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Consumption at

a crossroads

September 2013

Rsarch InstituteThought leadership from Credit Suisse Research

and the worlds foremost experts

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IntroductionTh global obsity pidmic and rlatd nutritional issus ararguably this cnturys primary social halth concrn. Withbrakthroughs in th fild of mdicin, hug laps in cancrrsarch and disass such as smallpox and polio largly rad-icatd, popl around th glob ar, on arag, liing muchlongr and halthir than thy wr dcads ago. Th focuson wll-bing has shiftd from disas to dit. Th whol con-cpt of halthy liing is a ky pillar of our Crdit Suiss Mga-trnds framwork thms w considr crucial in th olu-tion of th instmnt world. In this rport, w spcificallyxplor th impact of sugar and swtnrs on our dits.

Although mdical rsarch is yt to pro conclusily thatsugar is in fact th lading caus of obsity, diabts typ II ormtabolic syndrom, w compar and contrast arious studison its mtabolic ffcts and nutritional impact. Alongsid this,w qustion som of th accptd wisdom as to what is pr-cid as good and bad whn it coms to sugar consump-tion, namly as to whthr a calori consumd is th samrgardlss of whr it is drid from sugar, fats, or protin and whthr solid foods ar nutritionally diffrnt to liquids.

Naturally, rcnt focus hr mdical, mdia and rgulatory has intnsifid on crtain products, with soft drinks bing thcommon dnominator for all thr. Within th population, war alrady sing a gradual rduction in th consumption ofsugar and a switch to an altrnati dit or low-fat products,particularly among th most highly ducatd. Dmands forrgulation, or taxation to limit consumption, ar growing. Ytgornmnts and halth officials ha so far takn a mixdstanc on th mattr.

Th potntial for a surg in ngati public opinion and thlooming thrat of rgulation and taxation ar issus that th

food and brag industry clarly must addrss, though thxtnt to which thy can do so without hurting thir currntbusinss modls is up for qustion. A dirsification into nwhalthir products is gathring momntum. Chang will bringnw instmnt opportunitis with clar winnrs and losrs.

What can w xpct in th futur? What should instorsfocus on? Although a major consumr shift away from sugarand high-fructos corn syrup may b som yars away, andoutright taxation and rgulation a dlicat procss, thr isnow a trnd dloping. From th xpansion of high-intnsitynatural swtnrs to an incras in social rsponsibility ms-sags from th brag manufacturrs, w s grn shootsfor ditary changs and social halth adancmnt. Ultimatly,w xpct consumrs, do ctors, manufacturrs and lgislatorsto all play a crucial rol in changing th status quo for sugar.

Giles Keating, Had of Rsarch for Priat Banking andWalth ManagmntStefano Natella, Co-Had of Global Scuritis Rsarch

Contents03 Introduction

04 Com position, consumption and

consequences

06 Medica l research

16 The world sweetener market

18 Sugar

20 High-fructos corn syrup (HFCS)

21 High-intnsity/artificial

swtnrs (HIS)

22 The consumers

26 Pub lic policy initiatives

32 Corporates: Self-regulation

and opportunities

41 References

43 Bibliography

43 Imprint / Disclaimer

For more information, please contact:

Richard Krsly, Had of Global

Scuritis Products and Thms,

Crdit Suiss Invstmnt Banking,

[email protected]

Michal OSullivan, Had of Portfolio

Stratgy & Thmatic Rsarch,

Crdit Suiss Privat Banking

[email protected]:ISTOCKPHOTO.COM/ANGIePHOTOS,PHOTO:ISTOCKPHOTO.COM/BeeMORe

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Thr can b no doubt that th globalobsity pidmic has bn at th cn-tr of a major dbat inoling mdicalrsarch, halthcar profssionals,insuranc companis and socity atlarg. Mor rcntly, rsarch hasshown that a significant numbr ofchronic disass, including coronaryhart disass, mtabolic syndrom,and diabts typ II strongly corrlatwith wight gain. Th futur c osts ofdaling with all ths disass ar put-ting furthr prssur on th priat andpublic sctors financs alik.

Whil ths disass might rsultfrom th combind ffct of sralfactors, rcnt focus mdical, mdiaand rgulatory has conrgd on throl playd by sugar consumption, withsoft drinks bing th common dnomi-nator for all thr. Opinions on thffcts of sugar rang from thos whomaintain that it is toxic to thos whosay that it is a natural product and pr-fctly halthy at currnt lls of con-sumption. Whil th partis on both

sids of th dbat continu to dis-agr on a numbr of important issus,thr ar sral aras whr thr arfw doubts.

1. Th consumption of addd sugar(sugar not containd in natural productslik fruit or milk) or high-fructos cornsyrup (HFCS) has incrasd dramati-cally ovr th last fw dcads. Adddsugar is now ubiquitous in procssdfoods, both as a flavor nhancr andprsrvativ. Th world daily avragconsumption of sugar and HFCSpr prson is now 70 grams (or 17taspoons) pr day, up 46% sinc30 yars ago (whn it was 48 gramspr day). This is th quivalnt of280 caloris pr day (four caloris for

ach gram of sugar). Yt, consumptionvaris considrably from country tocountry. At th top, w find th USA,Brazil, Argntina, Australia and Mxico,all at mor than doubl th world avr-ag; ranging from 40 taspoons for thUSA to 35 for Mxico. At th othrnd, w find China with 7 taspoons.If you xclud childrn lss than fouryars old, you can add anothr5%10% to th numbrs abov.

2. Whil mdical rsarch is yt topro conclusily that sugar is thlading caus of obsity, diabts typII and mtabolic syndrom, th balancof rcnt mdical rsarch studis arcoalscing around this conclusion.Adancs in und rstanding th nga-ti ffcts of rfind carbohydrats onblood sugar rgulation and cholstrol,and th mtabolic impacts of fructos,ar undrmining th traditional iwthat all caloris ar th sam.

3. Gntic ariations in insulin

rspons ar an important factor andallow som popl to tolrat morsugar than othrs. en so, a scintificstatmnt issud by th AmricanHart Association in 2009 1 rcom-mnds that womn tak no mor thansix taspoons of addd sugar a dayand mn no mor than nin. To put thisin contxt, a rgular can of soda hasight taspoons of sugar, as dos aon cup sring of low-fat granola.Basd on th figurs abo, currntintak of addd sugars is wll aboths rcommndd lls in sraldlopd and dloping countris.

4. Liquid and solid sugar caloris arhandld diffrntly by th body. Thnrgy that is obtaind through br-

corrlation btwn obsity and sodaconsumption across many populationsis conincing and is a particular riskfactor for childhood obsity. Mxico,for xampl, ranks scond in th worldin adult obsity, first in diabts typ II which is th lading caus of dathin th country and fourth in infantilobsity.2

It also ranks scond globally inaddd sugar consumption pr prsonand scond in th amount of soft drinksconsumd pr prson, with 95% ofsoft drinks consumd (xcluding watr)bing full-calori.

7. Rgulators, gornmnts and publicofficials ha don littl so far to coun-tract concrns, with ry fw notablxcptions. Yt, w stimat that thannual costs to th halthcar systmdu to th global obsity pidmic arin xcss of USD 600 billion. But ob-sity, as bad as it is, is not th mostworrisom issu .

Diabts typ II is now affcting

clos to 370 million popl worldwid,with on in tn US adults affctd byit. Th costs to th global halthcarsystm ar a staggring USD 470 bil-lion according to th most rcnt sti-mats from th Intrnational DiabtsFdration, and rprsnt or 10% ofall halthcar costs. In th USA alon,th halthcar costs tid to diabtstyp II ar stimatd at USD 140 bil-lion, compard to USD 90 billion fortobacco-rlatd halthcar costs. en

mor worrisom is that ths numbrsar growing at a rat of 4% a yar,much fastr than for obsity (1%2%).By 2020, th annual cost to thhalthcar systm globally will rachUSD 700 billion and th poplaffctd will b clos to 500 million.Rcnt nts would indicat that localand national authoritis around thglob ar bginning to tak action,with arying dgr s of succss. Intr-ntions includ anti-soda adrtisingcampaigns, tax lis, rmoal ofnding machins in schools and rgu-lation of portion siz. Howr, asMayor Bloombrg discord in NwYork, whn his attmpt to limit cupsizs was dfatd in court, th com-bind lobby of th sugar industry which is a hug mployr and th r-for has significant oting powr andthat of th food and brag manu-facturrs maks things much mordifficult. Aftr balancing argumnts infaor and against, w bli that taxa-tion would b th bst approach and

will proid th bst outcom: rducingconsumption whil hlping th publicsctor dal with th growing social andmdical costs.

8.Against growing ngati publicopinion and th thrat of rgulation ortaxation, th food and brag indus-try is bginning to tak stps towardslf-rgulation and pro-acti mdiacampaigns. Th brag industry hasalso for som tim rcognizd thnd to dirsify into halthir prod-ucts, including fruit juics, sportsdrinks, bottld watr and dit soda.Howr, many of ths products aralso coming undr scrutiny; ithr assugar in a halthir guis (fruit juics)or for th infrrd disadantags of

artificial swtnrs particularlyAspartam, whos application wasrjctd six tims by th Food andDrug Administration (FDA).

9. In th procss of slf-rgulatingand ducating th public to takadantag of halthir choics, thbrag manufacturing industry hason adantag: in most cass, italrady proids a halthir altrnatiof th fully caloric rsion (which is notth cas for th tobacco and alcoholindustry. W bli th nxt stp inslf-rgulation will b to launch foodand brags that us natural swt-nrs with zro or minimal caloric con-tnt. Th xprimnt of Coca-ColaLif in Argntina (swtnd with halfStia and half sugar lading to a50% rduction in caloris) is an xam-pl of what w xpct to s or thnxt fw yars.

10. Bringing all this togthr, wbli that th nois on sugar and

its ffcts on our halth will incrasrathr than dcras. en wllrgardd and indpndnt bodis likth World Halth Organization (WHO)ha to catch up. In all its rports ondiabts, th WHO barly mntionssugar as ithr a caus or as part ofth tratmnt (i.. rducing sugarintak). So th most likly outcomor th nxt 510 yars will b a sig -nificant rduction in sugar consumptionand a markd incras in th rolplayd by high-intnsity natural swt-nrs in food and brags. Softdrink consumption might suffr som-what in th s hort trm, as it will taksom tim for companis to succss-fully stablish a nw lin of halthiraltrnatis.

Composition, consumptionand consequences

1 Circulation, Journal of th Amrican Hart Associa-tion (August 2009) http://circ.ahajournals.org/contnt/120/11/1011.full.pdf

2 Data ar basd on masurmnts rathr thanslf-rportd hight and wight. OeCD HalthData 2011 http://www.ocd.org/ls/halth-systms/49105858.pdf

ags is intrprtd and procssd dif-frntly by our body from nrgy that isobtaind through solid foods, n ifth orall quantity of caloris con-sumd is th sam. Sugar by itslf is apoor sourc of caloris as it proidslittl nutritional alu. Not surprisingly,th public dbat has cntrd on softdrinks and th rol thy ha playd inthis issu.

5. Th mdical profssion has manytims pointd to th link btwn sugarand th disass w mntiond abo,but dfiniti causality has bn difficultto pro, as xprimnts inol a largnumbr of indiiduals undr dirction tofollow a controlld dit for sralmonths or yars. Yt, our propritarysury of gnral practitionrs in thUSA, europ and Asia shows thatclos to 90% of participants supportths conclusions. In addition, thr isnot a singl study showing that adddsugar is good for you, which would bxpctd if th impact of sugar or

HFCS was truly nutral.

6. Consumrs ar incrasingly awarof this dbat. Within th population,w ar alrady si ng signs of rd uc-tion in th consumption of sugar, par-ticularly among th most highly du-catd. Public opinion asking for somrgulation or taxation to limit consump-tion is growing.

Sugar-swtnd brags, whichar concntratd sourcs of sugar, arbcoming a main focus of consumrs.In th USA, 31% of sugar supply isabsorbd by th brag industry.As th sugar is in a solutio n, it is asilyand compltly ingstd, giing a larginjction of caloris without th cons-quntial satiation of apptit. Th

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Thr ar also a numbr of factors whr th dbaton mdical rsarch in this ara is ongoing. Lt usstart with th basics and focus on thr importantfacts that allow us to bttr undrstand som of thconsquncs of xcss sugar and HFCS intak:obsity, diabts typ II and mtabolic syndrom:

1. Fructose and glucose are essentially same

Fructos, also calld fruit sugar, is on of thrmonosaccharids (along with glucos and galac-tos) that ar absorbd during digstion. Fructos ismainly ingstd in on of two forms, ithr sucros(tabl sugar) or high-fructos corn syrup (also calldhigh-fructos maiz syrup, glucos fructos syrup orglucos/fructos). Sucros consists of qual partsfructos and glucos. High-fructos corn syrup(HFCS), on th othr hand, usually has 55% fruc-

Our riw of th latst litratur and our conr-sations with xprts in th fild lad us to blithat, in gnral, th biological impact of fructos isssntially idntical to that of glucos at th con-cntrations at which ths nutrints ar gnrallyconsumd. Th Amrican Mdical Association haswighd in on th dbat and concludd that itdos not bli thr to b any diffrncbtwn HFCS and sucros whn it coms tocausing or aggraating conditions such as obsityor diabts typ II.

2. Liquids and solids are handled differently

by the body

Much of th rcnt focus in th dbat aroundaddd sugars has focusd on th sugars that comfrom swtnd brags. This is partially

tos and 42% glucos (in HFCS 55) or 42% fruc-tos and 53% glucos (in HFCS 42). HFCS doshav som important commrcial advantags ovrtabl sugar, and is considrably chapr, maning itis now rgularly usd as th main swtnr in bv-rags. Th tmporal rlationship btwn anincras in HFCS consumption (spcially in swt-nd bvrags) and th incras in obsity hasalso lvatd th focus on th potntially uniqu rolthat fructos may play in wight gain.

Thr ha bn a numbr of studis lookingfor diffrncs in how th body mtabolizs fruc-tos compard to glucos. Unfortunatly, manyha bn ry short-trm or carrid out at llsmuch highr than th concntrations at whichithr nutrint is typically ingstd. In addition, it israr for ithr substanc to b consumd in isola-tion in th typical human dit.

MedicalresearchMdical rsarch has mad significantprogrss, particularly in undrstanding th

way w procss caloris. Causality linkingxcss sugar consumption to obsity,diabts typ II and mtabolic syndromis difficult to pro; but for th doctors

w suryd th link i s ry strong.

Figure 1

Major sources of added sugar in the American diet

Sourc: Johnson t al, Cir culation, 2009: 120:1011-1020. Food groups that contribut mor than 5% of th

addd sugars to th Amrican dit ar listd in dcrasing ordr.

Food categories Contribution to added sugar intake

(% of total addd sugar consumd)

Rgular soft drinks 33.0

Sugars and candy 16.1

Caks, cookis, pis 12.9

Fruit drinks (fruitads and fruit punch) 9.7

Dairy dssrts and milk products (ic cram swtnd yogurt, 8.6and swtnd milk)

Othr grains (cinnamon toast and hony-nut waffls) 5.8

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bcaus soft drinks and othr sugar-swtndbrags ar now th primary sourc of adddsugar in th typical Amrican dit (Figur 1).

In addition, thr is now complling idncthat supports th notion that nrgy obtaindthrough brags is intrprtd and procssddiffrntly from nrgy obtaind through solidfoods, n if th orall quantity of nrgy con-sumd is th sam. This was first shown by Flood-Obbagy and Rolls 1, who showd that thr was noimpact on th amount of solid food that was con-sumd during a mal if th subjct was gin noth-ing, watr or a soft drink in adanc of th mal.

Similarly, Matts t al 2 dmonstratd that ingst-ing a bvrag did not impact th amount of calo-ris that wr ingstd during a subsqunt mal orin th 24-hour priod aftr th bvrag was con-sumd. Whn a solid food was givn, howvr, thnumbr of caloris that wr ingstd in th follow-

from swtnd brags ar also asir to idn-tify and isolat, and potntially rgulat, rstrict ortax as opposd to sugars that ar almost ubiquitousin all solid foods.

3. The response to sugar intake is individual

A final factor o f no dbat i s that thr is clarly agntic componnt to th dlopmnt of obsity.At a population ll, on wid ly citd hypothsisis that of th thrifty gnotyp, as coind bygnticist Jams Nl 3. This ssntially argusthat th human gns slctd or tim wrthos that hlpd humans suri challngingtims whr thr wr frqunt famins. Thnironmnt that many of us now li in has pln-tiful amounts of food aailabl yar round, but thgns may still b focusd on consring nrgywhn r p ossibl and, in that way, can lad to

1 Flood-Obbagy and Rolls. Th ffct of fruit in diffrnt formson nrgy intak and satity at a mal - Am Dit Assoc.2009;109: 430437. (2009)

2 Richard D. Matts, PhD, MPH, RD; Wayn W. Campbll.effcts of Food Form and Timing of Ingstion on Apptit Am Dit Assoc . 2009;109:430437 (2009)

3 Nl, Jams. Diabts Mllitus: A Thrifty Gnotyp RndrdDtrimntal by Progrss? Am J Hum Gnt. (Dcmbr 1962)

4 Johnson, Rachl., t al. Ditary Sugars Intak and CardioascularHalth Circulation 2009, 120:10111020 (August 2009)

5 Qi, Q., t Al. Sugar-Swtnd Brags and GnticRisk of Obsity Nw england Journal of Mdicin 367:15: 13871396 (Sptmbr 2012)

ing mal and in th following 24-hour priod wasrducd, suggsting th solid caloris that hadbn ingstd wr procssd in a diffrnt way,ithr in th intstin or in th cntral nrvous sys-tm, so that th body appropriatly adjustd its sub-squnt calori intak. With caloris from liquids,howvr, th body dos not sm to compnsatand th caloris ar addd on to what th prsonwould hav in gstd anyway. This is not s urprisingas high-caloric drinks bcam availabl only in thlat 1830s with th introduction of carbonatd lm-onad in th Unitd Kingdom.

Th amount of addd sugars that com fromsugar-swtnd drinks, along with th idncthat ths caloris ar procssd in a diffrnt wayto caloris from solid foods, has contributd to thscrutiny that sugar-swtnd brags ar nowundr for potntially contributing to th incras inorwight and obs indiiduals. Ths sugars

xcss nrgy rsrs and, or tim, wightgain and obsity.

Richard Johnson and othrs 4 sustain that homosapins xprincd two important gntic muta-tions that incrasd our ability to stor fat in sa-sons whr food was plntiful: th lack of th uri-cas nzym and lack of th ability to mak itaminC. Ths mutations nhancd our ability to incrasfat in rspons to our original major food sourc,fruit, and incrasd our chanc to suri in priodsof famin.

Many studis hav also bn compltd thatlook for individual gntic variations btwn sub-jcts who ar and ar not obs to try and idntifypossibl gntic variations that could play a rol inhow a prson consums and procsss nrgy.Mor than 40 diffrnt gntic variants hav bnidntifid to dat that hav bn linkd in som wayto an addd risk of wight gain and obsity. In total,gntics ar blivd to contribut btwn 30%and 70% of th risk to dvloping obsity, withnvironmntal factors driving th rst of th risk.

Intrstingly, a rcnt publication by Qi t al inth Nw england Journal of Mdicin 5 againshows that sugar-swtnd brags may playa particular rol in th dlopmnt of obsity. Inthis study Qi xamind 32 gntic loci that habn found to b associatd with body mass indx(BMI) in th past and th impact ths gns hadon wight gain. Upon xamining th intak ofsugar-swtnd brags, it was found thatthr was a strongr association btwn thprsnc of ths gns and changs in BMI inpopl who had a highr intak of sugar-swt-nd brags as opposd to thos who had alowr intak of ths drinks. Whil mor rsarchis ndd in this ara, Qis work suggsts that any

impact that gntics may ha on wight gain mayb mor pronouncd in popl who consummor sugar-swtnd brags. Anothr pos-sibility may b that popl who ha a strongrgntic prdisposition to obsity may b morsnsiti to any potntial wight gain causd byths drinks.

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5. Is there a fat switch?

Th gnral iw is still that obsity is du to po-pl ingsting mor caloris than thy burn. Morproocati rsarch ld by Richard Johnson fromth Unirsity of Colorado 8 now suggsts that itmay not b as simpl as that. Johnson suggststhat wight gain may b drin by actiation of afat switch that incrass th rat of fat storagand that can dri wight gain. Th triggr of thisswitch could b th ingstion of sugar (and in par-ticular fructos), although carbohydrats may trig-gr this switch as wll.

This thory is basd in part on som of thgntic factors bhind obsity that wr discussdarlir and th fact that crtain gns may havbn naturally slctd ovr tim as gns thatwr favorabl to hlping popl surviv p riods offamin. Ths gns act as a switch that is acti-vatd whn th body ingsts sugar or carbohydratsand lads to th mor rapid production of fat.

Johnson and collagus argu that th body isspcially snsiti to fructos (as opposd toothr sugars and carbohydrats) and that thingstion of fructos may ha a mor pronouncdimpact on th fat switch and th production of fat.Our riw of th litratur las us intrigud byth fat switch thory although w admit that as ofnow th scinc and data ar inconclusi.

6. The diabetes link

Th suspicion that incrasd consumption of sugarlads to diabts has bn highlightd by sraldoctors sinc th 1800s. Sir Frdrick Banting,who rcid th Nobl Priz in 1922 for his dis-cory of insulin, linkd th sharp incras of dia-bts in th USA, to th sharp incras in sugarconsumption. Han emrson, th Commissionrof Halth for Nw York City in 1924 wrot a paprntitld Th Swt Dath and h too linkd thconsumption of sugar to th sharp incras in dia-bts among th walthir Nw Yorkrs. Whil

causality on a scintific basis rquirs mor thansuspicions, th amount of data linking th sugarconsumption and diabts has grown xponntially.

Th dbat flard up again arlir this yar fol-lowing th publication of a study by Basu t al 9 thatxamind th potntial impact of sugar on causingdiabts, indpndnt of othr factors, includingorwight and obsity. This group found that forry 150 kcal/prson/day incras in sugar aail-ability thr was a 1.1% incrasd pralnc of

tions. On th othr hand, prhaps thos who pos-sss a gntic prdisposition to dvloping thsconditions (or somon who is alrady ovrwight orobs) should b furthr rstrictd from consumingsugary foods or hav to pay gratr prics for thsfoods. Obviously, individualizd rgulations or taxssuch as ths would b difficult to implmnt, add-ing uncrtainty about how rgulations and taxsshould b usd against sugary foods in gnral.

4. The obesity link

Globally, 35% of adults ar considrd ovrwightand 12% of all adults ar obs 6. Th rats of ob-sity incrasd from 5% for mn and 8% for womnin 1980 to 10% of mn and 14% of womn in2008. It is now stimatd that 7 205 million mnand 297 million womn ovr th ag of 20 arobs, or mor than half a billion adults worldwid.

Thr ar a numbr of major halth implicationsfrom th ris in th numbr of popl who ar or-wight and /or obs in both th dl opd worl dand mrging markts. Th landmark Global Bur-dn of Disas rport publishd at th nd 2012highlightd obsity as a mor significant halth cri-sis globally than hungr and/or malnourishmntand as th lading global caus of disabilitis. Thfi primary conditions that ar linkd to incrassin body mass indx ar high blood prssur, highcholstrol, coronary hart disas, strok and dia-bts typ II. Byond ths major conditions, bingorwight and/or obs also incrass th risk ofnumrous othr disordrs including ostoarthritis,gout, nonalcoholic fatty lir disas, gallstonsand cancr.

Along with th halth implications of th incrasin th numbr of popl who ar ovrwight and/orobs, thr ar also significant conomic impacts.Th dirct cost of managing obsity-rlatd condi-tions has bn stimatd to b around USD 190billion in th USA alon. Thr ar also indirctcosts rlatd to issus such as incrasd absnt-ism, incrasd disability and incrasd prmatur

mortality that hav bn stimatd to add as muchas USD 66 billion in additional costs in th USA.

In paralll with th incras in obsity, thr hasalso bn a dramatic ris in th total amount ofcaloris bing consumd ach day. Th numbr ofcaloris ndd for th arag mal according toth UK NHS (National Halth Sric) is 2500,though th US authoritis rcommnd 2700. Whatis gnrally agrd is that sugar should account forno mor than 10% of caloric intak.

Actual consumption is now significantly ahad ofthis in irtually ry markt, paking at 3700 prhad pr day in th USA. Th mrging marktsha gnrally low pr capita consumptions and thdlopd world gnrally highr.

So is it just sugar that has ld to an obsity pi-dmic? No, but sugar has bn a major contributor,byond th simpl amount of caloris it addd toour dit.

Figure 3

US calorie consumption growth over the 20th century

Sourc: USDA, Crdit Suiss Rsarch

1909 1917 1925 1933 1941 1949 1957 1965 1973 1981 1989 1997 2005

Balance better vs worse

US calories consumption/per day

4200

4000

3800

3600

3400

3200

3000

Figure 4

Per capita sugar consumpt ion 199697 and 201011Sourc: Sucdn

60

50

40

30

20

10

N or th A me ri ca So ut h A me ri ca E ur op e A si a A fr ic a O ce an ia

19961997 20102011

0

Annual kg per c apita

0 10 20 30 40

Self-reported data Measured data

% of adult population

United States

Mexico

New Zealand

Chile

Australia

Canada

United Kingdom

Ireland

Luxembourg

Finland

Iceland

Russian Fed.

Hungary

Greece

South Africa

Estonia

Czech Republic

Slovak Republic

Slovenia

Spain

Portugal

Turkey

Germany

Brazil

Belgium

Israel

Denmark

Poland

Austria

Netherlands

France

Sweden

Italy

Norway

Switzerland

Japan

Korea

China

Indonesia

OECD

India

Figure 2

Prevalence of obesity among adults, 2009Sourc: OeCD Halth Data 2011; national sourcs for non-OeCD countris.

6 OeCD Halth Data 2011

7 World Halth Organization, Obsity Halth Obsratory (http://www.who.int/gho/ ncd/risk_factors/o bsity_txt/ n/)

8 Johnson, Rachl., t al. Ditary Sugars Intak and CardioascularHalth Circulation 2009, 120:10111020 (August 2009)

9 Basu S, Yoff P, Hills N, Lustig RH (2013): Th Rlationship ofSugar to Population-Ll Diabts Pralnc: An economtricAnalysis of Rp atd Cross-Sct ional Data; PLoS ONe 8(2):57873. doi:10.1371/journal.pon.0057873

Th individualizd rspons to sugar consumptioncontributs significantly to th dbat about howmuch govrnmnt or halth authoritis should tax orrstrict accss to foods or drinks with a ddd sugars.On of th rasons that supportrs cit th nd forths masurs is th significant conomic impactthat obsity and othr mdical conditions hav onsocity as a whol. It could b argud that a prsonat lowr risk for dvloping any complications fromingsting sugar should b abl to avoid any rstric-tions and avoid paying any taxs sinc it is lss liklythat thy will dvlop th associatd mdical condi-

diabts, indpndnt of a arity of ditary, socialand conomic factors (Figur 6). As with any pop-ulation-basd analysis such as this on, thr arlimitations in th strngth of th conclusions thatcan b mad from th study. It dos add on morpic of possibl idnc on th sid of th argu-mnt that thr is somthing spcific to sugar thatdris th dlopmnt of conditions such as dia-bts, byond just th caloris sugar contains andth wight gain and obsity that th addd calorismay caus.

Th Basu study did a commndabl job ofattmpting to control for othr factors that maycontribut to wight gain and obsity. It is ssn-tially impossibl for a study to compltly isolatsugar for a long nough priod of tim to allow for

SUGAR_10 SUGAR_11


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fully conincing rsults to b gnratd ithr insupport of or against sugar. On point that w findintrsting, howr, is that thr ar no studisthat ha bn publishd (to our knowldg) thatsuggst sugar has a protcti bnfit, whil thrar a numbr of studis (including th Basu study)that at last partially implicat sugar. If sugar trulyhas no spcific impact on th body whn consid-rd in isolation from othr factors, on wouldassum that random chanc would lad to somstudis showing sugar to b bnficial, whil othrsshow harmful ffcts and othrs show no ffcts.

7. The metabolic syndrome link

Whil it dos appar that fructos and glucos arhandld in an ssntially quivalnt mannr in thbody, thr may b som conditions in th bodywhr fructos may hav a gratr dtrimntalimpact than glucos. Two spcific conditions thathav bn highlightd in th litratur whr fruc-

thir us or consumption of th substanc, (3) usth substanc compulsily, and (4) continu tous it dspit th harm it is causing.

Sugar may not pos th clar addicti charac-tristics of illicit drugs such as cocain and hroin,but to us it dos mt th critria for bing a potn-tially addicti substanc. It is clar that a prfr-nc for swt tast is innat in many popl, withswtnrs incrasing th plasur that poplobtain out of ating. Th consumption of swttasting foods and drinks has bn shown to triggrth rlas of th chmical dopamin in th basalganglia portion of th brain, th sam rsponsthat th brain has to stimulation by sxual arousal,narcotics and othr plasurabl stimuli. Most po-pl can also attst, at last ancdotally, to popldloping craings for and compulsily consum-ing crtain swt foods and drinks, n whn thyar not ncssarily hungry or thirsty. In addition,many (if not most) popl who ar orwight orobs continu to at sugary substancs n ifthy raliz that it is contributing to thir caloriintak and wight gain.

Th mor formal scintific data supporting thiw that sugar is addicti is somwhat limitd and

basd mainly on animal studis. Studis on labora-tory rats ha shown that rats can dlop craingsfor sugar watr. Thy also bing on sugar watrand show signs of withdrawal whn th sugar watris withhld. Rats ha also bn shown to dlopa tolranc to sugary substancs. Or tim, ratsthat ha bn fd a sugary dit ha a rductionin th numbr of dopamin rcptors in thir brain,lading to thm nding to ingst mor sugar toachi th sam amount of dopamin rlas andplasur rspons.

Studis of this sort ar mor difficult to conductin humans. Howr, studis using functional brainimaging tchniqus such as functional magnticrsonanc imaging (MRI) scans and positron mis-sion tomography (PeT) scans ha shown thatobs indiiduals tnd to ha fwr dopaminrcptors in thir basal ganglia, suggsting thatthy may also nd to at mor swt foods to

Figure 6

Increased sugar availability has been associated withincreased diabetes prevalence

Sourc: Basu t al, PLoS ONe 8(2): 57873.

10

5

-5

-200 -100 0 100 200 300

Change in sugar availability (kcal/person/day)

Change in diabetes prevalence (%)

0

Figure 7

Metabolic syndrome is madeup of a group of ve metabolic

risk factorsSourc: National Hart, Lung, and Blood Institut

Figure 8

Withdrawal from caffeine can causesymptoms similar to those seen withother addictive drugsSourc: Amrican Psychiatric Association

gnrat th sam dopamin rlas and plasurrspons. What is somtims lft out of th sugardiscussion is th fact that caffin is oftn in thsam food and bvrags that hav significantamounts of addd sugar. enrgy drinks, carbonatdbvrags and chocolats ar just som of thxampls of substancs that hav caffin includdwith addd sugars. Caffin also dos not pos thsam risk of addiction as som othr drugs but itdos stimulat th cntral nrvous systm, lads topositiv fdback loops and can caus withdrawalsymptoms whn it is discontinud (Figur 8). Givnthat caffin and sugar ar oftn ingstd togthr,it is somtims difficult to isolat th impact of onsubstanc as opposd to th othr. Rgardlss, anaddiction, or at last a mild-to-modrat dpn-dnc, dos sm to occur in som popl to onor both substancs, contributing to popl ingstingmor of th substanc than thy know thy should.

9. Is there a threshold sugar intake level we

have crossed?

Most of th focus around sugar intak has assumdthat thr is a linar dos rspons to incrasd

sugar consumption. As th consumption of sugarhas incrasd (along with th consumption of othrcaloris) thr has bn an incras in various md-ical conditions. Howvr, nwr data suggst that alinar dos rspons may b too simplistic. 10 11

Thr may b a thrshold ll in th body blowwhich sugars ar without harm. Should this b sup-portd by additional studis, thn it could impacthow futur ditary guidlins ar writtn. It mayalso hlp xplain why th pralnc of crtain con-ditions continus to ris n if th rat of con-sumption of soft drinks and som othr sugar-swtnd brags may ha lld off.

tos may play a particular rol ar mtabolic syn-drom and nonalcoholic fatty livr disas (NAFLD).Som of th opinions conncting fructos in par-ticular to mtabolic syndrom and nonalcoholic fattylivr disas ar drivn by th tmporal associationbtwn th ris in fructos consumption (as part ofsugar and as part of high-fructos corn syrup) andth ris of ths conditions, but thr is som bio-logical rational bhind ths concrns as wll.

Th mtabolic syndrom is a constllation offi diffrnt risk factors, ach lading to anincrasd risk of hart disas, diabts andstrok (Figur 7). various studis on small-siztst sampls ha shown that fructos consump-tion, but not glucos consumption, can incrasiscral adipos tissu, incras triglycrid llsand lowr HDL cholstrol lls. Othr studisha shown that fructos consumption mayincras lir nzyms, suggsting potntiallyaltrd hpatic function and a possibl rationalbhind th dlopmnt of NAFLD.

Unfortunatly, most of ths studis ha bnrlatily small studis of short duration so th dataar not conclusi on way or th othr. In addition,th fact that fructos is almost always ingstd

with glucos may mak it difficult to r ha con-clusi idnc of th isolatd impact that ithrnutrint is haing in th body.

Thr ar a coupl of qustions still bingdbatd without full agrmnt, but that ar ky toundrstanding th implications for consumr, sugarcompanis, and food and brag manufacturrs.

8. Is sugar as addictive as caffeine?

Som of th most ocal critics of th sugar industryha xprssd concrns that not only is sugartoxic, but it may contain som addicti proprtisthat lad popl to dsir mor and mor sugaror tim. Addiction is a powrful trm and, from amdical prspcti, rquirs som spcific critriato b mt. Spcifically, in ordr for somon to baddictd to a substanc, thy must (1) ha cra-ings for th substanc, (2) b unabl to control

Symptoms of caffeine withdrawal

Hadachs

Fatigu

Anxity

Irritability

Dprssd mood

Difficulty concntrating

Metabolic risk factors

Larg waistlin/abdominal obsity

High triglycrids

Low HDL (good) cholstrol

High blood prssur

High fasting blood sugar

Figure 5

Estimated prevalence and healthcare costs of adults with diabetes

Sourc: UnitdHalth Group Modling, 2010 (http://www.unitdhalthgroup.com/hrm/unh_workingpapr5.pdf)

Prevalence in adult

population

Health costs attributable

to diabetes (in USD bn)

2007 2010

(estimate)2020

(estimate)2007 2010

(estimate)201120

(projection)

Popl with prdiabts 26.3 % 28.4 % 36.8 % 27 34 585

Popl with undiagnosd diabts 2.9 % 3.1 % 4.1 % 12 15 253

Popl with typ I diabts 0.2 % 0.2 % 0.2 % 4 5 73

Popl with typ II diabts 7.6 % 8.2 % 10.8 % 110 140 2,439

Total 37.0 % 39.9 % 51.9 % 153 194 3,351

10 Johnson, RK, t al. AHA Scintific Statmnt: DitarySugars Intak and Cardioascular Halth. Circulation 2009;120: 10111020.

11 Rnni KL, Liingston Be. Associations btwn ditaryaddd sugar intak and micronutrint intak: a systmatic riw.British Journal of Nutrition. 2007; 97: 832841.

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Figure 9

Would you say sugar consumption is linked to thedevelopment o f?

Sourc: Crdit Suiss equity Rsrarch Nutrition Sury, 2013

Obesity Type II Diabetes Non-Alcoholic/

Fatty Liver

US

EU

Asia

Global

Yes/Definitely yes

98%

85%

74%

86%

US

EU

Asia

Global

96%

92%

86%

91%

US

EU

Asia

Global

78%

73%

70%

74%

Figure 10

Should the government and health ofcials do more to

reduce consumption of sugar, and will they in your opinion?

Sourc: Crdit Suiss equity Rsarch Nutrition Sury, 2013

Whil rsarch has yt to pro dirct causalitybtwn xcss sugar consumption and obsity,diabts typ II or mtabolic syndrom, th mdicalprofssion is rgularly confronting ths issus inthir day-to-day practic. It is intrsting to obsrwhat doctors think of ths issus. With this inmind, w conductd a propritary sury of 152doctors in th USA, europ and Asia. Th rsultsar quit startling.

Whil most doctors do not appar to ha muchspcializd knowldg or training about nutrition(and mor spcifically sugar or HFCS), 82% of thdoctors in th USA and europ think that sugarcaloris ar handld diffrntly by th body, com-pard to only 60% in Asia. On th qustion issugar addicti, 65% think this is th cas. Thris mor: 98% of th doctors in th USA think that

US 82% US 56%

EU 90% EU 52%

Asia 86% Asia 62%

Global 86% Global 57%

0% 20% 40% 60% 80% 100%

N on e M in im al M od er at e E xt en si ve

USA

Asia Pacific

Global average

Europe

Figure 11

How would you describe the extent of training/courseworkyou received on nutrition during your medical training?


0% 20 % 40 % 60% 80 % 100 %

D efi ni te ly n ot P ro ba bl y n ot M ay be P ro ba bl y y es D efi ni te ly y es

USA

Asia Pacific

Global average

Europe

0 % 20 % 40 % 60 % 80 % 100%

D efi ni te ly n ot P ro ba bl y n ot M ay be P ro ba bl y y es D efi ni te ly y es

USA

Asia Pacific

Global average

Europe

Figure 12

Do you believe there is a difference between how sucroseand fructose are handled by the body?Sourc: Crdit Suiss equity Rsarch Nutrition Sury, 2013

Figure 13

Do you believe sugar is addictive?


incrasd sugar consumption is linkd to th dl-opmnt of obsity, compard to 85% in europand 94% in Asia. Th sam qustion rgarding dia-bts typ II shows that 96% of th doctors wsuryd in th USA bli thr is a link withincrasd sugar consumption rsus 92% ineurop and 86% in Asia.

Finally, w askd th sury participants if thythought that th gornmnt or halth authoritisshould b doing mor to rduc sugar and HFCSconsumption. eighty-two prcnt of th doctorsanswrd ys in th USA, 90% in europ and86% in Asia. It is also intrsting to notic thatwhn w askd whthr thy b lid th gorn -mnt or th halth authoritis ar likly to do morto rduc th consumption of sugar and HFCS,only 57% rspondd ys.

The medical profession

PHOTO:ISTOCKPHOTO.COM/SKYNeSHeR

SUGAR_14 SUGAR_15


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The worldsweetener marketSugar accounts for or 80% of th swtnr markt. Growthhas bn basically in lin with global population growth (2%), butfr markt prics ha suffrd from xcss supply. Amonghigh-intnsity swtnrs, th fastst-growing sgmnt is naturalswtnrs, whil artificial swtnrs ar undr incrasdscrutiny du to potntially ngati halth ffcts.

Figure 14

Global sweetener market 2011Sourc: ISO estimats volums

Figure 15

Growth rates 20 0511Sourc: ISO stimats

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

HIS Sugar HFCS Naturalsweeteners

0.0%

W ha probd into th latst mdical rsarch onth ffcts of sugar and HFCS. In ordr to bttrassss th potntial implications of this rsarchfor consumrs and corporations, w nd to ana-lyz th main faturs of th global swtnrsindustry (sugar, HFCS and othr swtnrs).

Th global swtnr markt is stimatd to baround 190 million tons of whit sugar quialnt,and is unsurprisingly dominatd by sugar. each ofth major groups (high-intnsity/artificial swtn-rs, sugar, and high-fructos corn syrup) has bngrowing at a similar rat of circa 2% pr annum,though th most rcnt numbrs ha natural high-intnsity swtnrs growing rathr fastr.

Sugar is on of th most important agriculturalcommoditis tradd intrnationally. Th annual valuof world trad xcds USD 24 billion. Howvrmost sugar (71%) is consumd in th country of ori-gin, so th global trad (imports/xports) totalsaround 60 million tons, and Brazil accounts for 2530million tons of this. As th world markt is a smallrmarkt, it is thus rathr mor snsitiv to changs in

production particularly in Brazil than might othr-wis b thought. This mans that, although thr arsvral producrs globally, th ky is to undrstandwhat is happning in Brazil in particular, and to a lssxtnt in India, Thailand and China.

Th markt for high-intnsity swtnrs, bothnatural and artificial, is compltly opn, but thproducts ar th most haily rgulatd amongswtnrs. Ths rgulations ary from country tocountry. A high-intnsity swtnr clard in oncountry may b bannd in anothr. Th artificialswtnr industrys profil on halth is somwhatcolord and many still s som of ths products ina bad light. This is not th cas for natural HIS, thlargst portion of which is mad of polyols (sugaralcohols)

Finally, th markt for HFCS is similar in siz tothat of HIS, but is concntratd in thr major mar-kts: USA, China and Japan. Th principal rquir-mnt for HFCS to flourish is govrnmnt support.HFCS can only truly bcom stablishd whr it isallowd and whr thr is nough supply of starch.

82 %

Sugar

7 %

HFCS

1% natural

sweeteners

10 %

HIS

PHOTO:ISTOCKPHOTO.COM/PHOTOSOUP

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35

30

25

5

20

10

15

Jan 05Jul 05

Jan 06Jul 06

Jan 07Jul 07

Jan 08Jul 08

Jan 09Jul 09

Jan 10Jul 10

Jan 11Jul 11

Jan 12Jul 12

Jan 13

Surplus (inverted, r.h.s.) World price c/lb

-10000

-5000

0

5000

15000

10000

200000

Supply/demand

Sugar coms in two forms: (1) can sugar (75%80% of world supply, grown in tropical climats),and bt sugar (20%25%, grown in tmpratclimats). Som countris ar larg nough togrow both crops (.g. China and th USA). Thworld sugar markt is around 165 million tons andis growing rlatily stadily by around 2% prannum. Supply is mor cyclical, howr, and candpnd on crop yilds/wathr, and th willingnssof farmrs to plant crops (dpndnt on pric).Bt is a prnnial so farmrs dcisions can binfluncd by th pric of othr crops (notablycrals). Can taks 18 months to rach maturityand can yild sugar for typically fi yars (though

this can ary), aftr which yilds will drop.Many countris ha rgims that protct th

local production through arious mchanismsincluding support prics, import rstrictions, pro-duction quota, tc. exampls includ th US FarmAct, th europan Union Sugar Rgim, or thChins gornmnts controls on imports. Putsimply, th complxity of th infrastructur sur-rounding sugar is significant. Thus, th tradd mar-kt (or th world markt) is only 5560 milliontons, and is somtims rfrrd to as th rsidualmarkt (whr th sugar that is not a part of thspcial agrmnts is bought and sold). Th larg-st producr of sugar by som distanc is Brazil(22% of world production), followd by India

(15%), China (8%) and Thailand (6%). Howr,India and China consum all thy produc, so if wlook at th supply to th world markt instad,this is dominatd by Brazil (supplis typically halfth world markt) and Thailand (10%15%).

Sugar prices

Th rsidual natur of th world markt has madth world pric ry olatil and snsiti to mo-mnts in global supply rsus dmand. It has gn-rally bn in surplus (s Figur 19), but can ractsharply whn a dficit is rcordd or xpctd,much as it did happn in 200911.

Brazils cost of production is gnrally thought tob USD 18 cnts/lb. and, in th long trm, thisshould b th floor of th markt. As w mntiondarlir, most of th markts ar protctd/con-trolld, which mans th local pric bars littl sig-nificanc to th world pric and trads at a sig-nificant prmium (s Figur 20). Ths rgimsha bn in plac for many yars and ar dsigndto protct th local farmrs from th agaris of thworld pric and guarant thm an conomic rturn.

Politics versus economics

Hnc, th dynamics of sugar ha two principaldrirs: (1) economics: Th conomics of supply/dmand, that ha wathr, crop yilds, sup ply anddmand at thir cor; and (2) Politics: Th xtnsilobbying powr of th sugar industry is lgndary (itis oftn rfrrd to as th scond most politicalcommodity in th world aftr oil). Th industry is ahug mployr across th glob (thr ar 15 mil-lion can growrs in China, and 350,000 btgrowrs in europ). Politicians ar ry snsiti toprotcting ths businsss, and tailor rgims todo xactly that. Laing politics asid, w could sa slight rbound in sugar prics in 201314 du toth combination of thr main factors: (1) A potn-tial rduction in yilds in som aras, (2) Th cur-rnt low sugar prics ar ncouraging som pro-

ducrs to shift thir land us to othr crops (mainlygrains) gin bttr profitability, and (3) Th plantingmix should continu moing toward thanol produc-tion as a consqunc of rcnt gornmnt incn-tis (and ths incntis should continu bcausof trad dficits causd by gasolin imports). Ourlong-trm pric assumption USD 20 cnts/lb (from201415 onwards) is basd on th ll ndd tormunrat th cost of capital for this typ of proj-ct in Brazil.On th othr hand, dmand could bwakr and kp prics around t h currn t ll.Consnsus points to dmand growing around 2%pr yar, ry much in lin with th 2% incrassn or th past tn yars. Howr, as w wills latr, consumption in dloping countris islikly to grow at ths rats or n slightly highr,but dlopd markts could s much slowrgrowth as concrns about th mdical ffcts ofsugar gain furthr momntum.

Sugar 12Figure 16Supply/demand of world sugar (000 tons)

Sourc: FO Licht

200000

180000

140000

160000

120000

100000

80000

60000

40000

20000

19 97 19 99 2 001 2 00 3 2 00 5 2 00 7 2 00 9 2 011 2 013

Production Consumption

0

Figure 17

World sugar production

Sourc: FO Licht

Figure 18

World sugar production less consumption (m tons)

Sourc: Crdit Suiss basd on Czarnikow data

30000

25000

20000

15000

10000

5000

Brazi l T hail and A ust rali a G uat em ala In dia

0

Figure 19

World price of sugar, versus world surplus/decit

Sourc: Basd on Chicago pric for sugar and F O Licht supply/dmand data

USD per lb1.40

1.00

1.20

0.80

0.60

0.40

0.20

Japan

Denmark

France

Germany

Sweeden

UK

Mexico

Canada

Australia

Italy

Spain

USA

Brazil

China

Russia

India

0.00

Figure 20

Average retail prices of sugar (USD/lb.)

Sourc: Company data, Crdit Suiss stimats

6 %Thailand

8 %China

9 %eU40 %Othrs

15 % India

22 %Brazil PHOTO:ISTOCKPHOTO.COM/PAILOOLOM

12For mor dtails about th dynamics of th sugar marktplas rfr to LatAm Sugar & ethanol - Mor ChallngsThan Opportunitis in Brazils Sugar & ethanol Sctor,Crdit Suiss IB equity Rsarch, 29 July 2013.

SUGAR_19SUGAR_18


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Figure 22

Global production of HFCS

Sourc: FO Licht

14000

12000

10000

8000

2000

4000

6000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0

HFCS is obtaind through an nzymatic procss toconvrt som of th glucos from corn syrup orstarch into fructos to dlivr th dsird swt-nss. Normally chapr than can or bt sugar, it issold in liquid form and has bn widly adoptd byth food and bvrag industry sinc 1975. Advo-cats of sugar can and bt sugar, contnd thatHFCS is not a natural product and hav bn wag-ing a lgal battl in th USA to disallow th us ofth word corn sugar by HFCS producrs. Th FDAhas not allowd th us of this trm and th dbatin thn cntrd on whthr HFCS is natural. Thisis clarly a markting battl. For th scop of ourstudy, sugar and HFCS ar basically th sam.

High-fructose corn syrup (HFCS)

High-intensity/artificial sweeteners (HIS)Finding a high-intnsity (or artificial) swtnr thatmimics sugar but without any halth or tast issushas long bn th holy grail of th industry. Thrha bn a numbr of products or th yar thatha significantly adancd th industry (Aspar-tam, Sucralos, and possibly Stia rcntly), butthus far dspit th hug lls of R&D no onhas managd to xactly mimic sugar.

Th rlati swtnss of ths products bywight to sugar aris significantly too, from 30tims to 1500 tims, so that comparisons ar bstmad on a whit sugar quialnt (WSe). Thglobal markt is 1819 million tons of WSe.

Th rlati prics of ths swtnrs (again ona WSe basis) ar so far apart that th alu sharof th markt is matrially diffrnt to th olumshar.

Saccharin is th original artificial swtnr, anddominats in olum trms, but slls at a fractionof th pric of sugar (lss than USD 1 cnt/lb. r-sus sugar or USD 25 cnts). Oftn usd as arplacmnt for sugar on cost grounds in dlop-ing markts.

Aspartame was first allowd in food and br-ags in th 1980s (launchd by GD Sarl), buthas always suffrd from dbats or its safty. Itis th principal swtnr in dit soft drinks Andslls at around USD 8 cnts/lb.

As w mntion d bfor, th principa l rquir -mnt for HFCS to flourish is gornmnt support.With many (indd most) sugar industris aroundth world subjct to som form of gornmntsupport and rgim, HFCS can only truly gtstablishd whr it is allowd and whr thr isnough supply of starch. 80% of th HFCS pro-duction is found in th USA, Japan, China andth eU. Global dmand is growing ry modstly(up 1.3% pr annum), rflcting currnt lowsugar prics (as sn in 2008/9). Th currntspot pric of bulk HFCS in th USA is now USD29 cnts/lb. rsus 17 cnts/lb. for sugar canand 26 cnts/lb. for bt sugar.

Acesulfame potassium (also known as Ac K);launchd by Hochst in th 1980s. slls at aroundUSD 5 cnts/lb., and is oftn combind withAspartam to form a cocktail o f artificial swt n-rs in dit brags.

Sucralose was dlopd by Tat & Lyl in1975 (marktd undr th Splnda brand nam)and, finally gaining approal in 1998, it quicklystablishd itslf as on of th pr-minnt artifi-cial swtnrs (it is actually chlorinatd sugar)that, unlik othr HIS, is abl to b hatd (thusbringing in nw industris whr traditionally mostHIS wr sold in brags). T&L still dominatssupply with an 80%+ global shar. Sucralos sllsat USD 20+ cnts/lb.

Stevia: Stia is th only tru natural product inthis list (polyols ar too, but not th ons usdcommrcially). Prpard in diffrnt forms, Stiahas bn around for many dcads, but rcntlyrfining and improing its purity (notably by Pur-Circl) has ld to somwhat of a rnaissanc of thproduct, which has hlpd it to gain significanttranchs of markt shar notably in th US tabltop markt.

Other: Thr is a lot of rsarch going into natu-ral HIS. Th most rcnt launchs ar drid fromth Monk fruit and from th Oubli fruit, but thr ismor to com. This is a fast-growing ara whrw xpct th markt to xpand rapidly.

Figure 21

High-fructose corn syrup production

by countrySourc: FO Licht

Figure 23

High-intensity sweetener volume

shares (WSE)Sourc: ISO

Figure 24

HIS value shares (of global USD

1.2 billion market)Sourc: ISO

3 %South Kora

4 %Turky

5 %eU

6 %Japan

10 %

China

6 %

All othrs

66 %

North Amrica

2 %Othrs 1 %Notam

2 %Notam 7 %AcK

8 %Natural HIS4 %Stia

7 %AcK

10 %

Sucralos

10 %

Cyclamats

24 %

Aspartam

41 %

Saccharin

26 %

Aspartam

34 %

Sucralos

12 %

Saccharin

12 %

Cyclamats

PHOTO:ISTOCKPHOTO.COM/GeORGeCLeRK

SUGAR_20 SUGAR_21


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The consumersAddd sugars now rprsnt 17% of a normal US dit and wstimat that 43% of addd sugars com from swtnd brags.

As public awarnss of th potntial ngati ffcts of xcss sugarconsumption has incrasd, consumrs ha bn faoring dit softdrinks or th full-calori offrings. This is particularly tru amongpopl with highr incom and highr ducation.

Figure 25

US per capita daily calorie consumptio n in 2010

Sourc: Unitd Stats Dpartmnt of Agricultur economic Rsarch Sric

Whil th largst contributor to th incras in cal-oris has bn th consumption of grains, fats andoils, th consumption of sugar and swtnrs hasalso incrasd, but at a somwhat slowr rat thanorall caloris.

Addd sugar now rprsnts 17% o f a typicalUS dit for a normal prson, but if w aluat th

dit as a whol, w stimat that sugars in thirdiffrnt forms rprsnt 38% of th typical intak.Consumrs lik all sugar typs, but w ar nowbginning to s a shift in attitud whn focusingon addd sugars and HFCS. Sugar in fruit forxampl is still prcid as good, but addd sugarand HFCS may not b.

Is 17% a halthy ll? According to th World

Halth Organization, th rcommndd ditaryallowanc is 2900 caloris for mn (agd 1950)and 2200 for womn. In practic, many countrisar way abo ths guidlins. Furthrmor thWorld Halth Organization rcommnds that adddsugars should contribut no mor than 10% of thtotal caloric intak. This would imply that th totaladdd sugar caloris in th arag dit should bno mor than 290 for mn and 220 for womn.Many countris ar clarly ahad of this ll by asignificant margin.

It should b notd that addd sugar is consumdlargly through procssd foods and drinks, andnot as th basic product. Our stimats of thcaloric intak of swtnrs (HFCS and sugar) bycountry is considrably highr than th rcom-mndd 220290 implid abo.

Addd s ugar and HFCS ar prsnt in numr-ous foods and brags: from pasta saucs,

210 (8 %)

616 (23 %)

620 (24 %)

470 (18 %)

444 (17 %)

255 (10 %)

Added fats and oils anddairy fats

Flour and cereal products

Meat, eggs, and nuts

Caloric sweeteners

Dairy

Fruit and vegetables PHOTO:ISTOCKPHOTO.COM/ASISeeIT

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Public policy initiativesWith fw xcptions, rgulators and halth officials around th world hadon littl to addrss th impact of xcss sugar consumption. W blihighr taxation on sugary food and drinks would b th bst option torduc sugar intak and hlp fund th fast-growing halthcar costsassociatd with diabts typ II and obsity. Howr, lobbying in this arahas bn firc and has watrd down or stoppd major initiatis.

Against mount ing idnc of th ngati impactof sugar and HFCS on obsity, diabts typ II,mtabolic syndrom or rising lls of uric acidand cardioascular disas, th raction of rgula-tors around th world has bn limitd to incr-mntal taxs (mostly on soft drinks), strictrguidlins on labling, bans on distribution of afw sugary products in public buildings andschools, limits on th siz of drink packags, smallchangs in th official ditary guidlins and somducational adrtismnt.

Sral issus ha constraind, and will con-tinu to limit th rspons of rgulators, halth offi-cials and gornmnts. Yt tim is ticking by and

th rlatd halthcar costs ar rising fast. Whilthr is not on singl action that will rrs thglobal pidmic of obsity, diabts, tc., wbli that public opinion on this issu is gainingmomntum. This will forc rgulators to do som-thing and dri companis, or at last th largstons, to slf-rgulat and tak concrt actions torduc th amount of addd sugar in thir products.

Regulatory attempts: A limited response

Why hav rgulators bn so slow in racting?Thr main motivs mrg: (1) Th culprits spanacross svral businsss, and many of which arimpractical to rgulat, (2) thr has bn consis-tntly strong lobbying from th affctd partis, and(3) thr is th lack of a propr lgal framwork (atlast in th USA) to confront such a complx issu.1. Thr is no on-siz-fits-all solution to th

problms rlatd to ditary caloric incras and thxcss sugar w ar now consuming. Caloris,including thos drid from sugar, ar prsntacross a wid array of products. Sugar xists notonly in soft drinks and fruit juics, b ut also in saucs(n th most talntd Italian chfs add a littlsugar to a tomato sauc), brad, pasta, ric, hamand so forth.

Th clarst targts in controlling ditary sugarconsumption hav bn th bvrag companis.W would argu that ths companis hav playdth most prominnt rol in incrasing th amount ofsugar prsnt in our dits through rcnt history.Combind with our bodys inability to rcogniz liquid

caloris and fl satiatd, this has ld to som of thngativ halth outcoms w mntiond bfor.2. Lobbying in this ara has bn quit firc. Atth top, stands th global sugar lobby, oftnrgardd as th most powrful commodity lobbybhind that ddicatd to prsring th intrstsof th oil industry. With gornmnts promotingartificially high prics for sugar, and implmntingquotas to protct th labor bass dotd to sugarbt and sugar can (quialnt to gornmntsubsidis), thr is littl intrst to rduc sugarconsumption among thos in charg of agricul-tural policis.

Whil halth officials would justifiably supportmasurs aimd at rducing th aailability ofsugar, on could argu that th ots aailabl topoliticians supporting sugar-rducing actions arfwr and far btwn than thos supporting thfarmrs. As a sid not, th gnral consnsus has PH

OTO:ISTOCKPHOTO.COM/LISeGAGNe

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also bn that any attmpt to rgulat th br-ag industry in th USA would b mor liklydirctd at th corn industry (rsponsibl for manu-facturing HFCS). That industry simply has lsslrag than th sugar industry, and its farmrscan always substitut thir crop into bioful produc-tion. Ths intrsts, in turn, ar rinforcd andsupportd by anothr powrful lobby, th bragand food manufacturrs lobby.

As an xampl, wh n Nw York Stat consid-rd introducing a tax on sugary brags in2009, th Amrican Brag Association (thlargst US trad organization for soft-drink bottlrs)formd a Nw Yorkrs Against Unfair Taxs coali-tion, spnding a not insubstantial USD 9.4 millionon a widsprad campaign to halt th proposal.Anothr prominn t group formd by th manufac-turrs and food rtailrs has opratd undr thnam of Amricans Against Food Taxs. It wouldb rasonabl to assum similar groups w ill mrgon othr occasions whr taxs or othr financiallyburdnsom masurs ar bing considrd.3. It is unclar what agncy or gornmnt bodyshould or could tak th lad on this, particularly inth USA. In th cas of tobacco, th US Congrsspassd an xtraordinary masur mpowring thFDA to dal with th issu. Howr, it is a contn-tious dbat whthr th fdral gornmnt wouldb ntitld to act in a similar mannr or sugar.Local and stat authoritis, on th othr hand, canact fastr, as thy ha th powr to introduc lawsto protct public halth, safty and wlfar. Ineurop and Asia, indiidual countris continu todri chang in this ara rathr than collcti bod-is lik th europan Community. Franc and Hun-gary ha bn most acti on this front.

Health-based legislation versus the power

of lobbying

economists gnrally agr that gornmnt intr-ntion, including taxation, is justifid whn thmarkt fails to proid th optimum amount of a

good for socitys wll-bing. In th USA, 33 statsha ithr nactd taxs (albit ry small, 5% onarag) on soft drinks, or put lgislation into placstating that soft drinks ar non-xmpt from stattaxs unlik othr basic foodstuffs. Th UK showsa similar pictur, whrby th tax on soft drinks(and all othr non-ssntial, luxury foods for that

mattr) is alu-addd tax (vAT); not a dirct tax initslf, but on that implicitly trats soft drinks asnon-ssntial. W xpct som stats in th USAto bcom mor acti in this ara. Aftr MayorBloombrgs rcnt attmpt to limit th siz of thoffrings of sugary sodas, California is considringpushing through a pnny-pr-ounc xcis tax onsoft drinks. As w mntiond, a rcnt poll showsthat 68% of th popl intriwd would b infaor of this.

On a mor national ll, th FDA is currntly notconsidring any proposals to control or rgulatsugar consumption. According to th lgal xprtsw consultd, n if th FDA dcidd to tackl th

issu tomorrow and analyz whthr xcss sugarconsumption is toxic, it would tak at last thryars to draft a proposal, followd by a furthr twoyars of dbat. A lss-than-swift rspons to agrowing concrn, by anyons standard.

Or in europ, th Frnch gornmnt apparsto b th most adancd in taking action. Just ora yar ago, it imposd a tax of eUR 0.02 on sugarydrinks and artificially flaord drinks; clos to 5% ofth orall alu. Th potncy of th lobbis couldb sn hr onc again: a ry small tax in itslf,which was thn also applid to zro calori softdrinks flaord with artificial swtnrs. Th taxhas had th dsird ffct, with th carbonatdsoft drink markt dropping by 5% in olum lastyar (according to markt rsarchr Canadan).Howr, this could b attributd mor to psycho-logical ffcts than financial ons. F undamntally, itis bad PR to ha your industry taxd for halth

rasons. Asid from that, thr ar proposals toincras this tax to 20% by nxt yar. Whthr thislgislation is again dilutd, or matrializs at all, isdifficult to know. W should not that Franc is thlargst sugar-bt producr in europ.

Hungary and Irland, going on stp furthr,ha takn a widr stanc and ar alrady impos-ing taxs on prcid unhalthy foods in gn-ral. Just this May in Irland, a furthr 10% tax onsoft drinks was proposd and supportd by a widmajority of th public. In th UK, 61 organizations,including th Acadmy of Mdical Royal Collgs,ar adocating a GBp 7 tax pr can of soft drink(around 20% of th rtail pric) to b includd in

th spring budgt.Yt, contrary to this prailing trnd, Dnmark

rducd a long standing tax on soft drinks of eUR0.22 pr litr to half that in July, with plans to scrapit compltly by arly 2014. Th rasoning bhindthis chang, howr, has bn drin mor byfinancial considrations as opposd to social-halthconcrns. Dans oftn cross into nighboringcountris in ordr to import chapr soda from bor-dr shops; affcting both stat taxs and local rtailshops. essntially, th closr th consumr was toth Grman bordr, th lss soft drinks thy pur-chasd domstically.

This shows that a cohsi action is muchndd. So whr is th europan Union on allthis? Th europan Union is in som ways bhindth cur and, by our accounts, focusing solly ontwo issus: labling and artificial swtnrs. Withrgard to labling, all companis will b rquird to

clarly show th amount of caloris, fat, salt andsugar on thir product labls by th nd of 2014.At th sam tim, th europan Union has focusdon artificial swtnrs and A spartam in particular.Nothing on sugar. Th lgislation in th works, ifimplmntd, will limit th ADI (arag dailyintak) ll for Aspartam to 40 mg pr kg of bodywight (a can of dit cok contains 180 mg). ThFrnch authoritis, howr, ha suggstd thywould prfr somwh r in th rgion of 510 mgas a maximum rcommndd ll (two cans for aprson wighing 70 kg or 154 pounds).

In Asia and Australia, th dbat is only just onth horizon. Gin th rising lls of obsity, par-

ticularly in China and th Middl east, w blith status quo could soon b confrontd. Again wxpct diffrnt countris to implmnt diffrntmasurs to rduc sugar consumption, lookingwst to assss th pros and cons of all th aail-abl options.

Focusing taxation on where it matters most

Whil taxation may b not nough to addrss ob-sity concrns and may ary from country to country,or from stat to stat, w argu that this would bth most ffcti way of daling with th rlatdconcrns. effctinss hr is masurd simplyas th orall rduction in consumption of adddsugar. Taxing at th right ll should thorticallyachi this, and acadmic studis ha shown itto work. Aftr all, pric is an important dtrminantof food choics and dit. Thortically, all foodsPH

OTO:SHUTTeRSTOCK.COM/MNSTUDIO

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containing addd sugar should b targtd in anattmpt to rduc daily intak; howr, soft drinkscould ffctily bar th brunt of any financial ly.

A nutral obsrr would argu that gorn-mnts ar simply picking on an asy targt thbrag manufacturrs. Howr, du to th poorsatiating proprtis of sugar in liquid form, it couldb argud that thy ar a major contributor if notth largst to th currnt pidmic of obsity, dia-bts and mtabolic syndrom and, at th samtim, thy ar clarly asir to rgulat and taxfrom a social prspcti. Soft drinks ar notssntial to our dit as ar brad, pasta or ric.Watr is always a iabl altrnati. In addition, thbrag industry accounts for on third of alladdd sugars in our dit.

So, if th sol objcti is to rduc th con-sumption of full-calori soft drinks, on dos notnd to rinnt th whl. Tobacco and alcoholproid rlant tst cass, and unquiocally showthat, in both cass, taxation has bn abl to affctconsumption on th downsid.

In th cas of tobacco, svral studis sponsordby th WHO would suggst that a 10% incras intaxs lads to a 4% drop in consumption in high-incom countris and 8% in low-incom countris.Th pattrn of vnts in South Africa provids fur-thr confirmation of this (s Figur 32). During th1990s, tobacco tax rats ros 250%, vntuallyaccounting for 50% of th rtail pric. For vry10% incras in th pric of cigartts, consump-tion fll by 5% to 7%. Thr ar now 26 countris inth world whr tobacco taxs rprsnt mor than75% of th rtail pric, a factor clarly corrlatingwith th ovrall rduction in smoking globally. Simi-larly, in th cas of alcohol, govrnmnts and policymakrs hav utilizd taxs as a way to rduc con-sumption and, in paralll to this, fund ducation tohlp covr th rlatd halthcar costs.

How high?

Studis by profssors Brownll and Fridn, Myt-

ton and Raynr ha attmptd to ascrtain thpric lasticity of sral foods and brags.Spcifically for soft drinks, th stimat has bnthat a roughly 10% incras in prics would bringabout an 8%10% rduction in consumption.Whil w would agr thr is a rlationship, wdo not bli it is on that is prfctly linar.empirical idnc would suggst that, at low l-ls of taxation, consumption is not affctd on aon-to-on basis, but significantly lss. Con-rsly, th highr th pric incras, th highrth multiplir. empirical idnc supports thsfindings. Thr ha bn fw randomizd con-trolld trials (RCTs). In Irland, a 10% incras inth pric of soft drinks in th 1980s ld to an 11%dcras in consumption. In this cas, th pricincras affctd all soft drinks.

So what would b th ffct of introducing a 1%tax pr ounc on soft drinks? This would b quia-

60 %

50 %

40 %

30 %

20 %

10 %

US population Non-hisp. white Non-hisp. black Mexi can

Higher income Medium income

0 %

Low income

Figure 34

Percentage of obese population by income and race USA

Sourc: CDC/NCHS, National Halth and Nutrition Sury, Crdit Suiss analysis

Figure 35

Annual global soda consumption versus GDP per capitaSourc: euromonitor, Nilsn XAOC, Crdit Suiss stimats

120

80

60

100

Annual soda consumption per capita (liters)160

140

40

20

0 10000 20000 40000 5000030000 60000 70000

0

GDP per capita (USD)

Mexico Argentina

USA

United Arab Emirates

R2 0.3453Chile

Belgium

Norway

SwitzerlandSpainBrazil

IndiaChina

Malaysia

RussiaJapan

Hong Kong, ChinaSingapore

FranceItaly

PolandPeru

SlovakiaBulgaria

South AfricaColombia

Venezuela

Czech RepublicFinland

Turkey

HungaryGreece

Romania

South KoreaUkraine

Thailand

Philippines

MoroccoEgypt

Portugal

Indonesia

DenmarkSwedenNetherlands

GermanyCanada

IsraelUnited Kingdom

Australia

IrelandNew Zealand

Saudi Arabia

Austria

lnt, in rality, to incrasing th pric of a can by20%. W s only positi implications if halth isth main considration.

On could xpct it to rduc consumption by anquivalnt amount or at last induc a switch fromhigh-sugar-contnt soft drinks to lowr- or zro-sugar soft drinks. Th ffct could b vn highrthan th thortical 20% (on-to-on pric lastic -ity), as most largr bvrag manufacturrs hav alowr- or zro-sugar contnt offring with a similarflavor. W would also xpct th impact to b highron soft drinks than juics, basd simply on th pr-cption that juics ar halthir and a substitut(albit a poor on) for ating th ral fruit.

Th tax is likly to b a rgrssi on (.g.affcting mor popl at lowr incom lls).Howr, this might b positi not ngati, as thpoorr and lss ducatd sm to b affctd thmost on rlati basis by obsity and mtabolicsyndrom. Figur 34 shows that, within th lowrincom sgmnt, 26% of non-hispanic blacks and43% of hispanics in th USA ar obs rsus a20% national arag. So a hfty xcis tax islikly to impact mor thos sgmnts of th popu-lation whr th problm is mor acut.

A tax of this natur should proid soft-drink andjuic companis with an additional incnti toadapt thir product lins and lowr th sugar con-tnt. It should b notd, that many of thm aralrady working toward this.

A tax would hlp local, stat a nd fdral govrn-mnts rais much ndd funds to addrss thrlatd halth issus and dvot additional fundingfor bttr ducation and rsarch on th topic. esti-mats basd on th currnt lvl of consumption,and a pric lasticity of on, suggst that a 1% taxpr ounc would b abl to gnrat USD 15 billionin tax rvnus in th USA, or USD 1 billion if wwr to considr Nw York Stat alon. A fw aca-dmic studis hav gon furthr in trying to approx-imat th actual impact on wight rduction. Con-srvativ stimats point to a 2 lb. pr yar prprson dclin, assuming that th consumr substi-

tuts th 15% rduction in bvrag intak (avr-ag of 10%20%) with othr mor solid foods. It isby no mans normous, but still halthir than s-ing incrmntal wight gain in th population

As is alw ays th cas with ry pu blic issus,critics and lobbyists ha com up with a myriad ofrasons why this would b prjudicial. Thir mainargumnt rols around th claim that th taxwould b rgrssi, would not sol th obsitycrisis, and that it points th fingr at on sctoralon. W ha alrady addrssd th issu of itsrgrssi natur. Critics ar corrct in th snsthat this would not ntirly sol th pidmic ofobsity and diabts, tc., but fw ar likly to dis-agr that it is crtainly a start, and a stp in thright dirction. Rducing th growth of th obspopulation whil funding som of th halthcarcosts associatd with ths problms is an objc-ti that is difficult to oppos in any rgard.

2500 Cigarette consumption(millions of packs)

Tobacco excise tax asa % of retail price

2000

1500

500

1000

1980 1985 1990 1995 2000 2006

Consumption Excise tax rate

45%

40%

35%

30%

25%

20%

15%

5%

10%

0%0

Figure 32

Cigarette consumption and excise tax rate in South Africa,19802006

Sourc: WHO rport on th Global Tobacco epidmic, 2008

Figure 33

US price elasticity estimates, by food and beveragecategory, 19382007

Sourc: Amrican Journal Public Halth, Canadan

Not*: valus wr calculatd basd on th 160 studis riwd. Absolut alus of lasticity stimats ar

rportd. Th pric lasticity of dmand masurs th prcntag chang in purchasd quantity or dmand

with a 1% chang in pric.

Food and beverage

category

Absolute value of mean

price elasticity estimate

(95 % CI)

Range No. of

estimates

Food away from hom 0.81 (0.56, 1.07) 0.231.76 13

Soft drinks 0.79 (0.33, 1.24) 0.133.18 14

Juic 0.76 (0.55, 0.98) 0.331.77 14

Bf 0.75 (0.67, 0.83) 0.291.42 51

Pork 0.72 (0.66, 0.78) 0.171.23 49

Fruit 0.70 (0.41, 0.98) 0.163.02 20

Poultry 0.68 (0.44, 0.92) 0.162.72 23

Dairy 0.65 (0.46, 0.84) 0.191.16 13

Crals 0.60 (0.43, 0.77) 0.071.67 24

Milk 0.59 (0.40, 0.79) 0.021.68 26

vgtabls 0.58 (0.44, 0.71) 0.211.11 20

Fish 0.50 (0.30, 0.69) 0.051.41 18

Fats/oils 0.48 (0.29, 0.66) 0.141.00 13

Chs 0.44 (0.25, 0.63) 0.011.95 20

Swts/sugars 0.34 (0.14, 0.53) 0.051.00 13

eggs 0.27 (0.08, 0.45) 0.061.28 14

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Lastly, w wish to focus our analysis on th impacton corporats: w can diid this into fi groups:(1) food and brag companis, (2) th sugarindustry (sugar can, bt sugar and HFCS), (3)HIS (artificial swtnrs), (4) natural swtnrs,and (5) th halthcar Industry,

W bli that th implications of our analysisfor th brag industry and th natural-swt-nr industry will dri th outlook for th othr foursctors:1. W xpct companis in th brag industry

(mostly soft drinks) to ract to th growing publicconcrn and th thrat of taxs on sugary drinks bymoing as fast as thy can to slf-rgulat andchang tack. W will look at slf-rgulation indtail, but th most attracti option to achi thiswill b to dlop soft drinks that lrag naturalswtnrs to rduc th orall caloric contnt orrplac artificial swtnrs. If proprly managd,w think ths changs should ha a nutralffct on th brag industry, b ngati forartificial swtnrs and ry positi for naturalswtnrs. Th ky issu is tast. Natural swt-nrs nd to b abl to dlir a tast profil thatis as plasant as th full sugary drink or th onthat uss artificial swtnr somthing that thmanufacturrs ha found ry difficult or thpast fw dcads.2. W think th impact on companis in th foodindustry should b minimal as thy do not suffr

Corporates:Self-regulationand opportunitiesSral sctors will b impactd by th incrasd focus on th halthffcts of xcss sugar consumption: food and brag companis,sugar producrs, manufacturrs of artificial and natural swtnrsand halthcar companis. W xpct sugar consumption to dclin

with an impact on sugar prics. Th brag industry has th toolsand markting xprinc to mbrac chang and proid nwoffrings to bttr match consumr wishs. Natural swtnrsshould b th main bnficiaris.

from th sam ngati imag as th bragindustry, thy ar mor difficult to rgulat andthy ar lss affctd by th biomdical issuslinkd to sugary brags. W xpct th industryto gradually substitut sugar or HFCS with naturalswtnrs.3. Th sugar industry is likly to b ngatilyaffctd, but it will tak som tim. As th awar-nss of th mdical risk tid to xcss consumptionof addd sugars incrass worldwid, and as thaailability of natural swtnrs incrass, w

xpct sugar consumption to grow blow thgrowth rat of th global population. W should sthis happn first in dlopd countris (25 yars)and thn gradually xtnd to dloping countris(10 yars). If just th brag industry in th USAwr to stop u sing sugar or HFCS and us naturalor artificial swtnrs, dmand for sugar woulddrop by 30%.4. Th halthcar industry should bnfit fromincrasd awarnss, which in turn should lad toa rduction in th growth rat for obsity, diabtstyp II and mtabolic syndrom. W ar still faraway from this in many rgards, so that, in thshort trm, this clarly mans incrasd costs forth halthcar systm. Howr, if sugar con-sumption is curtaild, pharma and biotch compa-nis closly tid to th tratmnt of diabts typ IIshould on a longr-trm basis s a rductionin th potntial numbr of addrssabl patints. PH

OTO:ISTOCKPHOTO.COM/PJOHNSON1

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Beverages: Self-regulation

Lt us go into mor dtail and focus first on thbrag industry. W bli that fw countriswill implmnt taxs on soft drinks at th l l wsuggst. Som countris alrady ha taxs onsoft drinks, but at lowr lls (s Figur 36 forLatin Amrica). Mxico might b a gam changrin this ara and bcom th first of th larg soft-drink consumr markts to impos a significantxcis tax on full-calori soft drinks as part of thnw gornmnts budgt latr this yar.

In our iw, howr, th most likly outcom isthat th orhanging thrat of highr taxs and thfast-growing public outcry or th purportd con-tribution of soft-drink manufacturrs to th halthissus w mntiond will corc th companis toslf-rgulat.

So what are the major soft-drink and

food companies (with the focus clearly

more on the former) going to do in order

to self-regulate?

Undrstandably, th soft-drink companis ha lit-tl intrst in rducing th orall consumption ofsoft drinks, but at th sam tim thy can ill affordbing sn by th public as rsponsibl for a majorobsity or diabts pidmic.

W bli sn actionabl rsponss araailabl to th manufacturrs:

Incras aailability of th zro-calori rsion inry rgion and country.

Promot th markting of dit drinks mor thanfull-calori drinks.

Gradually rduc th calori contnt of th fullcalori rsion (although prious attmpts tochang traditional formulas, such as with NwCok ha bn known to backfir).

Impro and mak mor isibl th labling ofth sugar contnt of drinks; in som countristhr is still no obligation to do so.

Rplac sugar and artificial, intns swtnrs

with natural, low- or zro-calori sw tnrs.expand portfolios to offr altrnati drinks (fruitjuics, itamin watrs, nrgy drinks or simplysmallr sizs as thy ha rcntly announcdwith th nw 25 cl slimlin cans in th UK).

Launch public initiatis and campaigns to fostra halthir and mor acti way of lif. In othrwords, tak an acti rol in promoting a h althirlifstyl and ducating popl about dit choics.

Soft-drink companis ar likly to continu lobbyingagainst taxation of soft drinks through spcial-pur-pos and fully fundd groups (.g. AmricansAgainst Food Taxs), but will hav to b carful tonot do so opnly. Th ton of th latst prssrlas from th Coca-Cola Company shows armarkabl chang from ignoring th mdia link-ing obsity and diabts to soft-drink consumptionto taking stps to prsnt Coca-Cola as bing wll

Figure 36

Taxes on soft drinks in Latin America

Sourc: Crdit Suiss equity Rsarch, Fomnto economico Mxicano, S.A.B., Form 20-F 2007

2.0 %

4.0 %

6.0 %

2.0 %

0.0 %

Carbonated drinks YoY change in volume (12 week rolling)6.0 %

4.0 %

8.0 %

M ar -10 J ul -10 N ov -10 J ul -11 N ov -11Mar-11 Jul-12 Nov-12Mar-12 Jul-13Mar-13

Regular Diet

Figure 37

Volumes for both diet and regular carbonated drinksproducts continue to declineSourc: euromonitor, Nilsn XAOC, Crdit Suiss stimats

awar of ths issus and working to b part of thsolution. For companis with brands as strong asCoca-Cola or Ppsi, th biggst risk to sals growthand profitability is a ngativ public imag.

Hr soft-drink companis ha a hug adan-tag or tobacco and alcohol companis. Tobaccomanufacturrs could not offr nicotin-fr orsmok-fr cigartts (only now, dcads latr, arw sing th mrgnc of lctric cigartttchnology). Br brwrs xprimntd with zro-alcohol brs, but with ry littl succss. Guinnsslaunchd 0% Kalibr in 1986 as an upmarkt altr-nati to othr alcohol-fr lagr brands, and it isnow gnrally th only such product widly aail-abl in most markts. Clarly, w ar still quitsom distanc away from a zro-alcohol win or azro-alcohol whisky. With this in mind, soft-drink

companis ha a ral chanc to tak a proactiapproach at making th right changs and comout on th winning sid.

What can change and what is likely to

change?

If w aluat th world as a whol, it bcomsclar thr is ampl scop to impro th currntsituation, particularly in mrging markts, andmost notably in Mxico, by offring and proactilymarkting th dit rsion.

Is it just a coincidnc that Mxico ranks No. 3in pr-capita-soda-consumption and No. 2 in globalobsity rats, and at th sam tim sugary softdrinks rprsnting 95% of total soft-drink con-sumd nationally? W do not think so. In this ara,as w said bfor, showing causality is incrmn-tally problmatic, but assuming that all factors ar

Figure 38

Full-calorie versus diet carbonated-drink consumption by regionSourc: Brag-Digst, Canadan

coincidntal is undoubtdly wors. For furthr proofof th concpt, it is intrsting to not that, in Italy,sugary soft drinks account for 73% of th totalsoft-drink consumption, and th country itslf ranksNo. 35 in pr capita soda consumption and No. 25globally in obsity rats. Is this just a coincidnc?

Analyzing this rlationship in mor granular form,w turn our attn tion to th USA , which is a coun-try whr soft drinks ar fully aailabl in rystat. W can s that th ll of sugary rsusdit soft drinks aris across th country, with aclar pattrn mrging. Using cnsus data for du-cation and arag incom, w not thr is armarkabl corrlation btwn th pntration ofth dit rsion and th ll of ducation andincom. In othr words, th highr th incom andducation ll of th consumr, th highr th

pntration of th halthir rsion of cola. Wcan conclud that bttr accss to information mayb a focal point in controlling th situation.

Gnralizing this hypothsis lswhr, oncould assum similar intrprtations as in th USA.Thr is on caat, howr. Th aailability of thdit rsion of any gin cola may, traditionally, notb as xtnsi as it is in th USA, which gossom way to xplain why mrging-markt con-sumption of dit cola only accounts for 5% of thtotal, rsus a considrably highr 28% in thwstrn world. Rgional sugar lobbis may alsoplay a rol in gornmntal support for on or thothr, as most colas will us th locally aailablsugars to swtn thir brags. Not surpris-ingly, in Mxico, th sugar in th full-calori cok isdrid from can sugar (tru for most of LatinAmrica), whil, i n th USA , th sugar is proiddby th corn industry in th form of HFCS.

0 1 2 3 4 5 6 7 8 9 10 11 12

Teaspoons of sugar per 340 ml/12.oz serving

Starbucks Frappuccino Vanilla

7-Up

Nestea Lemon Iced Tea

Full Throttle Energy Drink

Gatorade Orange

Snapple Diet Teas

Starbucks Low Calorie Iced Coffee Light

Red Bull Energy Drink

Fresh Orange Juice

Pepsi Classic

Coca Cola Classic

Mountain Dew

Fanta Orange

Figure 39

Sugar content of popular beverages teaspoons per serving

Sourc: California Cntr for Public Halth 2011 study, Crdit Suiss Rsarch

2012 Full calorie share

of consumption

Diet share of

consumption

Asia 96.9 % 3.1 %

eastrn europ 96.7 % 3.3 %

Southrn Africa 95.8 % 4.2 %

MeNA 95.2 % 4.8 %

Latin Amrica 93.0 % 7.0 %

Wstrn europ 75.5 % 24.5 %

North Amrica 69.0 % 31.0 %

Australasia 64.7 % 35.3 %

Worldwid 85.9 % 14.1 %

VAT

rate

Excise rate Excise taxes

as % of sales

(estimated)

Mxico 16 %

Guatmala 12 % 0.18 cnts local currncy pr litr 2.9 %

Costa Rica 13 % 22.53 local currncy pr 250 ml 13.8 %

Nicaragua 15 % 9 % consumption, 1% gross incom 9.4 %

Panama 0 % 5 % d pn din g of co st of go od ,10 % slcti products

7.5 %

Argntina 17 % 8.7% if drink has lss than 5 % lmonor 10 % fruit juic

8.5 %

Colombia 16 %

Brazil 18 % Arag production 4.7 %,arag sals 10.8 %

10.8 %

vnzula 21%

SUGAR_34 SUGAR_35


19/23

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

2002 2012

Other (*), 2012, 22

Milk, 10

Beer, 11

Bottled water, 12

Tap water, 21

Soft drinks, 24Soft drinks, 29

0 %

-480 bps

Other (*), 2002, 22

Milk, 11

Beer, 12

Bottled water, 8

Tap water, 17

100 %

Figure 40

Beverage product portfolios corporates are expandingtheir product portfolios

Sourc: Brags Digst Factbook 2013, Crdit Suiss Rsarch

Tough times ahead for artificial sweeteners

A big dbat has unfoldd, particu larly in th euro-pan community, on th us of artificial swtn-rs. Th word artificial plays a ky rol hr, andth main focus of th xamination has bn Aspar-tam. Whil thr is no conclusi proof thatAspartam i s dangrou s to popls halth , thrha bn numrous, conflicting rcommndationsas to th maximum rcommndd daily limit.

As w mntiond, in th USA, th FDA turnddown th us of Aspartam as a swtnr sixconscuti tims, bfor finally approing it. Theuropan community had initially agrd to a rc-ommndd intrnational standard of 40 mg pr kgof bodywight, but Frnch authoritis ha sug-gstd thy would want this rducd furthr to amaximum of 510 mg pr kg of body wight.

Thr ar only a fw mdical studis on thistopic, and ultimatly no rliabl conclusions. Thcombination of a growing ngativ public opinion onartificial swtnrs and nw discovris in th fildof natural swtnrs should lad to a gradualdclin in th us of Aspartam and othrartificial swtnrs. Companis lik Tat and Lylthat hav bn at th cntr of th swtnrs mar-kt ar moving fast to dvlop nw productsin th ara of natural swtnrs and to partnr withbvrag and food companis to rduc th lvl ofsugar in thir products without impacting th tast.

The sweet spot: Natural sweeteners

Soft-drink companis ar working hard to introducnatural non-caloric or low-calori natural swtn-rs, into thir product offrings. Th main concrnso far, howr, has bn that natural swtnrssimply do not tast th sam as sugar, and in somcass la a bittr aftr-tast. Cok is trialing St-ia in Sprit in Franc and has rcntly launchd anw rsion of cok calld Coca Cola Lif inArgntina that is swtnd with 50 % sugar and50% Stia. Coca Cola Lif has 50% lss caloris

than th full-calori Cok rsion. Th word natu-ral is ky in th dlopmnt and adoption of anw gnration of swtnrs by th food and b-rag industry. Stia drid from th Stia plantis alrady aailabl; Nctrss drid from Monkfruit is also now aailabl both industrially and astabl sugar. Xylitol or alcohol sugar, which occursnaturally in som fruit, gtabls, mushrooms andcrals is usd both in sport drinks and crtainfoods. Th latst natural swtnr is a nw prod-uct calld Brazzin or Cwt which is drid froman African plant, th Oubli (Pntadiplandra brazz-ana). W xpct mor to com in th nar futuras th rac for a natural, non-caloric swtnr(that is widly accptd by th public) is hating up.

Fruit juices and others

As mn tiond, on of th rsponss of th so ft-drink industry to th growing public concrn aboutsoft drinks has bn to nlarg portfolios, xpand-ing into bottld watr, fruit juics and sport drinks.Watr (both tap and bottld) has gaind a signifi-cant shar of total consumrs liquid intak, whilcarbonatd soft drinks ha lost 480 basis pointsor th last tn yars.

W ha largly omittd fruit juics from ouranalysis hr, but in th spirit of an xhaustistudy, w should draw attntion to s om ky points.As can b sn in Figur 39, natural fruit juics andfruit juics drid from concntrat do not farmuch bttr than full-calori sodas whn looking atthis issu from a halth prspcti.

Yt thr ar crtain discrnibl diffrncs.Th body racts diffrntly to fruit juics than sug-ary sodas, both in trms of physiology and thsatiation ffct w mntiond arlir (whichworks bttr with fruit juics). In addition, fruitjuics contain othr nutrints/i tamins t hat migh tb bnficial to our body. Howr, th impact oftoo much juic consumption is not astly diffrntthan whn too many cans of full-calori soda aringstd. Yt th outcry is far lss than that ofsodas. Why?

First and formost, fruit juics ar prcivd asnatural products, and thr has undoubtdly bna trnd ovr th past dcad to favor natural andorganic products in our dits. But mak no mistak.Our forfathrs did not drink fruit juics (crtainlynot in th quantity that w do) thy simply at thfruit. Whil ating th fruit may lad to ingstingroughly th sam amount of sugar, th body fullynotics th calori intak whn ating th fruitand, as a rsult, substituts ths caloris for othrfood-drivd caloris, not simply adding to thm.Also, natural fruits ar rich in vitamin C, antioxi-dants, flavonols and othr substancs that combatth mtabolic ffcts of fructos. Som of thsbnfits disappar in th juic vrsion of th fruit.

As svral fruit-juic brands ar ultimatly owndby th larg soda manufacturrs, thr is hop thatth sam rmdial actions w citd abov will bapplid to fruit juics as wll. Whil substituting thnatural sugar in fruit juics with natural non-caloricswtnrs, such as Stvia or Monk Fruit maysound unnatural, this would b consistnt andlikly to happn, albit at a much slowr pac.

Byond juics, it would b a littl xcssi tolist ach and ry commrcial foodstuff containingaddd sugar. Fw ar awar that, in a singl sr-ing of Prgos tomato sauc, thr ar 10 grams ofsugar (almost thr spoons in total). Although thisis not quit th ll sn in fruit juics (whr a500 ml orang juic can contain or 50 grams ofsugar), it should nrthlss b considrd incr-mntal. In du cours, w would xpct thscompanis to gradually follow th lad of th soft-drink manufacturrs.

Figure 41

csri sugar en

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