Should dairy drinks and RTD coffee be included in soda taxes?

The UK Soft Drinks Industry Levy (SDIL) was introduced in 2018 and has generally been considered successful in its goals to reduce sugar intake from sugary drinks and encouraging reformulation across the beverage industry. But milk-based drinks have had an exemption from the outset.

Now, the UK government is setting out to revamp the SDIL: and a key question it is pondering is whether milk-based drinks should be included.​ If it goes ahead and includes them, it would be among the first to target milkshakes and RTD coffees for their sugar content.

Why aren't milk-based drinks included in the levy?

In the UK, milk-based drinks currently escape the SDIL on the condition they contain at least 75ml of milk per 100ml.

That exemption was created to ensure the levy did not disincentivize calcium consumption, particularly among young people.

In an effort to treat both animal milk and plant-based alternatives fairly, milk substitutes such as soya or almond milk are also exempt from the SDIL - providing they contain at least 120mg of calcium per 100ml.

But that means that pre-packaged milkshakes and milky coffee drinks are typically exempt from the levy: despite the fact they can contain high levels of sugar.

And that anomaly has been highlighted by campaigners ever since the SDIL was introduced.

Shaking up milkshakes

Dr Kawther Hashem, Head of Research and Impact at Action on Sugar, Queen Mary University of London, has been among the academics calling for the sugar tax to be extended to more products​. She welcomes the government's proposed review to expand the SDIL to milk-based and milk-alternative drinks.

"With many of these drinks containing high levels of sugar and calories, removing their current exemptions could create a much-needed shift toward healthier market options," she said.

"These drinks can be reformulated, which makes this an even more promising step.

"This review should signal the start of broader efforts to address the urgent dietary health issues affecting the UK. The rising rates of obesity, heart disease, and other diet-related conditions highlight the need for a more comprehensive approach to public health policy."

However, the dairy industry argues it's not that simple. What is different to soft drinks is that dairy drinks aren’t just about ‘empty calories’ in the same way that typical soft drinks are. Whatever the sugar content may be, brands can still provide calcium, protein and vitamins the drinks.

"Milk is an important provider of nutrients including calcium, high quality protein, B vitamins, iodine, potassium, phosphorus and more," Dr Judith Bryans, Chief Executive of Dairy UK, told us. "Milk-based drinks can therefore be an easy and affordable way for many – particularly groups like children and young adults – to meet their daily recommended intakes for a range of key micronutrients.

"Extending the levy to include all milk-based drinks, regardless of their milk content, would be counterproductive and could have unintended consequences for nutritional health."

There's also the question of how sugar would be measured, added Bryans.

In soda, that's simple - sugar is added to the drink and calculated accordingly. Less so with dairy. 

"It [a levy] also ignores the presence of naturally-occurring sugars like lactose, which contribute to overall sugar content but are not a public health concern," she said.

"We will be working with the Treasury as part of their review and will continue to advocate that milk-based drinks with over 75% milk content remain excluded from any expansion of the levy – in light of the rich health and nutritional benefits they can deliver."

But the UK government questions the nutritional importance of milk-based drinks - particularly the highly-flavored and sugary variety.

“As young people only get 3.5% of their calcium intake from milk-based drinks, it is likely that the health benefits do not justify the harms from excess sugar,” notes the UK government.

“By bringing these drinks into the SDIL, the government would introduce a tax incentive for manufacturers of these drinks to reduce sugar in their recipes.”

The latte tax: Coffee drinks

The UK's sugar tax only applies to pre-packaged goods so - as the levy stands - any decision to include milk-based drinks in the tax would only apply to those sold in retail.

That means coffees sold in coffee shops would not be covered.

That's a serious omission, say campaigners such as Action on Sugar, who found flavored coffees and hot chocolates can contain up to 73.6g sugar per serving - more than double the daily recommended intake (add in a sugary snack and a visit to a coffee shop can result in a sugar hit five times the adult's maximum daily sugar limit​). 

But put that industry aside, and RTD coffee in retail is booming globally, and growing steadily in the UK​.

Iced coffee products in retail can also contain high amounts of sugar - something that's commonly not understood by consumers.

And such drinks would​ come under the sugar tax - in fact, RTD coffee is name-checked specifically by the UK government in its proposals to expand the sugar tax to milk-based drinks, showing they're a clear target.

Setting a precedent?

The WHO, which supports sugar taxes as a public health measure, recommends milk drinks should be included in such levies (in fact, it says SSB taxes should apply to all categories of sugar-sweetened carbonates, fruit-flavored drinks, fruit juices, sports and energy drinks, vitamin water drinks, sweetened iced teas and lemonades and sweetened or flavored milk drinks and yogurts).

Its guidance​, however, does acknowledge the nutrient content of some drinks ('specifically, while many [products] are sufficiently high in free sugars to warrant taxation, some include other nutrients that may contribute to a healthy diet (e.g., protein in chocolate milk) that could mitigate concerns.

A decision on which products to tax should be made by assessing the market and its contribution to free sugar or caloric intakes, according to its guidance - alongside price sensitivities and potential substitutions (whether consumers are likely to replace taxed drinks with a more or less healthy option).

But, currently, milk-based drinks are rarely included in soda taxes. That means there simply isn't much data on how important taxing such drinks are to sugar-reduction efforts.

In Philadelphia, for example, beverages with 50% dairy milk or more are not subject to the tax.​ That includes chocolate milk and drinkable yogurts. Unsweetened non-dairy milks, such as unsweetened almond milk, soy milk, or rice milk, are not subject to the tax. Non-dairy milks that contain sweetener are​ subject to the tax - but, like the UK - become except if they are deemed by the USDA to be nutritionally equivalent to dairy milk.

San Francisco's soda tax excludes any milk product​, as is the case in Berkeley, California​ and Bolder, Colorado​.

One of the few jurisdictions to include milk-based products in their soda tax is Mauritius. The tax's remit clearly includes milk-based drinks​, and includes lactose in its definition of sugar.

However, there has been little research specifically into how big a difference the inclusion of milk-based drinks makes to the effectiveness of sugar taxes. In any case, results from one market may not translate well to another.

On introducing the sugar tax in 2016, the UK pledged to track the policy closely and compare pre- and post-tax date.

If it does choose to extend the sugar tax to milk-based drinks, the policy could create the necessary data to inform future policy decisions globally.