Asia’s Beverage Industry Approaching A Tipping Point For Sugar Reduction Initiatives

Monday, February 28th, 2022

The COVID-19 Pandemic Lent Momentum To The Sugar Moderation And Avoidance Trend In Asia

Contributed by Bobby Verghese, Consumer Analyst at GlobalData.

As a key source of dietary sucrose and calories, both of which are detrimental to health, white (refined) sugar continues to be demonised as a food villain. With the COVID-19 pandemic elevating consumer health and wellness concerns, and more governments actively targeting sugar-related diseases such as diabetes and obesity, the Asian beverage industry is fast approaching a tipping point for sugar reformulations initiatives.

The COVID-19 Pandemic Lent Momentum To The Sugar Moderation And Avoidance Trend In Asia

At the outset of the COVID-19 outbreak in 2020, the World Health Organization (WHO) and public health bodies across various countries issued notifications that individuals with non-communicable diseases (NCDs) such as diabetes, obesity, and cardiovascular diseases were at greater risk to the disease. With excess sugar intake linked to several of these medical conditions, it is unsurprising that Asian consumers were motivated to drop their sugar intake in a bid to stay healthy amid the pandemic. GlobalData’s Q2 2021 consumer survey affirms that the majority of Asian consumers are moderating or dropping sugar intake from their diets, with the trend being more pronounced in Southeast Asian countries such as the Philippines, Indonesia, Malaysia, and Thailand, where sugar consumption is considerably high.

“As sugar sweetened beverages (SSBs) are a key contributor of dietary sugar and calories, the sugar-reduction trend is quite visible in the soft drinks sector, particularly in carbonates, the most consumed soft-drink category in Asia after packaged and bulk/HOD water. While low-calorie carbonates accounts for a small volume share, the segment has garnered more momentum in recent years, and even made gains in 2020 even as volume sales of regular carbonates dropped sharply,” says Bobby Verghese, consumer analyst at GlobalData.

Government Interventions Against Sugary Beverages Is Catalysing The Beverages Industry’s Reformulation Efforts

Diabetes and obesity have reached epidemic proportions in Asia due to the adverse influence of rapid industrialisation, urbanisation, and westernisation on diets and lifestyles, and inherent issues such as high malnutrition and illiteracy levels. With healthcare costs due to these diseases escalating over the last decade, governments in the region are gearing up to curb the sale and consumption of sugar sweetened beverages through public health campaigns, sugar taxes, front-of-pack nutritional labelling systems, and restrictions on TV advertisements for sugary drinks.

While the sugar taxes imposed toward the end of the last decade in Cambodia, India, Laos, Malaysia, Sri Lanka, Thailand, and the Philippines have kickstarted sugar reformulation initiatives in the food and beverages industry, it is too early to judge whether it has had the desired impact on consumer sugar intake. Rather than falling back on sugar taxes, health professionals are calling for more creative, intensive, and targeted government interventions to modify consumption behaviour.

Positive steps in the new direction can be seen in Asian countries such as China, where NCDs such as cardiovascular diseases and diabetes cause 89 percent of annual deaths as per the WHO. The country’s government is mobilising its entire machinery to implement President Xi Jinping’s Healthy China Action (2019-2030) initiative, which includes guidelines to tackle NCDs. Under the initiative, authorities target a 17 percent reduction in per-capita sugar consumption from 10.5g per day in 2012 to five grams per day by 2030.

Instead of imposing sugar taxes, Chinese authorities are adopting a phased approach, beginning with steps to incorporate healthy diets and fitness into the regular lifestyles of citizens. This will be followed by the introduction of recommended daily limits for sugar, salt, and edible oil. Subsequently, the government plans to incentivise retailers to allocate separate shelf space for low sugar/salt/fat products and promote the use of natural sweeteners in the processed foods industry.

Similarly, the Singapore government has also refrained from taxing SSBs despite declaring a war on diabetes from 2017. Instead, in 2019, the government took the bold decision to ban advertisements for sugary drinks across all media platforms, both traditional and digital. Moreover, the city-state announced plans in 2021 to implement Nutri-Grade, a front-of-pack nutrition labelling system for non-alcoholic beverages. Under the system, beverages will be assigned grades ranging from A to D to indicate the ascending proportion of sugar and saturated fat in the formulation. The move follows the findings of a recent retail-level study that a large proportion of non-alcoholic beverages, including purported ‘health drinks’ such as fermented vinegars and vitamin fortified beverages, are loaded with sugar. Nutri-Grade is intended to remedy this by goading beverage manufacturers to reformulate products to attain higher grades and encourage retailers to stock such products.

Manufacturers Test Waters With Various Sugar Alternatives

Even as consumers are gravitating towards low-sugar and no-sugar drinks, they are not willing to compromise on flavour, thereby making it impractical to remove sugar entirely from formulations. Accordingly, non-alcoholic beverage makers are reformulating recipes by partly or completely substituting white sugar with natural and artificial sweeteners such as stevia, monk fruit, erythritol, xylitol, inulin, and neotame. However, each of these substitutes have their own pros and cons. For instance, while stevia is a natural, low-calorie, high-intensity, and safe sweetener, it leaves a bitter aftertaste that needs to be masked. Similarly, agave nectar/syrup, a plant-derived with beneficial bioactive compounds, is loaded with fructose, which can cause health risks such as fatty liver.

As a result, formulators are adopting innovative methods to replicate the sweetness, mouthfeel, and other functionalities of sugar. For instance, in 2021, Coca-Cola introduced zero-sugar and reduced-sugar versions of its flagship brands — Coca-Cola Classic, Sprite, and Fanta — using a combination of sucralose and acesulfame potassium in place of refined sugar. A number of innovative sugar-reduction technologies, including modified white sugar crystals, processed sweeteners, and fibre or protein infused sugars, are under various stages of development, safety testing, and commercialisation. Ultimately, the success of low-/no-sugar drinks will depend on consumer perception of the overall consumption experience, and the health benefit/risks of the sweetener. GlobalData’s Q2 2021 consumer survey findings outline that Asians are less positive about the health benefits of sweeteners such as stevia and aspartame when compared with a natural ingredient such as honey.

‘Caveat Emptor’ – ‘Let The Buyer Beware’

At present, the beverage industry employs a plethora of sugar-related claims such as low-sugar, less sweet, no-sugar, zero sugar, sugar-free, no added sugar, no artificial sugar, and reduced-sugar. Many of these claims lack a clear and uniform definition across the region and can leave most consumers perplexed. For instance, a layperson may assume that drinks with a ‘sugar-free’ claim does not contain any sugar. However, under Indian laws, ‘sugar-free’ drinks can contain up to 0.5g of sugar per 100ml. Additionally, the term ‘no added sugar’ does not reveal the fact that naturally occurring sugars may be present in drinks, as in the case of fructose in juice and lactose in milk.

This can lead to ‘health washing’, wherein consumers are misled by false health claims. In recent case involves Genki Forest, a Chinese beverage start-up that rose to fame with ready-to-drink teas marketed with the taglines ‘zero sugar, zero fat, zero calorie’ and ‘zero cane sugar’. Social media posts about the presence of ‘hidden’ sugars and sweeteners in its drinks went viral, compelling the company to issue a formal public apology and clarification in April 2021.

“With more beverage makers and ingredient formulators making a beeline for Asian markets with strong sugar-reduction cues, consumers can expect to see a wider choice of low-/no-sugar/calorie in retail shelves and on-premises menus in the immediate future. While stricter regulations and the fear of media backlash may keep companies in check, it remains the prerogative of the consumer to do their own research into the ingredient lists, and make an informed choice,” Verghese concludes.