France’s proposed new sugar tax could transform the biggest food companies – will the consumer pay the price?

The best example of this processed food trend is McDonald’s. In 1979, the fast food giant opened its first restaurant in Strasbourg and then strategically expanded to all major cities and later to all shopping centers, train stations and motorway service areas in order to reach as many consumers as possible. France is now the most important market after the USA with 1,707 branches across the country.

Le Monde cites the pressure of recent years as a further growth factor; The French are desperate to eat more for pleasure to curb the fears they have felt in recent years due to COVID-19, the Ukraine war, political instability and food inflation. The nation wants to feel better through snacks, and manufacturers are producing more and more fast food snacks that contain more and more calories.

Last year’s big winners, according to NielsenIQ, were Heineken’s Desperados Tropical beer (rum and passion fruit flavored), Kinder chocolate ice cream and Kinder Tronky waffles.

Likewise, Krispy Kreme opened 20 stores across Paris last year and earned $15 million by marketing donuts as the new croissants, tapping into key cultural touchpoints and selling Barbie, Harry Potter and Halloween versions.

In the fight against obesity and the need to increase revenues in a severely impoverished economy, one policy idea is to tax these sugary, highly processed products.

Nutrition taxes are becoming increasingly popular

The WHO currently recommends that countries use food taxation to combat the rise of chronic diseases such as diabetes and obesity, and many institutions such as the World Bank argue in the same direction.

The Institut Montaigne, a liberal think tank, as well as the CEOs of Coopérative U, BEL (Babybel, Laughing Cow) and Sodexo recently advocated raising VAT on very sweet products to 20%, compared to the current 5.5% or 10% %.

To help one in five obese adults in France, they suggested the government could impose a tax on products that do not meet sugar levels agreed by ministries. You are thinking in particular of sweets, chocolate, biscuits, breakfast cereals, spreads and industrial pastries.

The institute estimates that the funds raised through these measures, amounting to 1.2 billion euros and 560 million euros per year, could finance a food voucher worth 30 euros per month for the 4 million poorest French people.

These arguments have become more popular in France, particularly when it comes to soft drinks. In 2012, the government introduced a tax on sugary drinks and again in 2018, saying they were too easy to drink and potentially addictive.

Every year the French consume more than 21 liters of sugary drinks and this tax raised around 443 million euros in 2023. Now that the French Senate has voted to make carbonated and sweet drinks significantly more expensive, this amount could easily double in 2025.

A tax of 4 to 35 cents per liter bottle

The new soda tax will be applied on a sliding scale based on the amount of added sugar a drink contains.

If there is 5g of added sugar per 100g, manufacturers have to pay four cents for a liter bottle (from currently 3.79 cents). This would be the case, for example, with Lipton’s Peach Ice Tea, which contains 3g of sugar per 100g and costs around €1.20 per bottle.

The second tranche is more extensive. Say a drink contains between 5 and 8g of added sugar per 100g; The tax will then triple to 21 cents, from the current 7.3 cents per liter. This is the case of Schweppes Tonic (5.8g added sugar per 100g) and Oasis with 6.6g per 100g. Both, owned by Coca-Cola, now have to pay a tax of 21 cents on each liter bottle sold for $1.20 or €1.40.

For the third and largest tranche, the tax increases to a whopping 35 cents for all soft drinks where the added sugar is more than 8 g per 100 g (previously 17.7 cents). This higher tax rate applies to a liter of regular Coca-Cola, which contains 10.6g of added sugar and costs around €1.30 per liter in supermarkets, as well as children’s favorite Capri Sun (8g of added sugar).

It’s hard to say whether big companies will choose to charge consumers higher prices for soft drinks or try to reduce their sugar content.

Less traction on food

Forty countries have introduced dietary taxes, mostly on sugary drinks, because it’s an easier hit. The public generally believes that it makes more sense to tax sugary drinks because they have little nutritional value and can be easily replaced with cheaper, more nutrient-dense and unsweetened alternatives. The same argument can only sometimes be made so easily for highly processed foods.

Several MPs in France are calling for a new tax on foods whose nutritional value endangers the health of children because their sugar content is well above recommended limits. However, the Ministry of Health has dealt with the Ministry of Agriculture and Food; The latter feared that a new sugar tax would have a negative impact on companies that need to remain economically competitive and maintain jobs.

First of all, there might be a softer solution. The government could work with manufacturers on sugar targets, changing ingredients and using healthier recipes, which could eventually lead to tax measures, but only if those targets are not met.