Is it time to tax sugar, salt and preservatives: what are the implications for businesses? - The Share Centre Blog

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Michael Baxter

Is it time to tax sugar, salt and preservatives: what are the implications for businesses?

Written by: Michael Baxter on February 20th 2013

Category: Thought for the day

How very dare they? People should be left to choose. It is up to them how much sugar they consume and whether they drink fizzy drinks. Morally, the government should leave alone. Well, actually there is compelling research to show that this view may be wrong. And if that is so, it may mean some pretty drastic changes are forced upon the food and soft drinks business. As an investor, you need to be aware of this.

I have given up Coca Cola for lent. If things go to plan, when my forty days and nights of Coke fasting are over, I will no longer feel the desire to drink the stuff. Don’t get me wrong, I love the drink, but the recent spate of publicity about the danger done by fizzy drinks did sink in. More to the point, I could not help but notice my expanding waistline, and wondered whether there was a correlation with how few notches I needed to use on my belt and how much Coke I was drinking.

So far so good. Indeed, if anything I am finding that I don’t miss it. Not that my waistline seems to have benefited by much. Of course, many millions of people have faced the same challenge before, and a big percentage of these people changed to Diet Coke. The way the company in question managed to migrate so many people from normal to Diet Coke stands as real testimony to its staying power. No wonder Warren Buffett is such a fan.

But I think something bigger is afoot, and the recent scare over horse meat may even be part of this. The truth is that our eating habits are ruining our health, and may in any case be immoral. Meat, as I am sure you know, takes more resources to create/grow/nurture than vegetables. If we all turned veggie, there would be more food to go around, across the world.

To be honest, even if all our meat was contaminated by gee gees, I am not sure wild horses could drag me into a life of vegetarianism. But I have to confess, that I would benefit from eating a little less meat, as well as sugar, salt, wheat and dairy products. Oh and preservatives, too.

When it comes to sugar there is a problem hardwired into us. When we were hunter gatherers, sugar was rare. In small portions it is beneficial. So when we did track down something sugary and sweet, such as honey, we went a bit mad, and ate as much as we could. Now sugar is much more plentiful, but our need to consume it whenever we see it has not gone away.

But there is a wider point. If there is one thing that psychology has taught us, it is that humans are not always rational, and we do not always behave in our own self- interest. For one thing, we tend to be unrealistically optimistic; for another we find it hard to accept that some common practice is bad for us, and for another we find it almost impossible to see how our actions, when multiplied out, can be very damaging.

So we are optimistic, and before it was made compulsory to wear seat belts, many thought: “I don’t need to wear a seat belt. I am a good driver. No accident will happen to me.” Well, we were wrong, and when it became compulsory, I suspect thousands of lives were saved, and maybe a good deal more than that.

We can’t believe a habit is bad for us, so we look for excuses. Before he died of lung cancer, my Father used to insist that smoking was not damaging him, and he cited as evidence an aunt who smoked and lived until she was 90.

We find it impossible to see how our actions, when multiplied out, can cause wider damage, so we have over–fishing of the oceans, not to mention the conviction that subprime mortgage securitisation is a good idea.

Here are two books that tell the other side. One is called ‘Nudge’ by Thaler and Sunstein; the other ‘Thinking Fast and Slow’ by Daniel Kahneman. The latter is one of the most successful books in the world at the moment; the former one of the most influential books so far this century.

Kahneman shows how what one might call our subconscious is more important than we realise, and how it can even determine actions we think are based on logical reasoning. Thaler and Sunstein showed how we can be nudged into acting in our own interest. We can be nudged into saving for our pension so that we have to opt-out, rather than opt-in into a company pension. They show how we can be nudged into saving our lives by wearing a seat belt, and not losing our bank card by leaving it in an ATM.

We can also be nudged into living longer and healthier lives, by encouraging us to eat less processed meat, pre-packaged meals, sweets, and fizzy drinks.

When food that is neither fresh, nor good for us, is as cheap as if often is, we get nudged into habits that are very bad for us.

That is why taxes on sugar, preservatives and salt will rise. Investors need to think about which companies rely on such products and which focus on food that is good for you instead. (And, by the way, that does not necessarily mean organic food, but may include GM crops.)

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Tags: Coca Cola to Diet Coke Warren Buffett, compulsory to wear seat belts, Daniel Kahneman, demand for sugar dates back to hunter gatherers, humans are not always rational, Nudge, nudged into habits that are very bad for us, nudged into healthy eating, over–fishing, tax on sugar salt and preservatives, thinking fast and slow

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