Imposing tax on sugary drinks is not the best method of taxation, according to PepsiCo CEO Indra Nooyi.
The UAE is likely to introduce excise tax from this year with rates ranging from 50 percent and 100 percent on certain goods including import, production and sale of tobacco products, carbonated drinks and energy drinks.
In its Fiscal Balance Program 2020 report published in December, the Saudi government said it would also impose a 50 percent tax on soft drinks and a 100 percent tax on tobacco and energy drinks from Q2 2017.
Last year, the World Health Organisation also urged countries to introduce sugary tax to curb soaring obesity rates, particularly in children.
In a recent interview with Arabian Business, Indra Nooyi said she was against any discriminatory tax, but in favour of working with governments to address any health issues.
“I think the sedentary lifestyle of people did cause an increase in weight and the wrong kind of weight; obesity levels went up. I think governments that want to think about a sugar tax have to think about … what are you trying to solve? Are you trying to raise revenues or are you trying to solve a health issue?
“If you’re trying to address a health issue, let’s approach this in a more holistic way. We want consumers to shift to lower-sugar offerings, because water is great but people want a little bit of flavour and taste. The best thing for us to do is let us incentivise consumers to move to lower sugar offerings, so if you drink a ...sparkling beverage with 10, 20 calories, or 50 calories, don’t tax it,” Nooyi said.
She said the company is already creating products with less or no sugar in response to consumer demand.
Soft drink – the core of PepsiCo for a century – now accounts for less than 25 percent of the company’s total revenues. Soft drinks sold today contains significantly less sugar, whether it is the standard Pepsi, with 30 percent less, or diet Pepsi with none.
In October, PepsiCo announced that by 2025 two-thirds of its drinks would have 100 calories or fewer from added sugar, per 350 millilitres.
About 25 percent of the company’s global revenue already comes from products it categorises as “everyday nutrition”, including Quaker oat products, Aquafina and healthier varieties of snacks, such as Forno (baked Lay’s potato chips) and SunBites.
“Clearly society changes and people’s tastes change; companies have to change too. One of the things we do as a consumer products company, we watch consumer trends, we study consumers constantly and we change our direction and our product offering with those consumer trends,” Nooyi said.