar-1

Source: Euromonitor International

 

While tablets and countlines feature for Germany and the UK, it is not just confectionery that contributes to the high consumption of sugar within these countries – dairy and bakery products, such as packaged bread and pasteurised milk, also rank highly. As the graph shows, many of these products will experience a decline in volume consumption over the next five years, with semi-skimmed milk expected to contract by 2% over the forecast period, equivalent to 750 million litres.

Given that such diverse products are all experiencing declining volume consumption, it would be overly simple to solely blame increased awareness of sugar’s health impacts as the reason for such decline. Indeed, sugar occurs naturally in milk. However, an increased emphasis on the dangers of excessive sugar consumption will make it more difficult for these products to achieve organic value growth.

Within soft drinks, using natural sugars or sweeteners such as stevia has been met with an ambivalent response, as in the case with Coca-Cola’s Sprite brand, which has seen a significant decline in sales since it reformulated its recipe. The problem of relying on sugary products in a period where sugar is a public enemy will prove tricky for manufacturers to resolve. Reducing sugar proportions within products will be more difficult than simply reducing the size of the product, as in the case of calorie consumption.

Hitting Targets: Energy (kcal) by Countline Pack Size 2014

Sugar-2

Source: Euromonitor International 

 

Less calorific chocolate bars – goodwill or pragmatism from manufacturers?

Considerable efforts have been made by the likes of Mars and Mondelez to reduce calories within their countlines – most products now have fewer than 250 calories. However, calorie reduction has not just stemmed from the goodwill of these multinational corporations. While product reformulation has reduced calories, Mars, Mondelez Hershey and Nestlé have all reduced the size of their countlines by between 10-20%, usually without reducing the unit price of the products. This most recently took place in Australia, where Mondelez reduced the size of its Cadbury’s products – again, without reducing prices. Reducing pack size has significantly contributed to companies’ abilities to meet their voluntary targets.

Manufacturers are making these decisions as a result of increasing pressure on the cost of ingredients. Specifically, the price of cocoa, which is essential to the chocolate recipes, rose by 25% per metric tonne over the course of 2014. All companies that have reduced pack sizes have cited input costs as placing a significant strain on their cost of operations. Increased cocoa prices are not mirrored by sugar, the price of which has declined per pound over the last five years. Compared to cocoa, sugar is a cheap commodity with stable prices, and this might explain the launch of products such as Cadbury’s Marvellous Creations, which reduce cocoa content by replacing chocolate with sugar confectionery. This may be difficult for products such as Kit Kat and Snickers, which are standardised. However, as high cocoa content puts pressure on operating costs, it is possible that other manufacturers will pursue a goal of replacing chocolate with sugar, regardless of the ingredient’s bad reputation.

 

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